2019 (7) TMI 1680 - AT - Central Excise

Tribunal rules VAT subsidy not part of excise duty, grants abatement without extra proof

The Tribunal ruled in favor of the appellant, M/s Khyati Industries, in a case involving the non-inclusion of VAT subsidy under the Rajasthan Investment ... Valuation - inclusion of VAT subsidy in the assessable value - short/non payment of Excise Duty - contravention of Section 4(3)(d) of the Central Excise Act, 1944 - period January 2016 to December, 2016 - denial of abatement of Notification No. 26/2012-ST, dated 26.2.2012. Inclusion of VAT subsidy in the assessable value - HELD THAT:- The demand is not sustainable - This Tribunal has also occasioned to examine the issue afresh in case of M/s H-One India Private Limited Vs. CCE, Rajasthan [2019 (5) TMI 1226 - CESTAT NEW DELHI] wherein after considering the various decisions of this Tribunal, it has been held that the VAT subsidy obtained in form 37B under RISP scheme is not includible in the computation of transaction value under Section 4D of the Act. Abatement claimed scheme by the appellant under the Notification No. 26/2012 - denial on the ground that the appellant failed to adduce any documentary evidence as mandated by the Central Board of Excise and Customs 37B order dated 12.3.2007 - HELD THAT:- This issue is also decided in favour of appellant in case of M/s Benara Bearings & Pistons Ltd. Vs. CCE, Kanpur [2013 (4) TMI 672 - CESTAT NEW DELHI] where it was held that the procedural requirements of filing certificates or declarations on each and every GR amounts to legislation and cannot be upheld in as much as there is no such requirement of filing the affidavits/certificates in the notification itself. The notification only requires non-availment of credit by the transport agencies. It is not the Revenues case that the transport agencies, who were not even registered with the service tax department, has availed any credit. Admittedly, the appellant is not output service provider and only recipient of services and, therefore, is not laible to pay the tax under reverse charge mechanism and is excluded from the purview of Cenvat Credit Scheme. The amended notification as has been extracted above also strengthened the contention of appellant that as a service recipient is not bound to follow the requirement of endorsement of non-availment of Cenvat credit under 37B order by the CBIC. Appeal allowed - decided in favor of appellant. Issues Involved:1. Short payment/non-payment of Central Excise duty on VAT subsidy under the Rajasthan Investment Promotion Scheme, 2010.2. Denial of abatement under Notification No. 26/2012-ST due to lack of documentary evidence.Detailed Analysis:1. Short Payment/Non-Payment of Central Excise Duty on VAT Subsidy:The appellant, M/s Khyati Industries, was alleged to have short-paid or not paid Central Excise duty amounting to Rs. 60,984 on the VAT subsidy received under the Rajasthan Investment Promotion Scheme, 2010. The Department contended that this subsidy should be included in the transaction value as per Section 4(3)(d) of the Central Excise Act, 1944, and related rules.The appellant argued that the issue of non-inclusion of VAT subsidy under the RIPS scheme had been settled in their favor by various decisions of the Tribunal, including cases like Shree Cement Ltd. and Greenlam Industries Ltd. The Tribunal examined these precedents, noting that the VAT subsidy obtained under the RIPS scheme is not includible in the computation of transaction value under Section 4D of the Act.The Tribunal referred to the case of M/s H-One India Private Limited, where it was held that the VAT subsidy in the form of Form 37B under the RISP scheme is not to be included in the transaction value. The judgment highlighted that the subsidy was a financial assistance provided by the government and not a remission of tax. The Tribunal distinguished this case from the Supreme Court decision in Super Synotex (India) Ltd., which dealt with a different scheme where only 25% of VAT was required to be deposited.The Tribunal concluded that the financial assistance granted to the appellant under the RIPS scheme could not be included in the transaction value for the payment of excise duty. The impugned order was set aside on this ground.2. Denial of Abatement Under Notification No. 26/2012-ST:The appellant also contested the denial of abatement under Notification No. 26/2012-ST, which allowed for an abatement of 75% or 80% of the value of taxable services. The Department denied this abatement on the grounds that the appellant failed to provide the necessary documentary evidence as required by the CBEC circular dated 12.3.2007.The appellant cited the Tribunal's decision in cases like M/s Kalpana Industries and M/s Benara Bearings & Pistons Ltd., which held that the procedural requirements for filing certificates or declarations on each consignment note were not part of the notification itself but were prescribed by a CBEC circular. The Tribunal in these cases had ruled that such procedural requirements could not override the notification.The Tribunal noted that the notification only required that Cenvat credit on inputs, capital goods, and input services used for providing taxable services should not be taken by the service provider. The appellant, being a recipient of services and not an output service provider, was not liable to pay tax under the reverse charge mechanism and was excluded from the purview of the Cenvat Credit Scheme.The Tribunal concluded that the appellant was not bound to follow the requirement of endorsement of non-availment of Cenvat credit under the CBEC 37B order. The impugned order was set aside on this ground as well.Conclusion:The Tribunal set aside the impugned order, ruling in favor of the appellant on both issues. The VAT subsidy under the Rajasthan Investment Promotion Scheme, 2010, was not includible in the transaction value for excise duty purposes, and the appellant was entitled to the abatement under Notification No. 26/2012-ST without the need for additional documentary evidence.