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2025 (4) TMI 242 - AT - Central ExciseShort payment of Central Excise duty due to the exclusion of VAT retention from the assessable value for the period from December 2009 to March 2014 - HELD THAT - It is not the case that appellant has retained the VAT as his income infact 99% of VAT retention by the appellant is a capital subsidy /incentive given by the State Government for setting up a new industrial unit as per Industrial Policy of Assam 2003 read with Assam Industrial Taxation Remission Scheme 2005. In that circumstances the decision in the case of Super Synotex (India) Ltd. 2014 (3) TMI 42 - SUPREME COURT is not applicable to the facts of the case. The issue has been examined by this Tribunal in the case of M/s. Harit Polytech Pvt. Ltd. 2023 (7) TMI 1547 - CESTAT DELHI where it was held that Since the subsidy under Promotion Policy is held to not to be an additional consideration it is held that the impugned demands cannot sustain. Conclusion - The remission of 99% of VAT retention by the appellant is nothing but a subsidy given by the State Government as per industrial policy. Therefore the same is not includable in the assessable value of the goods cleared by the appellant. No demand is sustainable as per the Show Cause Notice issued to the appellant. Hence whole of the demand is set aside. Consequently no penalty is imposable on the appellant - Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment is whether the retention of 99% VAT by the appellant, granted as an incentive under the Assam Industries (Tax Remission) Scheme, 2005, should be included in the assessable value under Section 4 of the Central Excise Act, 1944. The question revolves around whether such retention constitutes an additional consideration that affects the calculation of excise duty. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework centers on Section 4 of the Central Excise Act, 1944, which governs the determination of assessable value for the purpose of excise duty. The appellant argued that the VAT retention was an incentive or subsidy and not an additional consideration affecting the assessable value. The appellant relied on previous decisions, including M/s. Harit Polytech Pvt. Ltd. and Welspun Corporation Ltd., where similar issues were adjudicated, establishing that such subsidies are not additional considerations. Court's Interpretation and Reasoning The Tribunal examined the nature of the VAT retention, concluding that it was a subsidy provided by the State Government to encourage industrial development, as per the Industrial Policy of Assam, 2003, and the Assam Industries (Tax Remission) Scheme, 2005. The Tribunal differentiated this case from the precedent set in CCE, Jaipur II vs. Super Synotex (India) Ltd., as the VAT retention was not retained as income by the appellant but was a state-granted subsidy. Key Evidence and Findings The Tribunal noted that the VAT retention was not a result of the appellant's income generation but was a capital subsidy/incentive from the State Government. The Tribunal referenced similar cases, particularly M/s. Harit Polytech Pvt. Ltd., which held that such subsidies are not additional considerations, thereby supporting the appellant's position. Application of Law to Facts Applying the law, the Tribunal found that the VAT retention did not constitute an additional consideration under Section 4 of the Central Excise Act, 1944. The Tribunal emphasized that the subsidy was a state incentive for setting up a new industrial unit and not an amount retained as income by the appellant. Treatment of Competing Arguments The Tribunal considered the respondent's reliance on the decision in Super Synotex but found it inapplicable due to the distinct nature of the VAT retention in this case. The Tribunal favored the appellant's argument, supported by precedents that subsidies under state incentive schemes do not alter the assessable value. Conclusions The Tribunal concluded that the VAT retention by the appellant was a subsidy and not includable in the assessable value. Consequently, the demand for excise duty, interest, and penalty based on the inclusion of VAT retention was unsustainable. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal stated, "Since the subsidy under Promotion Policy is held to not to be an additional consideration, it is held that the impugned demands cannot sustain." Core Principles Established The judgment reinforced the principle that subsidies or incentives granted by state governments under industrial policies do not constitute additional consideration for the purpose of calculating assessable value under the Central Excise Act. Final Determinations on Each Issue The Tribunal set aside the demand for excise duty, interest, and penalty, concluding that the VAT retention was a subsidy and not part of the assessable value. The appeal was allowed with consequential relief to the appellant.
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