2023 (7) TMI 659 - AT - Central Excise

Valuation - inclusion of Recovery of VAT/CST - remission of unpaid VAT by the State Government - appellant was availing the exemption on goods purchased whereas in the case of sale of finished goods availing the benefit of sales tax deferment - CBEC Circular No. 378/11/98/-CX dated 12.03.1998 - HELD THAT - The fact is not under dispute that in the present case the nonpayment of sales tax /VAT is not on account of exemption but on account of remission granted by the State Government. The Adjudicating Authority has confirmed the demand relying on the Hon ble Supreme Court Judgment in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS 2014 (3) TMI 42 - SUPREME COURT whereas the said judgment was distinguished by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I VERSUS M/S WELSPUN CORPORATION LTD. 2017 (5) TMI 177 - CESTAT MUMBAI on the ground that in Super Synotex (India) Ltd the sales tax/ VAT was not paid by the assessee on the ground that the same was exempted at the time of removal of goods whereas in the present case VAT/Sales tax was very much payable while clearing the goods and subsequently the same was remitted by the State Government. This Tribunal considering the identical facts of remission of VAT/Sales tax in the case of Welspun Corporation Ltd held that the sales tax/VAT /CST actual payable but since the same was remitted it cannot be said that the sales tax/ VAT/CST was not payable. Therefore in terms of Section 4 (4) (d) (ii) of the Central Excise Act, 1944, the same is deducted from the assessable value. The ratio of the decision of Welspun Corporation Ltd is clearly applicable in the present case - the demand in the present case is not sustainable - Appeal allowed.

Summary

Issues Involved:

1. Inclusion of remitted VAT in the assessable value for excise duty.
2. Applicability of the Supreme Court judgment in Super Synotex (India) Ltd.
3. Time-barred demand.

Summary:

Inclusion of remitted VAT in the assessable value for excise duty:

The appellant, engaged in manufacturing Soda Lime Amber empty Glass Bottles, availed a composite scheme under the New Incentive Policy of 1995-2000 by the Government of Gujarat, which included sales tax exemption and deferment. A show cause notice was issued alleging that the appellant retained VAT/CST amounting to Rs. 8,00,34,587/- and proposed a demand of Central Excise Duty of Rs. 1,01,71,736/-. The appellant contended that the VAT, although collected, was remitted by the State Government and thus should not be included in the assessable value for excise duty. They relied on the Mumbai Tribunal's decision in Welspun Corporation Ltd and various other judgments, asserting that remitted VAT cannot be included in the assessable value as per Section 4 (4) (d) (ii) of the Central Excise Act, 1944.

Applicability of the Supreme Court judgment in Super Synotex (India) Ltd:

The Adjudicating Authority confirmed the demand based on the Supreme Court judgment in Super Synotex (India) Ltd, which the appellant argued was not applicable to their case. The Tribunal distinguished the present case from Super Synotex, noting that in the latter, sales tax was exempted at the time of removal, whereas in the present case, VAT was payable at the time of clearance and subsequently remitted. The Tribunal, referencing the Welspun Corporation Ltd case, held that remitted VAT cannot be included in the assessable value, as it was actually payable at the time of removal.

Time-barred demand:

The appellant argued that the demand was time-barred, as the show cause notice was issued in January 2012 for the period from December 2006 to April 2010. They cited various judgments to support their claim. The Tribunal, agreeing with the appellant, found that the demand was indeed time-barred.

Conclusion:

The Tribunal concluded that the demand in the present case is not sustainable, set aside the impugned order, and allowed the appeal with consequential relief.

(Pronounced in the open court on 14.07.2023)