2019 (3) TMI 1088 - AT - Central Excise

Valuation - inclusion of subsidy of VAT, which was granted by the Govt. of Rajasthan - Section 4 of the Central Excise Act, 1944 - Held that - For the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. By following the decision of the Tribunal in the Welspun Corporation Ltd. case 2017 (5) TMI 177 - CESTAT MUMBAI it can be concluded that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Inclusion of subsidy of VAT in the valuation for clearance of excisable products.

Analysis:
The appeal revolved around the inclusion of VAT subsidy granted by the Government of Rajasthan in the valuation adopted by the appellant for excisable products clearance. The appellant, operating under Rajasthan Investment Promotion Scheme, was eligible for subsidies requiring VAT deposit with the government and subsequent disbursement of subsidy in form 37B. Revenue contended that VAT liability discharged using subsidy cannot be considered as VAT actually paid under Section 4 of the Central Excise Act, demanding differential duty, interest, and penalties.

The appellant argued that Rajasthan Government's scheme mandates actual VAT payment, allowing deduction under Section 4(3)(d). Referring to Commissioner of Central Excise v/s Welspun Corporation Ltd., the appellant emphasized the distinction from the Super Synotex case. The Revenue justified the inclusion of refunded VAT in assessable value post-1/7/2000, citing the Super Synotex case.

The Tribunal analyzed the scheme's nature, highlighting that VAT payment through 37B Challans is legitimate as per Rajasthan Government's requirements. Referring to the Super Synotex case, the Tribunal noted the distinction made by Welspun Corporation Ltd. case, where VAT remission did not require inclusion in transaction value, aligning with the present scenario.

By following Welspun Corporation Ltd. case, the Tribunal concluded that VAT paid using 37B Challans should not be included in the assessable value, settling the issue in favor of the appellant. The decision was supported by precedents like Shree Cement Ltd. and Birla Corporation Ltd., leading to setting aside the impugned orders and allowing the appeals.