2019 (1) TMI 556 - AT - Central Excise

Valuation - includibility - amount of sales-tax collected from the buyers and retained by them to the extent of sales-tax liability being discharged through VAT 37-B Challans - Held that - It is an admitted fact that the said subsidy is credited to the sales tax account of the appellant which he receives by way of VAT 37B Challans. It is also apparently an admitted fact that the appellant was paying total VAT charged at applicable rates on sale of goods to the State Exchequer and was filing the VAT returns. The VAT 37B Challans, the appellant was utilising to discharge the output VAT liability for the subsequent period. The appellant herein had opted for remission of tax scheme un4er which a portion of the VAT paid was remitted back to the appellant. It becomes clear that when the sales tax/ VAT is payable at the time of removal, in that case, in terms of Section 4D of Central Excise Act, the same is not includable in transaction value. Remission in the nature of subsidy - additional consideration or not? - Held that - In the present case, the remission is in the nature of subsidy which the appellant was receiving from the State Government in the form of VAT 37B Challans and not from the buyers of the appellant. The said remission was not only as good as cash but can also not be considered as an additional consideration - In terms of the aforesaid definition, it is clear that the transaction value includes all the payments made by the buyer to the assessee. However, in the instant case, the subsidy has been paid to assessee by the State Government. Only the mode of payment is by way of crediting the sales tax head under VAT challan in favour of the appellant. Thus, it could not be said that the amount is in the nature of additional consideration. Extended period of limitation - Held that - The evidence about any positive act except the allegation of using the VAT Challans for discharging the VAT liability for subsequent period could not be produced on record - discharge of liability by way of VAT 37b Challans has already been held as legally sustainable methodology of discharging tax liability for subsequent period. It is held that, in the given circumstances, Department was not entitled to invoke the extended period of limitation. Appeal allowed.

Summary

Issues:
1. Alleged non-payment of Central Excise duty on sales-tax collected and retained by appellant.
2. Applicability of Rajasthan Investment Promotion Scheme (RIPS) subsidy.
3. Inclusion of subsidy in assessable value.
4. Interpretation of transaction value under Section 4(3)(d) of Central Excise Act.
5. Comparison with previous legal judgments.
6. Alleged mis-representation by the appellant.

Analysis:
1. The issue revolves around the appellant's alleged non-payment of Central Excise duty on sales-tax collected and retained. The Department claimed that the appellant did not pay the duty on the sales-tax amount retained through VAT 37-B Challans, leading to a show cause notice and subsequent orders for recovery. The appellant contested this claim, citing the nature of sales-tax benefits under RIPS as incentives for investment promotion, not linked to production or sale price, and thus not a short payment of sales-tax.

2. The appellant's eligibility for subsidies under RIPS and the utilization of VAT 37B Challans for VAT liability discharge were crucial points of contention. The appellant argued that the subsidy received through these challans was wrongly considered as excise duty payment, leading to the demand for Central Excise duty. The appellant sought to set aside the order based on this argument.

3. The Tribunal analyzed the inclusion of subsidy in the assessable value, considering legal precedents and the nature of the subsidy received by the appellant. The Department justified the inclusion based on previous court decisions, but the Tribunal differentiated between remission and exemption, highlighting that the subsidy received did not amount to additional consideration and should not be included in the assessable value for duty calculation.

4. The interpretation of transaction value under Section 4(3)(d) of the Central Excise Act was crucial in determining the legality of including the subsidy in the assessable value. The Tribunal emphasized that the subsidy received by the appellant did not qualify as additional consideration paid by the buyer, as it was a payment from the State Government credited through VAT challans, not directly from buyers.

5. The Tribunal compared the present case with previous legal judgments like Maruti Suzuki case to establish the differences in the nature of incentives or subsidies received. The Tribunal highlighted that the appellant had paid the entire sales tax collected without retention, unlike the case in Maruti Suzuki, where a portion was retained. This distinction influenced the Tribunal's decision regarding the grant of sales tax subsidy.

6. The issue of alleged mis-representation by the appellant was also addressed, with the Tribunal concluding that no evasion of duty occurred as the appellant had paid the sales tax to the State Exchequer without retention. The Tribunal clarified the misunderstanding on the Department's part regarding the transaction value definition and held that the appellant was not liable for the alleged wrong interpretation. The appeal was allowed, setting aside the order under challenge.