2019 (3) TMI 97 - AT - Central Excise

Valuation - subsidy in the form of Challan Form 37B - inclusion of subsidy amount in the assessable value - Section 4 of the Central Excise Act, 1944 - Revenue has taken the view that payment of VAT using 37B Challans cannot be considered as actual payment of VAT - Held that - As per the concept of transaction value outlined in Section 4, with effect from 01/07/2000, any sales tax/VAT actually paid can be deducted from the transaction value for payment of excise duty. 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. 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: Inclusion of subsidy amount in the valuation adopted by the appellant.

Analysis:
1. The appeal concerned the inclusion of subsidy amount in the valuation adopted by the appellant. The appellant, operating under the Rajasthan Investment Promotion Scheme, was eligible for subsidies under various schemes of the Rajasthan Government. The dispute arose when the Revenue included the subsidy amounts in the value of goods cleared by the appellants, demanding differential duty, interest, and penalties.

2. The appellant argued that the VAT paid to the Government before being granted as subsidy through Challan Form 37B should be considered as actual payment of tax. The appellant contended that the scheme of the Rajasthan Government did not exempt them from paying VAT but required the VAT to be actually paid, allowing deduction under Section 4 (3) (d) of the Central Excise Act. The appellant relied on a Tribunal decision to support their argument.

3. The Revenue, however, justified their stance by referring to a Supreme Court decision, emphasizing that the amount refunded by the Rajasthan Government to the appellants needed to be included in the assessable value. The Revenue argued that the subsidy amounts should be considered part of the assessable value of the goods manufactured by the appellants.

4. The Tribunal analyzed the case, noting that the appellants were required to discharge their VAT liability under the Rajasthan Government schemes. The core issue was whether the subsidy amounts should be included in the assessable value of goods under Section 4 of the Central Excise Act. The Tribunal considered the concept of transaction value and the deduction allowed for VAT actually paid.

5. Referring to a previous Tribunal decision in a similar case, the Tribunal concluded that there was no justification for including the VAT amounts paid by the appellant using VAT 37B Challans in the assessable value. Therefore, the impugned orders were set aside, and the appeals were allowed, ruling in favor of the appellant.