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TMI Blog2023 (3) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... re the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods such value shall, in a case where the goods are sold by the assessee, be the transaction value provided the assessee and the buyer of the goods are not related and the price is the sole consideration. Transaction Value, in terms of section 4 (3) (d) of the Excise Act, means the price actually paid or payable for the goods when sold but does not include the amount of duty of excise, sales tax and other taxes, if any actually paid or actually payable on such goods. The Scheme that came for consideration before the Supreme Court in Super Synotex was Sales Tax New Incentive Scheme for Industry, 1989 (Sales Tax Incentive Scheme) . Under the said Scheme, an assessee was entitled to retain 75% of the sales tax collected from the customers and was required to deposit only 25% with the Government. The Commissioner held that the assessee was availing partial sales tax exemption under the Sales Tax Incentive Scheme upto 75% of the tax liability and was paying only 25% of the sales tax, despite collecting the entire consideration from the customers and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining 75% of the amount was retained by the assessee, which amount was treated to be the price of the goods. In the promotion policy involved in the present case, the subsidy does not reduce the sales tax that is required to be paid by the assessee as the entire amount of sales tax collected by the assessee from the customer is paid. The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under section 4 of the Excise Act. The reference is answered in the following manner: a- Subsidy under the promotion policy does not reduce the selling price; b- The amount of subsidy under the promotion policy is not an additional consideration; c- The decision of the Supreme Court in Super Synotex India would not be applicable to the present case; d- The subsidy amount under the promotion policy does not affect the selling price of the goods; e- Section 9 of the Rajasthan VAT Act, 2003 would have no application to the facts of the present case; and f- As regards appropriate case for reference to the ld. Third Member on the questions framed by the ld. Member (Technical), as neither party raised any objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical) OR The provisions of section 9 of Rajasthan VAT Act 2003 has got no application in the facts of the present case, as held by the Member (Judicial). (F) It is an appropriate case for reference to the ld. Third Member on the questions framed by the ld. Member (Technical) OR There is no case for reference to the Ld. Third Member and the appeal is fit to be allowed, as held by the Member (Judicial). 2. To examine the aforesaid issues, it would be necessary to first examine facts and for this purpose facts of Excise Appeal No. 51011 of 2019 are being considered. The factual aspect in other appeals are almost similar. It transpires from the records that M/s Harit Polytech Pvt. Ltd. (the appellant) received an investment subsidy under the Rajasthan Investment Promotion Policy-2003 (the promotion policy) and the same was adjusted by the appellant towards payment of Value Added Tax (VAT) . The promotion policy was floated by the State of Rajasthan to promote investments in the State and to generate employment opportunities. The sum total of the capital investment subsidy, in the case of new investments, was subjected to a maximum limit (both for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. (Explanation : For the removal of doubts, it is hereby declared that the price-cum duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, following directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other faxes, if any, actually paid, shall be deemed to include the duty payable on such goods. 5. Transaction value is defined in section 4 (3) (d) of the Excise Act, and is as follows:- (d) transaction value means the price actually paid or payable for the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt was adjusted through the subsidy amount of Rs. 1000/-. 9. The learned Member (Technical) examined whether the amount of subsidy can be considered as an additional consideration under rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (the 2000 Rules) and held that since subsidy is computed with reference to the tax paid and is percentage of the tax paid, it is directly or indirectly related to sale of goods and would be an additional consideration received by the appellant. Thus, according to the learned Member (Technical), when the appellant collects the full amount of sales tax from the customers and deposits only a part of the same towards sales tax and retains the remaining amount, this remaining amount would have to be added to the transaction value. For coming to this conclusion the learned Member (Technical) placed reliance upon the decisions of the Supreme Court in Commissioner of Central Excise, Jaipur-II vs. Super Synotex (India) Ltd. [2014 (301) ELT 273 (SC)] , Commissioner of Central Excise, Jaipur vs. Shree Rajasthan Syntex Ltd. [2015 (318) ELT 626(SC)] , Commissioner of Central Excise, Delhi-III vs. Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such subsidy have been done by way of issue of VAT-37 B challan, which the appellant or enterprise can use for discharge of their sales tax liability in subsequent period. Under the facts and circumstances, it is not an amount, which is flowing to the appellant enterprise or manufacturer, from the buyer of the goods. Thus, it is not an additional consideration (on sale of goods) by any stretch of imagination. Rather it is the amount of subsidy, which is not related to the selling price of the appellant nor flowing directly or indirectly from the Government to the appellant enterprise, by way of price subsidy. 11 . Further, in the facts and circumstances of the present case, I find that the capital/wage subsidy has not reduced the selling price of the goods. Thus, there is no case of transfer value being depressed, which may amount to indirect flow from the buyer to the seller/appellant. 12. So far the ruling of the Apex Court in Indo Rama Synthetic (supra), the fact was that the selling price or consideration was at a lower price and the difference was being received by Indo Rama Synthetic (supra), through Advance Authorization issued by the DGFT against cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected and payable is Rs. 2500/- and the assessee adjusts the sales tax liability of Rs. 1000/- from the VAT 37B challan issued to him by the State Government towards the subsidy which he is entitled to receive under the promotion policy and deposits the remaining amount of Rs. 1500/- towards sales tax in cash through VAT 37A challan. 15. It has, therefore, to be examined whether out of the amount of Rs. 2500/- which the appellant had collected from the customers towards sales tax, the amount of Rs. 1000/- can be said to be an additional consideration in a situation where out of the total tax liability of Rs. 2500, Rs. 1000/- is paid through VAT 37B challan provided to him by the State Government as a subsidy and the balance amount of Rs. 1500/- is deposited by the appellant through VAT 37A challan. What needs to be noted is that the entire sales tax liability to the extent of Rs. 2500/- has been discharged by the appellant since Rs. 1000/- was deposited through VAT 37B challan and the remaining Rs. 1500/- was deposited in cash through VAT 37A challan. The Department has considered this Rs. 1000/, which the appellant had received from the customers towards sales tax, to be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In a case of exemption, sales tax is neither collectable nor payable and if still an assessee collects any amount on the head of sales tax, that would become the price of the goods. Therefore, an incentive scheme of the present nature has to be treated on a different footing because the sales tax is collected and a part of it is retained by the assessee towards incentive which is subject to assessment under the local sales tax law and, as a matter of fact, assessments have been accordingly framed. xxxxxxxxxx (emphasis supplied) 18. The Supreme Court, thereafter examined the effect of the amendment made in section 4 of the Excise Act w. e.f. 01.07.2000 and in this context examined the Circular dated 09.10.2002 issued by the Central Board of Excise and Customs. The observations made by the Supreme Court for arriving at the transaction value under section 4 of the Excise Act in the light of the aforesaid Circular dated 09.10.2022 are reproduced below:- 22. It is evincible from the language employed in the aforesaid circular that set off is to be taken into account for calculating the amount of sales tax permissible for arriving at the transaction value under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is basically the subsidy amount and it is not the case of the Department that subsidy amount has to be included in the transaction value. 21. The learned Member (Technical), after examining the provisions of the promotion policy as also the meaning of subsidy in Wikipedia, in Investopedia, Cambridge Dictionary and Oxford Dictionary, concluded that subsidy provided by the Government as part of the investment policy tends to reduce the sale price of the goods and as such the transaction value is depressed by the amount of subsidy so received. 22. The learned Member (Technical) concluded from the provisions of the promotion policy that since it was computed with reference to the tax paid and was a percentage of the tax paid, it would be an additional consideration received in view of the decision of the Supreme Court in Commissioner of C. Ex., Nagpur-I vs. Indo Rama Synthetics Ltd. [2015 (323) E.L.T. 20 (S.C.)] In the said decision the Supreme Court relied upon its earlier decision in Commissioner of Central Excise, Bhubaneswar vs. IFGL Refractories Ltd. [2005 (186) ELT 529 (SC)] . In IFGL Refractories the Supreme Court noted that the agreement provided that M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in IFGL Refractories, observed as follows:- 12. This argument does not convince us at all. Fact remains that the issuance of advance licence for intermediate supply to the assessee was facilitated as a result of surrender of advance licence in favour or the buyer by the buyer. Thus, getting the licence invalidated for direct import of items in favour of the buyer was the trigger point for issuance of the advance licence for intermediate supply in favour of the assessee. Possibility of refusal on the part of DGFT to issue licence in favour of the assessee is only in the realm of conjecture. Fact is that the assessee got the licence and it became possible only on account of sacrifice made by the buyers. Further, what is important is that the buyers got their advance licences for direct import in their favour invalidated with the sole purpose of purchasing the polyester staple fiber from the assessee at lesser price, i.e. 37.50 per kg. Therefore, the argument of the assessee that benefit in the form of imports without payment of duty flows to the assessee only pursuant to and based on licence issued by DGFT to the assessee and does not flow from the invalidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Ltd . [2017 (357) ELT 197 (Tri.-Bang.)] the issue that arose for consideration was whether the differential amount (difference between subsidized price and total price paid for the goods), received separately from Oil Pool Account by IOC Ltd. and paid to the manufacturer of the subject goods, would be part of the value of the goods under section 4 of the Central Excise Act, 1944 and whether duty of Central Excise was chargeable on the said differential amount. It is in this context that the Tribunal, after referring the decision of the Supreme Court in Super Synotex, held that: 6.7. We make note again that the additional reimbursement (consideration) is not an empty transaction. This is the transaction which is with reference to the subsidized sale of the subject goods by the assessee to the buyer under Public Distribution System(PDS) and for this sale the additional consideration received from Oil Pool Account has been further reimbursed to the manufacturer who is M/s Kochi Refineries Ltd. (KRL) in this case. The Tribunal cannot accede to the logic of the Respondents that transaction is complete just by delivery of the goods (SKO) to the buyers when part payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax is 'remitted*. Thus when the sales tax/VAT is payable at the time of removal in that case in terms of Section 4d) of the Central Excise Act, the same is not includible in the transaction value. Further the sales tax amount was adjusted against the remission granted by the sales tax authority under an assessment. xxxxxxxxxx 5.5 The Apex Court judgment of Super Synotex has already been distinguished by the learned Commissioner (Appeals) as above. However, the Revenue in the review order/appeal did not refute the above findings, therefore, now the reliance of learned AR on the judgment of Super Synotex (supra) is of no help to the Revenue. 5.6. In the case in hand it is very much clear that from the Scheme as well as from the Eligibility Certificate, that the amount of Sales Tax allowed to be remitted to the respondent was towards capital subsidy. Even the requirement to re-invest 50% of the incentive in projects in the State of Gujarat further emphasizes the point that the amount of Sales Tax retained was only as capital subsidy. We further find from the facts narrated in the impugned order that the incentive receivable as capital subsidy by the appellants wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually paid, as the remission was nothing but the incentive or capital subsidy which the State Government granted with respect to the investment made by the appellants in the earthquake ravaged region of Kutch of State of Gujarat. Instead of recovering Sales Tax and then refunding the same as capital subsidy. the State Government had remitted the same to appellants. Consequently like CST since VAT which was payable was actually paid the same is required to be excluded from the transaction value hence for this reason also the sales tax remitted by the Government towards incentive of Capital investment cannot be a part of the transaction value. (emphasis supplied) 29. The aforesaid decision of the Tribunal in Welspun Corporation was followed by the Tribunal in Shree Cement Ltd. vs. CCE, Alwar [2018 (1) TMI 915-CESTAT- New Delhi] . The decision rendered by the Tribunal in Shree Cement was followed by the Tribunal in Ultratech Cement Ltd. vs. Commissioner [2018 (TIOL) 727 CESTAT Delhi] . In FCC Clutch India Pvt. Ltd. vs. Commissioner of Central Excise, Alwar [2019 (365) E.L.T. 539 (Tri.-Del.)] , the Tribunal specifically dealt with the Rajasthan Scheme f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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