2019 (4) TMI 748 - AT - Central Excise

Valuation - claim of Refund of excess duty paid - recovery of sales tax amount/ VAT amount and to retain with themselves as an incentive - duty on additional consideration of sales-tax collected from the buyers - Section 4 (3) (d) of Central Excise Act, 1944 - Held that - The appellant herein had opted for remission of tax scheme under 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. Tribunal Mumbai in the case of CCE, Mumbai Vs. M/s Welspun Corporation Ltd. 2017 (5) TMI 177 - CESTAT MUMBAI has held that once the Sales Tax Department has assessed the sales tax as paid, the Central Excise Department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, sales tax was not paid by them. After the assessment by the Sales Tax Department for sales tax to have been paid, condition of Section 4(3)(d) of Central Excise Act, 1944 stands fulfilled. There is a difference between remission and exemption. As while in case of exemption, the levy itself is statutorily exhausted and no sales tax is paid or payable by the assessee whereas in case of remission, the sales tax is payable as there is no exemption from levy and /or payment of sales tax at the time of clearance and the same has to be statutorily discharged - 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. 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 it 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. Time 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. The 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 Department was not entitled to invoke the extended period of limitation. The demand could be confined only to the normal period of one year - the demand as such is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Central Excise duty on additional consideration of sales-tax collected from buyers.
2. Applicability of Rajasthan Investment Promotion Scheme, 2010 (RIPS) on subsidy received.
3. Interpretation of transaction value under Section 4(3)(d) of Central Excise Act.
4. Comparison with legal precedents regarding remission, exemption, and sales tax subsidy.
5. Alleged mis-representation by the appellant.

Analysis:

Central Excise Duty on Sales-Tax Consideration:
The appellant, engaged in manufacturing scooters and motorcycles, faced a demand for Central Excise duty on sales-tax collected from buyers but not paid to the State Exchequer. The dispute revolved around the inclusion of this amount in the transaction value. The Tribunal noted the appellant's compliance with VAT payments and the issue of alleged duty evasion was scrutinized.

Applicability of RIPS Subsidy:
The appellant availed benefits under RIPS, receiving subsidies credited through VAT Challans. The Department treated this as retention of sales tax, leading to the duty demand. The Tribunal differentiated between remission and exemption, emphasizing that the subsidy did not constitute additional consideration as it was received from the State Government, not buyers.

Interpretation of Transaction Value:
The Tribunal analyzed the definition of transaction value under Section 4(3)(d) of the Central Excise Act, emphasizing that payments made by buyers to the assessee constitute transaction value. However, in this case, the subsidy received was not considered additional consideration as it was a mode of payment from the State Government.

Legal Precedents and Comparison:
The Tribunal cited legal precedents to support its stance, distinguishing between cases of exemption, incentive, and subsidy. It highlighted that the subsidy received through VAT Challans was akin to cash for VAT payments in subsequent periods, aligning with the legal payment of tax under the Rajasthan scheme.

Alleged Mis-representation:
The Tribunal dismissed allegations of mis-representation, noting that no amount was retained by the appellant, and no evasion of duty occurred. It clarified the Department's misunderstanding of relevant provisions, especially the definition of transaction value. The Tribunal held the demand unsustainable and set aside the order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the order and emphasizing the legal distinction between subsidy, exemption, and incentive in the context of Central Excise duty and sales tax payments.