2024 (11) TMI 1568 - AT - Central Excise

Sales tax/VAT refund incentives under NPV scheme and whether they increase excise transaction value; demand rejected

The dominant issue was whether State sales tax/VAT incentives/refunds granted as a percentage of tax paid under an NPV-type scheme were includable in the ... Non-confirmation of duty demand for the extended period of limitation - non-imposition of penalty on the appellants-assessee - non-inclusion of sales tax/VAT benefits in the assessable value - HELD THAT:- The issue of demand of central excise duty on non-inclusion of sales tax/VAT benefits in the assessable value arising out of the present dispute is no more res integra, in view of the judgements relied upon by the appellants in the cases of Commissioner of Central Excise, Raigad Vs. Uttam Galva Steels Ltd. [2015 (10) TMI 1727 - CESTAT MUMBAI], PGP Glass Private Ltd., Vs. CCE & ST, Vadodara [2023 (7) TMI 659 - CESTAT AHMEDABAD], Rational Engineers Pvt. Ltd. Vs. Commissioner of Central Excise, Thane-I [2023 (11) TMI 363 - CESTAT MUMBAI] and Mahindra Steel Service Centre Ltd., Vs. Principal Commissioner of CGST & Central Excise, Bhopal [2023 (12) TMI 476 - CESTAT NEW DELHI]. The issue decided in those cases was that incentives/subsidy of VAT/Sales Tax refunded by the State Government at a percentage of the tax paid by the assessee, under the NPV scheme, would not be includable in the assessable value for the purpose of payment of central excise duty thereon. The impugned order dated 30.06.2015 passed by the learned Commissioner, Central Excise & Service Tax, Goa Commissionerate, Goa is set aside - Appeal of Revenue dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the amount representing the difference between sales tax/VAT collected from customers and the lesser amount discharged under the Net Present Value option under the Goa VAT Deferment-cum-NPV Scheme, 2005 (i.e., the 'net gain' from payment at NPV), constitutes 'additional consideration' and is therefore includable in the assessable value/transaction value for levy of central excise duty under Section 4 read with the applicable valuation rules. (ii) Consequent to the above determination, whether the duty demands confirmed by the adjudicating authority could be sustained, and whether Revenue's challenge to non-confirmation for the extended period and non-imposition of penalty survives. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Inclusion of 'net gain' under the Goa VAT NPV Scheme in assessable value as additional consideration Legal framework (as discussed by the Tribunal): The dispute was examined in the context of valuation under Section 4 of the Central Excise Act, 1944, read with the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, particularly the concept of 'additional consideration' allegedly arising from the buyer to the seller. Interpretation and reasoning: The Court treated the controversy as settled by consistent Tribunal decisions holding that incentives/subsidy/refund-like benefits arising from VAT/Sales Tax schemes based on NPV payment are not includable in assessable value. Applying that settled position, the Court accepted that the differential between the sales tax/VAT collected and the NPV amount paid (the retained portion/net gain) does not become an amount flowing from the buyer to the seller as consideration for sale of goods, but arises from the State's incentive framework. The Court further relied on the fact that the issue had attained finality through the dismissal of Revenue's civil appeal against the Tribunal's view in a comparable matter, removing any scope for further debate. Conclusion: The 'net gain'/retained portion arising due to discharge of sales tax/VAT liability under the NPV option of the Goa VAT NPV Scheme is not includable in assessable value/transaction value for central excise purposes; hence the foundation for the duty demand fails. Issue (ii): Sustainability of confirmed duty demand and effect on Revenue's limitation/penalty grounds Interpretation and reasoning: Since the Court conclusively held that the disputed amount is not includable in assessable value, the impugned order confirming duty even for the normal period could not stand. Once the demand itself is unsustainable on merits, Revenue's appeal seeking confirmation for the extended period and imposition of penalty necessarily fails as consequential. Conclusion: The impugned order was set aside in entirety; the assessee's appeal was allowed; Revenue's appeal was dismissed, and the cross-objection was disposed of accordingly.