2018 (11) TMI 613 - AT - Central Excise

Valuation - inclusion of subsidy amount under RIPS in assessable value - the amount is paid to the appellant in the form of VAT 37B Challans under the Head of VAT Liability. It is this Challan which the appellant has used in the subsequent period for discharge of subsequent VAT liability - penalty - Held that - It is an apparently admitted fact that the appellant was paying total VAT charged at applicable rates on sale of goods to the State Exchequer and was filing the VAT returns. The VAT 37B Challans, the appellant was utilising to discharge the output VAT liability for the subsequent period. In the present case, the remission is in the nature of subsidy which the appellant was receiving from the State Government in the form of VAT 37B Challans and not from the buyers of the appellant. The said remission was not only as good as cash but can also not be considered as an additional consideration. Extended period of limitation - Held that - Discharge of liability by way of VAT 37b Challans has already been held as legally sustainable methodology of discharging tax liability for subsequent period. Department was not entitled to invoke the extended period of limitation - demand could be confined only to the normal period of one year. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of failure to pay Central Excise duty on sales tax collected from buyers.
2. Demand for short payment of Central Excise duty during 2011-12 to 2013-14.
3. Dispute regarding subsidy received under Rajasthan Investment Promotion Scheme.
4. Interpretation of transaction value under Central Excise Act.
5. Comparison with relevant legal precedents.
6. Alleged mis-representation by the Department.

Analysis:
Issue 1: The appellant was accused of not paying Central Excise duty on sales tax collected from buyers and retained by them. The Department claimed that the appellant used subsidies to evade duty payment. A Show Cause Notice was issued, demanding payment of duty, interest, and penalty. The Additional Commissioner confirmed the demand, leading to the appeal.

Issue 2: The appellant argued that the subsidy received under the Rajasthan Investment Promotion Scheme was based on VAT payments and not retained sales tax. The Department contended that the refunded amount by the State Government should be included in the transaction value. Legal precedents were cited by both parties to support their arguments.

Issue 3: The Tribunal noted that the appellant received subsidies in the form of VAT Challans under the RIPS. The Department considered the use of these Challans as retention of sales tax, leading to the dispute. The Tribunal analyzed the nature of the subsidy and its impact on the transaction value for duty calculation.

Issue 4: The Tribunal examined the definition of transaction value under the Central Excise Act, emphasizing that the subsidy received was not an additional consideration. Citing legal precedents, the Tribunal clarified that the subsidy in the form of VAT Challans did not alter the transaction value for duty assessment.

Issue 5: Distinctions were drawn between the present case and legal precedents cited by the Department, highlighting that the subsidy received was not an exemption or incentive but a remission. The Tribunal differentiated between sales tax incentive schemes and sales tax subsidies, supporting the appellant's position.

Issue 6: The Tribunal addressed the alleged mis-representation by the Department, concluding that no evasion of duty occurred as the appellant had paid the full sales tax collected. The Tribunal found no suppression of facts and clarified the misunderstanding on the relevant provisions, ultimately setting aside the Order and allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, overturning the demand for short payment of Central Excise duty and highlighting the legal validity of utilizing VAT Challans for subsequent tax liabilities under the subsidy scheme.