Retention of VAT under remission scheme counts as sales tax concession in assessable value under Section 4 Excise Act

The CESTAT Kolkata held that the appellant's retention of 99% of the VAT under the State VAT remission scheme constituted a sales tax concession that must be included in the assessable value for Central Excise duty under Section 4 of the Central Excise Act, 1944. Consequently, the appellant was liable to pay the differential excise duty along with interest. However, considering the case facts, all penalties imposed were set aside. The appeal was allowed in part.

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ISSUES:

Whether the amount of VAT/Sales Tax collected and retained by the manufacturer, under a State VAT remission scheme, is includible in the assessable value for Central Excise duty under Section 4 of the Central Excise Act, 1944.Whether the judgment of the Hon'ble Supreme Court dated 28.02.2014 in the case of CCE Jaipur II vs M/s Super Synotex (India) Ltd. applies retrospectively to the period prior to the judgment.Whether the Show Cause Notice (SCN) issued for recovery of duty including the extended period is barred by limitation in the absence of suppression of facts.Whether remission of VAT given by the State Government as subsidy for capital investment can be treated as additional consideration for valuation under Central Excise law.

RULINGS / HOLDINGS:

The retained portion of VAT remission under the State VAT scheme is required to be added to the assessable value for levy of Central Excise duty as it constitutes additional consideration, consistent with the Hon'ble Supreme Court's holding that "unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of 'transaction value' under Section 4(4)(d), for it is not excludible."The judgment of the Hon'ble Supreme Court dated 28.02.2014 is not applicable retrospectively; therefore, the principles established therein cannot be applied to periods prior to the judgment.The SCN for the extended period is barred by limitation as there was no suppression of facts, and "no suppression clause can be invoked for extending period of demand." Hence, demands for the extended period are not sustainable.The remission of VAT granted by the State Government as a subsidy for capital investment cannot be treated as an additional benefit to be included in the assessable value; such remission is not "additional consideration" for valuation purposes.

RATIONALE:

The Court applied Section 4 of the Central Excise Act, 1944, and the concept of "transaction value" as amended, relying primarily on the Hon'ble Supreme Court's ruling in CCE Jaipur II vs M/s Super Synotex (India) Ltd., which clarified that retained sales tax remission amounts constitute additional consideration and must be included in assessable value unless actually paid to the State Government.The Court distinguished earlier Circulars and case law that predated or did not consider the Supreme Court's decision, emphasizing that retrospective application of the Supreme Court's judgment is not permitted under law.The Court recognized settled principles on limitation, confirming that extended period demands require suppression of facts, which was absent in this case, thus invalidating the extended period demand.The Court noted that remission of VAT as a subsidy for capital investment does not amount to additional consideration and therefore should not be added to the assessable value, aligning with established valuation jurisprudence.The decision reflects a doctrinal consistency with the Supreme Court's authoritative interpretation of valuation under Central Excise law and limitation principles, with no dissenting or concurring opinions noted.

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