Sales tax deferment converted into capital subsidy remained deductible from assessable value under excise valuation principles.

A Haryana sales tax deferment scheme under Section 25A and Rule 28C was treated as a deferred liability rather than a simple sales tax exemption. Because the assessee retained an amount equivalent to part of the tax as capital subsidy under the scheme, the amount remained legally payable for excise valuation purposes and was deductible from assessable value as sales tax actually payable. The analysis also noted that the relevant board circular supported deduction based on entitlement under local law, not the form of book adjustment. On this reasoning, the demand and penalty were unsustainable and the appeal succeeded.

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Issues: Whether sales tax retained by the assessee under the Haryana deferment scheme and converted into capital subsidy was deductible from assessable value as sales tax actually paid or actually payable under the excise valuation provision.

Analysis: The relevant State scheme operated under the deferment mechanism in Section 25A of the Haryana General Sales Tax Act, 1975 and Rule 28C of the Haryana General Sales Tax Rules, 1975. The arrangement did not amount to a mere conventional sales tax concession under the exemption provisions, but in substance deferred the liability and allowed the assessee to retain an amount equivalent to part of the sales tax as capital subsidy. The net effect was an adjustment of reciprocal liabilities rather than a case where sales tax was never payable. The Board circular on set-off was also treated as supporting the principle that local law entitlement, rather than the form of book adjustment, governs deduction.

Conclusion: The assessee was entitled to abatement of the sales tax element, and the demand and penalty were unsustainable.

Final Conclusion: The appeal succeeded and the order confirming duty demand and penalty was set aside.

Ratio Decidendi: Where the local sales tax scheme defers tax and converts the deferred amount into capital subsidy, the amount remains legally payable for purposes of excise valuation and is deductible from assessable value as sales tax actually payable.

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