2020 (2) TMI 1056

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....after deduction of VAT paid by them. In this case, the VAT amount, instead of paying in cash, the same is adjusted against the subsidy granted to them for the earlier transactions. The case of the Department is that since the VAT was adjusted against the subsidy, there is no actual payment of VAT, therefore, the adjusted amount cannot be considered as payment of VAT and the same is not excludible from the transaction value in terms of Section 4(3)(d) of Central Excise Act, 1944. Accordingly, the demand of excise duty on the amount of adjusted VAT was raised. The same was confirmed by the adjudicating authority. Therefore, the present appeal. 2. Learned Counsel appearing on behalf of the appellant submits that even though the VAT payment ....

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....s out lined above, the appellants are covered by the Investment Promotion Schemes of the Rajasthan Government. In terms of the various schemes of the Rajasthan Government, the appellants are required to discharge their VAT liability by making payment of the same. Out of such VAT credited to the Government, a certain portion is disbursed back to them in the form of subsidies. Such disbursement happens in the form of VAT 37 B, challan which can be utilized in subsequent periods to discharge VAT liability. The crux of the dispute in the present case is whether such subsidy amounts are required to be included in the assessable value of the goods manufactured by the appellants, in terms of Section 4 of the Central Excise Act. As per the concept ....

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....idered legal payments of tax. In view of the above, Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. 10. It is pertinent to reproduce the observations of the Tribunal in the Welspun Corporation Ltd. case "5.1 The Respondent company opted for "Remission of Tax Scheme" and was thus eligible for the Capital subsidy in the form of remission of Sales Tax subject to the conditions to be fulfilled.... The subsidy in the form of remission of sales tax was in fact a percentage of capital investment. Separate assessment orders were thus issued by the assessing officer of the sales tax department from time to time towards the incentive sch....