2019 (3) TMI 852 - AT - Central Excise

Exclusion of VAT 37B Challan subsidies from assessable value upheld by Tribunal

M/s Ideal Coating Industries Versus Commissioner Central Excise & Central Goods and Service Tax Jodhpur

The Tribunal held that subsidy amounts paid using VAT 37B Challans should not be included in the assessable value of goods. The impugned order demanding ... Valuation - inclusion of subsidy amounts in the assessable value of the goods manufactured by the appellants - Section 4 of the Central Excise Act - Revenue has taken the view that payment of VAT using 37B Challans cannot be considered as actual payment of VAT - Held that:- In the present case, for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. 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. Whether VAT liability discharged by utilizing investment subsidy granted in form 37B can be considered as VAT actually paid for the purpose of Section 4 of the Central Excise Act, 1944.2. Whether subsidy amounts disbursed in form 37B challan can be included in the assessable value of goods manufactured by the appellants.Analysis:1. The case involved appeals against an order demanding differential duty due to the inclusion of subsidy amounts in the value of goods cleared by the appellants. The appellants operated under the Rajasthan Investment Promotion Scheme, eligible for subsidies where VAT/CST/SGST was deposited with the government, entitling them to subsidies disbursed in form 37B. Revenue contended that VAT paid through subsidy cannot be considered as VAT actually paid for Section 4 purposes, leading to the demand for differential duty.2. The appellants argued that the Rajasthan Government scheme required actual payment of VAT, not exemption, and under Section 4(3)(d), deduction of VAT paid should be allowed. They cited precedents like the Welspun Corporation Ltd. case where subsidy amounts were not included in the transaction value. The Tribunal's decision in Shree Cement Ltd. case also supported this view, emphasizing that subsidy amounts via Challan 37B were legal tax payments.3. The Tribunal analyzed the Apex Court's ruling in Super Synotex India Ltd., highlighting the distinction made in the Welspun Corporation Ltd. case regarding VAT remission schemes. In the present case, the appellants remitted VAT initially, receiving a portion back as subsidy in Challan 37B, which was considered a legal tax payment under the Rajasthan Government scheme.4. Referring to the observations in the Welspun Corporation Ltd. case, the Tribunal concluded that the subsidy amounts paid using VAT 37B Challans should not be included in the assessable value. Thus, the impugned order demanding differential duty was set aside, and the appeals were allowed.This detailed analysis of the judgment highlights the key issues, arguments presented by both sides, relevant legal precedents, and the Tribunal's ultimate decision, providing a comprehensive understanding of the case.