VAT retention under industrial policy is not part of assessable value for central excise duty.

State-granted VAT retention or remission under an industrial policy was treated as a capital incentive, not as part of the sale price or any additional consideration for excisable goods. The Tribunal applied its earlier rulings that such remission schemes do not enter the assessable value for central excise, because the retained VAT is an incentive flowing from the State policy rather than a component of transaction value. On that basis, inclusion of the retained VAT was rejected and the related duty demand was held unsustainable.

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Issues: Whether 99% VAT retention/remission granted under the State industrial policy was includable in the assessable value of the excisable goods cleared by the appellant.

Analysis: The appellant's VAT retention was treated as a capital subsidy/incentive flowing from the State industrial policy and the remission scheme, and not as an amount retained as part of the sale price or as an additional consideration for the goods. The Tribunal followed its earlier decisions holding that such State-granted incentive/remission does not form part of the assessable value for levy of central excise duty. On that basis, the demand based on inclusion of the retained VAT could not survive.

Conclusion: The VAT remission/retention was not includable in the assessable value, and the duty demand was unsustainable. The appeal was decided in favour of the assessee.

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