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2025 (4) TMI 1534 - AT - Central ExciseEvasion of Central Excise duty - non-inclusion of the amount of VAT/Sales Tax collected and retained by them in the assessable value in violation of Section 4 of the Central Excise Act 1944 - HELD THAT - The facts are not in dispute. The appellant was eligible for remission under the State VAT scheme. Therefore while the appellant were charging 100% VAT on their customers they were retaining 99% of the VAT and paying only the balance 1% VAT to the State Govt. There is nothing on record that this 99% was required to be paid subsequently in instalments. Thus it gets clarified that this amount is simply retained by the appellant. This very issue was considered by the Hon ble Supreme Court in the cited case of Commnr. Of Central Excise Jaipur vs M/S. Super Synotex (India) Ltd. Ors 2014 (3) TMI 42 - SUPREME COURT wherein it has been held that As is seen from the facts 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of transaction value as substituted with effect from 1.7.2000. Therefore the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book. It is found that the issue had reached the Apex Court which has held that the retained portion of VAT is required to be treated as additional consideration and hence the same is to be added to the Assessable Value. The appellant is required to pay the differential Excise Duty for the normal period along with interest. However considering the factual details of the case all the penalties are set aside. The demand of central excise duty for the normal period of limitation along with interest upheld. No penalty imposable on the appellant. The demand confirmed for the extended period of limitation is set aside. The issue is remanded back to the adjudicating authority only for the limited purpose of verifying the correctness of duty payment for the normal period along with interest by the appellant. Conclusion - VAT remission or sales tax incentives retained by the manufacturer and not paid to the State Government constitute additional consideration and must be included in the assessable value for Central Excise duty under Section 4 of the Central Excise Act 1944. Appeal disposed off by way of remand.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) Whether the amount of VAT remission or sales tax incentive retained by the appellant under the State VAT scheme is includible in the assessable value for the purpose of levy of Central Excise duty under Section 4 of the Central Excise Act, 1944; (b) Whether the Show Cause Notice issued for recovery of excise duty on such VAT remission was barred by limitation, particularly in the absence of any suppression of facts by the appellant; (c) Whether the retrospective application of the Supreme Court judgment dated 28.02.2014 in the case of Commissioner of Central Excise, Jaipur-II vs. M/s Super Synotex (India) Ltd. is permissible in the facts of the present case; (d) Whether the penalties and interest demanded along with the excise duty are justified; (e) Verification of the payment made by the appellant towards excise duty on VAT remission for the normal period. 2. ISSUE-WISE DETAILED ANALYSIS (a) Inclusion of VAT remission in Assessable Value The appellant contended that the remission of VAT granted by the State Government was a subsidy or incentive for capital investment and hence should not be treated as additional consideration to be included in the assessable value under Section 4 of the Central Excise Act, 1944. They relied on various Tribunal decisions holding that VAT incentives are not includible in the assessable value. The appellant also submitted compliance with the Supreme Court judgment dated 28.02.2014 by making payment of excise duty on VAT remission for the period March 2014 to March 2015. The Revenue's Authorized Representative (AR) countered by relying on the Supreme Court judgment in the case of Commissioner of Central Excise, Jaipur vs. M/s Super Synotex (India) Ltd., which held that the amount of VAT remission or sales tax incentive retained by the assessee is to be treated as additional consideration and must be included in the assessable value for excise duty purposes. The AR also cited a recent decision of the same Tribunal bench in Jalshakti Plastics Industries vs. Commissioner (Appeals) CGST & Central Excise, which followed the Supreme Court ruling and held that VAT incentives retained by the assessee are includible in assessable value. The Tribunal noted that the facts were undisputed: the appellant collected 100% VAT from customers but retained 99% of it under the remission scheme, paying only 1% to the State Government, with no evidence that the retained portion was to be subsequently paid. This retention was thus treated as additional consideration forming part of the transaction value under Section 4(4)(d) of the Central Excise Act. The Tribunal extensively quoted the Supreme Court's reasoning that unless the sales tax is actually paid to the State Government, the retained amount cannot be excluded from assessable value. The Tribunal distinguished the appellant's cited case laws on the ground that those either did not consider the Supreme Court judgment or involved situations where VAT remission was required to be utilized for subsequent VAT payments, which was not the case here. (b) Limitation and Suppression of Facts The appellant argued that the Show Cause Notice was barred by limitation and that there was no suppression of facts to justify an extended period of limitation. The Tribunal agreed with this contention, relying on the recent decision in Jalshakti Plastics Industries, which held that where the appellant had not suppressed any information and where earlier Tribunal decisions supported the exclusion of VAT remission from assessable value, the extended period demand was not sustainable. The Tribunal therefore set aside the demand confirmed for the extended period of limitation. (c) Retrospective Application of Supreme Court Judgment The appellant contended that the Supreme Court judgment dated 28.02.2014 should not be applied retrospectively to the facts prior to that date. The Tribunal's analysis implicitly supported this view by distinguishing the normal period from the extended period and allowing excise duty recovery only for the normal period, in line with limitation principles and the timing of the Supreme Court ruling. (d) Penalty and Interest The Tribunal held that while excise duty and interest for the normal period were payable, the imposition of penalties was not justified given the factual circumstances, compliance by the appellant, and the lack of suppression or mala fide intent. Hence, all penalties were set aside. (e) Verification of Payment for Normal Period The appellant submitted payment of Rs.88,935/- towards excise duty on VAT remission for March 2014 to March 2015, supported by e-payment challans. However, this payment was not mentioned in either the original order or the appellate order. The Tribunal remanded the matter to the adjudicating authority for verification of the correctness of duty payment for the normal period along with interest. 3. SIGNIFICANT HOLDINGS "Unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of 'transaction value' under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of 'transaction value' as substituted with effect from 1.7.2000. Therefore, the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book." This principle, extracted verbatim from the Supreme Court judgment, formed the cornerstone of the Tribunal's decision. Core principles established: - VAT remission or sales tax incentives retained by the manufacturer and not paid to the State Government constitute additional consideration and must be included in the assessable value for Central Excise duty under Section 4 of the Central Excise Act, 1944. - The extended period of limitation for demand of excise duty cannot be invoked in the absence of suppression or concealment of facts by the assessee. - Penalties are not imposable where there is no mala fide intent or suppression, and compliance has been made with the law as understood at the relevant time. - Retrospective application of judicial decisions is subject to limitation principles and cannot be used to extend demand beyond the normal period. Final determinations: - The demand of Central Excise duty including interest for the normal period is upheld. - The demand confirmed for the extended period of limitation is set aside. - All penalties imposed are set aside. - The matter is remanded to the adjudicating authority to verify the correctness of duty payment for the normal period along with interest.
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