Tribunal rules VAT retained by respondent not part of excise duty calculation.

The Tribunal upheld the Commissioner's decision, ruling that the VAT amounts retained by the respondent using VAT 37B Challans need not be included in the assessable value for excise duty calculation. The Tribunal emphasized that the VAT subsidies received were legitimate payments under the Rajasthan Government scheme, and therefore, there was no justification for including these amounts in the assessable value. As a result, the Department's appeal was dismissed.

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Issues:
1. Whether the additional consideration of sales tax collected by the respondent and retained by them should form a part of the transaction value for the purpose of central excise duty liability.
2. Whether the VAT amounts paid by the assessee using VAT 37B Challans should be included in the assessable value of the goods manufactured.

Issue 1:
The respondent, engaged in manufacturing P.P. Woven Sacks, was alleged by the Department to have not discharged their duty liability properly by not including the additional consideration of sales tax collected by them and retained, equivalent to the VAT-37B challans issued under the Rajasthan Investment Promotion Policy, 2010. The Department contended that this amount should have formed part of the transaction value as per Section 4(3)(d) of the Central Excise Act, leading to short payment of central excise duty. A show cause notice was issued demanding duty, penalties, and interest. The Assistant Commissioner confirmed all charges, but the Commissioner (Appeals) allowed the appeal of the respondent, stating the original order lacked merit. The Tribunal, citing a previous case involving a similar issue, upheld the Commissioner's decision, emphasizing that the VAT amounts retained by the respondent using VAT 37B Challans need not be included in the assessable value for excise duty calculation.

Issue 2:
The Tribunal referenced a previous case involving the Investment Promotion Schemes of the Rajasthan Government to establish a precedent regarding the inclusion of VAT amounts paid using VAT 37B Challans in the assessable value. The Tribunal noted that the subsidies received by the assessee in the form of VAT 37B Challans, which could be used to discharge VAT liabilities in subsequent periods, should not be considered as VAT actually paid for the purpose of excise duty calculation. The Tribunal differentiated the case at hand from a Supreme Court decision, highlighting that the VAT subsidies received were legitimate payments under the Rajasthan Government scheme. By following the decision in the referenced case, the Tribunal concluded that there was no justification for including the VAT amounts paid using VAT 37B Challans in the assessable value, thereby dismissing the appeal of the Department.

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