VAT remission under a State incentive scheme was held outside excise assessable value, as the tax remained payable on removal.

Sales tax or VAT collected on clearances but later remitted under a State incentive scheme was treated as not includible in central excise assessable value. The key distinction was that the scheme operated by remission, not by blanket exemption at the time of removal, so the tax remained payable when goods were cleared and then stood remitted by the State. On that basis, the amount fell within the exclusion for taxes actually paid or actually payable in transaction value computation. The resulting central excise demand was held unsustainable.

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Issues: Whether sales tax or VAT collected on clearances but remitted under a State incentive scheme could be included in the assessable value for central excise duty.

Analysis: The amount was not excluded on the footing of a blanket tax exemption at the time of clearance. The scheme operated by remission, under which the tax was payable when the goods were removed and was later remitted by the State Government as part of an incentive or capital subsidy mechanism. On that footing, the amount fell within the statutory exclusion for taxes actually paid or actually payable while determining transaction value under the central excise valuation provisions. The distinction between exemption and remission was treated as , and the remission was held not to alter the character of the tax as one that was payable at the time of removal.

Conclusion: The sales tax or VAT remission was not includible in the assessable value, and the demand of central excise duty was unsustainable.

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