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2017 (6) TMI 419 - AT - Central ExciseValuation - appellant was allowed to recover the amount of sales tax involved on sales transaction of final product and retain the same - According to the department such an amount which has been retained by appellant is additional consideration flowing from buyer to appellant and as per the provisions of Rule 6 of the Central Excise Valuation Rules, read with Section 4 of the CEA and Board s Circular dt 30th June 2000, central excise duty needs to be discharged - Held that - reliance placed in the case of Commissioner of Central Excise, Mumbai-I Versus M/s Welspun Corporation Ltd. 2017 (5) TMI 177 - CESTAT MUMBAI , where the issue is identical to the issue in the case before us, where, the assessee had paid the excise duty under proteston the amounts of the sales tax incentives remitted and filed a refund claim while in the case in hand there is a demand for the duty on the amount retained by appellant as sales tax incentives and subsequently remitted by the assessing officer under GVAT Act - we have no hesitation to hold that the impugned order is unsustainable and liable to be set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the sales tax remission received by the appellant as an incentive under the Economic Development of Kutch District scheme should be included in the assessable value for the purpose of excise duty. 2. Whether the extended period for issuing the show cause notice is applicable in this case. 3. Whether the remission of sales tax qualifies as a capital subsidy and its impact on the assessable value. Detailed Analysis: 1. Inclusion of Sales Tax Remission in Assessable Value: The appellant, engaged in manufacturing excisable goods (MS Pipes), availed sales tax remission under the Economic Development of Kutch District scheme. The department contended that the sales tax amount retained by the appellant constitutes additional consideration from the buyer and should be included in the assessable value as per Rule 6 of the Central Excise Valuation Rules and Section 4 of the Central Excise Act (CEA). The appellant argued that the remission is a capital subsidy and not a consideration from the buyer, citing precedents like Ajanta Manufacturing Ltd. and CCE v. Mazagon Dock Ltd. The Tribunal examined the provisions of the GVAT Act and concluded that the remission granted under Section 41 of the GVAT Act means the sales tax was actually payable and later remitted. The Tribunal referred to the case of Welspun Corporation Ltd., where it was held that sales tax payable at the time of removal but later remitted should not be included in the transaction value. The Tribunal noted that the remission is a capital subsidy and not an additional consideration, thus not includable in the assessable value. 2. Applicability of Extended Period for Show Cause Notice: The appellant argued that the extended period for issuing the show cause notice is not applicable as the remission was known to the Revenue, evidenced by the EA-2000 audit and subsequent communication in 2010. The Tribunal accepted this argument, noting that the department had accepted the appellant's explanation during the audit and did not initiate proceedings immediately. Therefore, the issuance of the show cause notice after a considerable time is time-barred. 3. Remission as Capital Subsidy: The appellant contended that the remission is a capital subsidy, not a consideration from the buyer. The Tribunal agreed, emphasizing that the remission is granted under a specific scheme for economic development and is intended as an incentive for investment in the Kutch area. The Tribunal also noted the distinction between remission and exemption, with remission implying the tax was payable and later remitted, whereas exemption means no tax is payable at all. The Tribunal reiterated that the remission qualifies as a capital subsidy and should not be included in the assessable value. Conclusion: The Tribunal set aside the impugned order, holding that the sales tax remission received by the appellant under the Economic Development of Kutch District scheme is a capital subsidy and not includable in the assessable value for excise duty purposes. The extended period for issuing the show cause notice was deemed inapplicable, and the appeal was allowed. The decision aligns with the precedent set in the Welspun Corporation Ltd. case.
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