2019 (1) TMI 366 - AT - Central Excise

Valuation - inclusion of subsidy amounts in the value of the goods cleared by the appellants in assessable value - Section 4 of the Central Excise Act - Held that - It appears that the identical issue has come up before the Tribunal in the case of Shree Cements Ltd. V/s CCE, Alwar 2018 (1) TMI 915 - CESTAT NEW DELHI , where it was held 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.

Summary

Issues:
Interpretation of Investment Promotion Scheme under Rajasthan Government regarding VAT liability, inclusion of subsidy amounts in assessable value under Central Excise Act, applicability of VAT payments using subsidy challans, comparison with previous case laws, determination of actual VAT payment for excise duty benefits.

Analysis:
The appeal was filed against an Order-in-Appeal by the Commissioner (Appeals), Central Excise & CGST, Alwar, concerning the appellant's eligibility for subsidies under the 'Rajasthan Investment Promotion Scheme.' The dispute arose from the Revenue's inclusion of subsidy amounts in the value of goods cleared by the appellants, leading to a demand for differential duty. The Tribunal examined whether the subsidy amounts disbursed in Form 37B for VAT liability could be considered as actual VAT payment under Section 4 of the Central Excise Act. Reference was made to a similar case involving Shree Cements Ltd., emphasizing the necessity to determine the treatment of such subsidies in the assessable value.

The Tribunal analyzed the concept of transaction value under Section 4 of the Central Excise Act, highlighting the importance of actual VAT payment for excise duty benefits. Citing the decision of the Apex Court in a specific case, it was noted that unless sales tax/VAT is genuinely paid, no benefit towards excise duty can be granted. However, a previous Tribunal case involving Welspun Corporation Ltd. presented a different interpretation based on the Gujarat VAT Act, where subsidy amounts were not required to be included in the transaction value. The Tribunal considered the legal nature of VAT payments using subsidy challans and the scheme of the Government of Rajasthan, concluding that such payments should be recognized as legitimate tax payments.

By referring to the observations in the Welspun Corporation Ltd. case, the Tribunal emphasized the direct relationship between remission of tax and capital investment, ultimately determining that there was no justification for including VAT amounts paid through VAT 37B Challans in the assessable value. Consequently, the impugned orders were set aside, and the appeals were allowed, aligning with the decision in the Welspun Corporation Ltd. case. The Tribunal's decision was based on the legal validity of VAT payments made using subsidy challans and the specific conditions outlined in the Investment Promotion Scheme under the Rajasthan Government.

In conclusion, the Tribunal's analysis focused on the interpretation of the Investment Promotion Scheme, the treatment of subsidy amounts in the assessable value, the distinction between actual VAT payment and subsidy utilization, and the comparison with relevant case laws to determine the correct application of tax liabilities under the Central Excise Act. The decision highlighted the importance of recognizing legitimate tax payments made through subsidy challans and the direct link between tax remission and capital investment in assessing excise duty liabilities.