VAT concession retention forms part of assessable value, but the excise demand failed because extended limitation was unavailable.

Amounts retained by an assessee under the Haryana VAT concession scheme were held includible in the assessable value for central excise duty, following the settled position and controlling Supreme Court precedent. However, the demand was raised for an earlier period by invoking the extended period of limitation, and the extended period was found unavailable in light of the departmental circular and lack of clarity at the relevant time. As the recovery depended entirely on extended limitation, the demand could not survive. The valuation issue was decided against the appellant, but the impugned order was set aside because the demand was barred by limitation.

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Issues: (i) Whether the amount retained by the appellant on account of VAT concession under the Haryana scheme was includible in the assessable value for central excise duty; (ii) whether the demand was sustainable when raised by invoking the extended period of limitation.

Issue (i): Whether the amount retained by the appellant on account of VAT concession under the Haryana scheme was includible in the assessable value for central excise duty.

Analysis: The valuation question was governed by the settled position that amounts retained by an assessee towards VAT concession under the Haryana Government scheme form part of the assessable value. The prior decision of the Supreme Court was treated as controlling on the merits of inclusion of such retained amount in the assessable value.

Conclusion: The amount retained on account of VAT concession was includible in the assessable value, and the appellant had no case on merits.

Issue (ii): Whether the demand was sustainable when raised by invoking the extended period of limitation.

Analysis: The dispute related to an earlier period and the notice was issued by invoking the extended period. In the light of the departmental circular and the absence of clarity at the relevant time, the extended period was held to be unavailable for recovery of the demand. Since the entire demand depended on the extended period, the demand could not survive.

Conclusion: The extended period of limitation was not invokable, and the demand was not sustainable.

Final Conclusion: Although the valuation issue was decided against the appellant, the demand failed on limitation, so the impugned order was set aside and the appeal succeeded.

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