2018 (4) TMI 1161 - AT - Central Excise

Tribunal deems subsidies as valid VAT payments, relieves appellant from differential duty

M/s Shree Cement Limited Versus CCG&ST, Jodhpur

The Tribunal allowed the appeal, holding that VAT amounts paid using subsidy challans were valid tax payments under the Rajasthan Government's scheme. ... Valuation - inclusion of VAT in assessable value - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the CEA, 1944 - Held that: - the identical issue has already come up before the Tribunal in appellant’s own case Shree Cement Ltd. Shree Jaipur Cement Ltd. Versus CCE, Alwar [2018 (1) TMI 915 - CESTAT NEW DELHI], where it was held that 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. Issues:1. Interpretation of VAT liability under Rajasthan Investment Promotion Scheme.2. Consideration of subsidy amounts in the value of goods cleared by the appellants.3. Application of Section 4 of the Central Excise Act, 1944.Analysis:1. The appeal challenged an Order-in-Original passed by the Commissioner, Central Goods & Service Tax, Jodhpur, regarding the VAT liability of the appellant under the Rajasthan Investment Promotion Scheme. The appellant was eligible for subsidies under various schemes and required to deposit VAT/CST/SGST with the government, with entitlement to subsidy disbursement. The Revenue contended that VAT liability discharged using investment subsidy cannot be considered as VAT actually paid under Section 4 of the Central Excise Act, leading to a demand for differential duty, interest, and penalties.2. The Tribunal referred to a similar case involving Shree Cement Ltd., where it was observed that subsidies received by the appellants in the form of VAT 37B challans for discharging VAT liability should not be included in the assessable value of goods manufactured. The Tribunal distinguished a Supreme Court decision and another case involving remission of tax scheme, emphasizing that subsidies received were legal payments of tax under the Rajasthan Government's scheme, akin to cash, and thus, should not be treated as non-payment of VAT.3. The Tribunal reiterated that the VAT amounts paid using VAT 37B challans should not be included in the assessable value, following the precedent set in the Welspun Corporation Ltd. case. The decision highlighted the direct relationship between remission of tax and capital investment, emphasizing that such subsidies were linked to fixed assets and did not constitute an exemption from tax payment. Therefore, the Tribunal set aside the impugned order and allowed the appeal, concluding that the VAT amounts paid through subsidy challans were valid tax payments under the Rajasthan Government's scheme.