2017 (5) TMI 177 - AT - Central Excise

Valuation - claim of Refund of excess duty paid - recovery of sales tax amount/ VAT amount and to retain with themselves as an incentive - case of Revenue is that as per the provisions of Rule 6 of Central Excise Valuation Rules, 2000 read with Section 4 (1) and 4 (3) (a) (d) of the Central Excise Act, 1944 and Para 10 and 11 of Board s Circular No M.F. (DR) F.No.354/81/2000 - TRU dt. 30.06.2000 the amount of sales tax retained by the Respondent as an incentive was required to be added/considered for levy of Central Excise duty as an additional consideration. Rejection of refund claim on the ground that the Sales tax was collected by the Respondent from their customers and retained by them. That since the said amount was not actually payable, the same is liable to be included in assessable value and is liable for duty. Held that - the tax was actually payable and there was as such no blanket exemption from sales tax. The term remission from sales tax itself means that the sales tax was actually payable at the time of clearance of goods but was remitted at a later date by passing of assessment orders by the Sales Tax authorities - the sales tax is actually payable to the government at the time of removal of goods from the place of removal . The liability to pay the sales tax/ Vat is not extinguished at the time of removal of goods since it is not exempted from sales tax/Vat. It is only after the assessment of the sales tax officer and subject to the condition that the Respondent s liability to the Sales tax is remitted . Thus when the sales tax/ Vat is payable at the time of removal in that case in terms of Section 4 (d) of the Central Excise Act, the same is not includible in the transaction value. Further the sales tax amount was adjusted against the remission granted by the sales tax authority under an assessment. Once the Sales Tax department has assessed the Sales Tax as paid, the Central Excise department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them. Hence, we find that once the Sales Tax department assessed the Sales Tax as paid, the condition of Section 4(3)(d) of the Central Excise Act, 1944 stands fulfilled. In case of exemption no tax is actually paid or actually payable, whereas in the case of remission, tax is actually payable and paid which is allowed to be remitted by way of retention or by way of refund - In the instant case, it is not that Sales Tax was not only payable but in fact it stood actually paid, as the remission was nothing but the incentive or capital subsidy which the State Government granted with respect to the investment made by the appellants in the earthquake ravaged region of Kutch of State of Gujarat. Instead of recovering Sales Tax and then refunding the same as capital subsidy, the State Government had remitted the same to appellants. Consequently like CST since VAT which was payable was actually paid the same is required to be excluded from the transaction value. Hence for this reason also the sales tax remitted by the Government towards incentive of Capital investment cannot be a part of the transaction value. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Whether the sales tax retained by the respondent under the Incentive Scheme 2001 should be included in the assessable value for the levy of Central Excise duty.
2. Distinction between "remission" and "exemption" of sales tax under the Gujarat VAT Act, 2003.
3. Applicability of the Supreme Court's judgment in the case of M/s Super Synotex (India) Ltd.
4. Whether the remission of sales tax as capital subsidy should be considered part of the transaction value.

Detailed Analysis:

1. Inclusion of Sales Tax Retained Under Incentive Scheme in Assessable Value:
The Revenue contended that the sales tax retained by the respondent as an incentive under the Incentive Scheme 2001 should be added to the assessable value for the levy of Central Excise duty. This was based on Rule 6 of the Central Excise Valuation Rules, 2000, and Section 4 (1) and 4 (3) (a) (d) of the Central Excise Act, 1944. The respondent argued that the sales tax was payable at the time of clearance of goods and thus, should not be part of the assessable value. The adjudicating authority initially rejected the refund claim, stating that the sales tax collected and retained was not actually payable and thus should be included in the assessable value. However, the Commissioner (Appeals) allowed the respondent's appeal, leading to the Revenue's current appeal.

2. Distinction Between "Remission" and "Exemption" of Sales Tax:
The respondent emphasized the difference between "remission" and "exemption" of sales tax. "Remission" implies that the sales tax is payable at the time of clearance but is later remitted, whereas "exemption" means the tax is not payable at all. The Gujarat VAT Act, 2003, under Section 41 and Rule 18B, provides for remission, not exemption, meaning the sales tax was actually payable and thus, should not be included in the assessable value. The Tribunal agreed, stating that the remission of sales tax under the Incentive Scheme 2001 was a form of capital subsidy directly related to capital investment.

3. Applicability of Supreme Court's Judgment in M/s Super Synotex (India) Ltd:
The Revenue relied on the Supreme Court's judgment in M/s Super Synotex (India) Ltd., which held that sales tax not actually paid or payable should be included in the transaction value. However, the Tribunal distinguished this case, noting that the Super Synotex case dealt with an exemption scheme, whereas the present case involved remission. The Tribunal noted that in the Super Synotex case, the sales tax was neither paid nor payable, whereas, in the current case, the sales tax was payable and later remitted as an incentive.

4. Remission of Sales Tax as Capital Subsidy:
The Tribunal found that the remission of sales tax under the Incentive Scheme 2001 was a form of capital subsidy for investments in the Kutch district. The sales tax was actually payable at the time of clearance and was later remitted as an incentive. This remission was considered a capital subsidy and not an additional consideration for the sale of goods. The Tribunal also noted that the Gujarat VAT Act, 2003, under Section 11 (7A), deems remitted tax as statutorily paid, further supporting the respondent's position.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order, concluding that the sales tax retained under the Incentive Scheme 2001 should not be included in the assessable value for the levy of Central Excise duty. The Revenue's appeals were dismissed, and the Tribunal noted that the remission of sales tax as a capital subsidy did not form part of the transaction value. The Tribunal also distinguished the case from the Supreme Court's judgment in M/s Super Synotex (India) Ltd., emphasizing the difference between remission and exemption of sales tax.

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