2018 (7) TMI 909 - AT - Central Excise

Tribunal excludes VAT subsidies from assessable value, citing Central Excise Act. Precedents support tax payment argument.

The Tribunal held that VAT subsidy amounts received in the form of VAT 37 B challans should not be included in the assessable value under Section 4 of the ... Valuation - inclusion of VAT subsidy amount in the form of Vat-37 B in arriving at assessable value - Held that:- The issue is covered by the decision in the case of GREENLAM INDUSTRIES LTD [2018 (4) TMI 1552 - CESTAT NEW DELHI], where Identical issue decided in the case of 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: Inclusion of VAT subsidy amount in assessable value under Section 4 of the Central Excise Act, 1944.Analysis:The appeal was filed against the Order-in-Appeal concerning the inclusion of VAT subsidy amount in the assessable value under Section 4 of the Central Excise Act, 1944. The Revenue had included the subsidy amount in the value of goods cleared by the appellant, leading to a demand for differential duty. The crux of the issue was whether such subsidy amounts, received in the form of VAT 37 B challans, should be considered in the assessable value. Both the appellant and the Revenue presented their arguments before the Tribunal.The Tribunal referred to a previous Final Order and a case involving Shree Cements Ltd. to analyze the issue. It was noted that under the Investment Promotion Schemes of the Rajasthan Government, appellants were required to discharge their VAT liability, and a portion of VAT was disbursed back to them as subsidies in the form of VAT 37 B challans. The question was whether these subsidy amounts should be included in the assessable value of goods manufactured by the appellants. The Tribunal considered the concept of transaction value outlined in Section 4 and the relevance of actual payment of VAT for excise duty benefits.Referring to the decision of the Apex Court in the case of Super Synotex India Ltd., the Tribunal highlighted the requirement for actual payment of sales tax/VAT to the government to avail excise duty benefits. However, the Tribunal also discussed a case involving Welspun Corporation Ltd., where subsidy amounts were not required to be included in the transaction value under the Gujarat VAT Act, 2003. In the present case, the Tribunal emphasized that the VAT liability discharged using subsidy challans was considered legal payments of tax under the Rajasthan Government's scheme.By following the decision in the Welspun Corporation Ltd. case, the Tribunal concluded that there was no justification for including VAT amounts paid using VAT 37 B challans in the assessable value. Consequently, the impugned orders were set aside, and the appeals were allowed based on the earlier Final Order.