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2019 (1) TMI 241 - AT - Central ExciseCENVAT Credit - inclusion of subsidy in assessable value - Section 4 of the Central Excise Act, 1944 - Held that - In the present case, for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax. In view of the above, Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. Tribunal in the Welspun Corporation Ltd. 2017 (10) TMI 1303 - CESTAT MUMBAI conclude that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.
Issues:
- Whether the subsidy amounts granted in form 37B can be included in the assessable value of goods for excise duty calculation. - Whether the VAT liability discharged using subsidy challans constitutes actual payment of VAT. - Interpretation of Section 4 of the Central Excise Act regarding deduction of VAT actually paid from the transaction value. - Comparison of decisions in the case of Super Synotex India Ltd and Welspun Corporation Ltd by the Tribunal. Analysis: Issue 1: Inclusion of Subsidy Amounts in Assessable Value The case revolved around the appellants' eligibility for subsidies under the Rajasthan Investment Promotion Scheme. The Revenue contended that the subsidy amounts granted in form 37B should be included in the value of goods cleared by the appellants for excise duty calculation. However, the Tribunal examined the scheme's nature, emphasizing that the subsidy was not an exemption but required actual payment of VAT. The Tribunal held that the subsidy amounts need not be included in the assessable value, citing the Welspun Corporation Ltd case where a similar decision was made regarding remission of tax scheme. Issue 2: Actual Payment of VAT The disagreement centered on whether the VAT liability discharged using subsidy challans constituted actual payment of VAT. The Revenue argued that such payments were not equivalent to actual VAT payment, leading to the demand for differential duty. Conversely, the appellants contended that the scheme mandated VAT payment, and the subsidy received was a portion of the VAT initially paid. The Tribunal sided with the appellants, stating that the subsidy challans were considered legal payments of tax under the Rajasthan Government's scheme. Issue 3: Interpretation of Section 4 of the Central Excise Act The Tribunal analyzed Section 4 of the Central Excise Act, focusing on the deduction of VAT actually paid from the transaction value for excise duty calculation. It noted that any sales tax/VAT actually paid could be deducted from the transaction value, as per the Act. The Tribunal referred to the decision in the Super Synotex India Ltd case, highlighting the requirement for actual payment of VAT to avail benefits under Section 4(3)(d). Issue 4: Comparison of Tribunal Decisions The Tribunal compared the decisions in the Super Synotex India Ltd case and the Welspun Corporation Ltd case. While the Apex Court emphasized actual payment of VAT post-2000, the Tribunal in the Welspun case distinguished the inclusion of subsidy amounts in the transaction value based on the Gujarat VAT Act. Ultimately, the Tribunal aligned with the Welspun Corporation Ltd case's reasoning and concluded that VAT amounts paid using VAT 37B Challans should not be included in the assessable value. In conclusion, the Tribunal set aside the impugned orders, allowing the appeals in favor of the appellants based on the interpretation of the Rajasthan Government's subsidy scheme, the actual payment of VAT using subsidy challans, and the application of Section 4 of the Central Excise Act.
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