2019 (5) TMI 1617 - AT - Central Excise

Valuation - remission in the nature of subsidy - additional consideration or not? - inclusion of 75% VAT refunded by the State Government to the noticee under the Madhya Pradesh Industrial Investment Promotion Assistance Scheme, 2004/2010 in the assessable value - HELD THAT - The transaction value includes all the payments made by the buyer to the assessee. However, in the instant case, the subsidy has been underpaid to assessee by the State Government as a financial assistance Industrial Promotion Scheme of MP State Government. Only the mode of payment is by way of crediting the sales tax head under VAT challan in favour of the appellant. Thus, it could not be said that the amount is in the nature of additional consideration. 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. Reliance placed in the case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR 2018 (1) TMI 915 - CESTAT NEW DELHI wherein it was held that where assesses are required to remit the VAT recovered by them at the time of sale of goods manufactured and a part of such VAT is given back to them in the form of subsidy in VAT 37b Challans, such Challans are as good as cash but for the limited purpose of being used for the payment of VAT in the subsequent period. The Tribunal has clarified that in terms of the scheme of Government of Rajasthan, payment of VAT using such Challans are the legal payments of tax. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the amount received by the appellant as VAT refund/subsidy under a state scheme is chargeable to Central Excise duty.
2. Interpretation of transaction value under the Central Excise Act, 1944 in relation to the VAT refund/subsidy received by the appellant.

Analysis:
1. The appellant, engaged in manufacturing asbestos sheet and moulds, received a VAT refund/subsidy under a state scheme. The Department contended that this amount is chargeable to Central Excise duty as per the definition of transaction value. A show cause notice was issued for recovery, which was confirmed by the Adjudicating Authority. The Appeal was allowed by the Order-in-Appeal, leading to the Department's appeal before the Tribunal.

2. The Department argued that the VAT refund/subsidy should be included in the transaction value based on a previous Tribunal decision creating confusion regarding VAT payments made through subsidy challans. They relied on a Supreme Court decision stating that VAT amounts refunded and retained by the assessee are includable in the transaction value and subject to excise duty.

3. The appellant's counsel countered by stating that the financial assistance received from the state government was not a VAT refund or subsidy but a promotional scheme. They argued that the amount received was not susceptible to the assessable value for excise duty payment. The Commissioner's Order was supported, and the Department's appeal was requested to be dismissed.

4. The Tribunal analyzed the definition of transaction value, emphasizing that it includes all payments made by the buyer to the assessee. However, in this case, the subsidy was financial assistance from the State Government, credited under VAT challans, and not additional consideration from buyers. The Tribunal referenced previous cases where similar VAT subsidies were considered legal payments of tax, not additional consideration.

5. Citing precedents and clarifications from previous cases, the Tribunal upheld the Order under challenge, dismissing the Department's appeal. The decision was based on the understanding that the subsidy received in the form of VAT challans was akin to cash and a legal payment of tax, not constituting additional consideration for excise duty purposes.