At, Customs Excise Service Tax Appellate Tribunal New Delhi
By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA (PRESIDENT) & THE HONORABLE JUSTICE: V. PADMANABHAN
For Petitioner: Vipin Jain, Vishal Aggarwal and Manya Bhardwaj, Advocates And For Respondents: H. Saini, DR
1. These three appeals deal with an identical issue and hence are being disposed through this common order.
2. The appeals E/51033/2017 and E/51204/2017 are against the Order-in-Original No. 16-17 dated 01/03/2017 and 17-18 dated 21/06/2017 respectively. The appellants have their factories situated in the State of Rajasthan and were operating under Rajasthan Investment Promotion Scheme which was notified by Government of Rajasthan with the objective of facilitating investment in the establishment of new enterprises. Under the various schemes of the Rajasthan Government, the appellant (assessees) were eligible for subsidies. As per the various schemes applicable to the assessees, they were required to deposit VAT/CST/SGST at the applicable rate with the Government and in terms of the scheme notified, will be entitled to disbursement of subsidy by the appropriate authorities. The subsidy concerned is sanctioned and disbursed in form 37B and such challan in the form VAT 37B can be utilized for discharge of the VAT liability of the appellant for subsequent periods. Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the Central Excise Act, 1944. Accordingly, Revenue proceeded to include such subsidy amounts in the value of the goods cleared by the appellants and demanded the differential duty. The impugned orders also charged interest and penalties on such differential duty. Aggrieved by the impugned orders, present appeals have been filed.
3. With the above background we heard Shri Vipin Jain, Vishal Aggarwal, Manya Bharadwaj, Ld. Counsels for the appellant as well as Shri N. Saini, Ld. DR for the Department.
4. The Ld. Counsel for the appellant explained in detail the scheme of the Rajasthan Government regarding the grant of subsidy for new enterprises. He explained that the VAT is initially paid to the Government of Rajasthan before a portion of the same is granted as subsidy in the form of Challan Form 37B. Such challan is one of the modes which is allowed to be utilized for payment of VAT in the subsequent period along with other modes of payment including cash and input tax credit. He contended that the Revenue has wrongly proceeded under the presumption that the tax paid through 37B Challan does not represent actual payment of tax. He stressed on the fact that the scheme of the Rajasthan Government is not in the nature of exemption from payment of VAT but requires the VAT to be actually paid. Consequentially he submitted that in terms of Section 4(3)(d), deduction of such VAT paid is allowed and hence the impugned orders are not sustainable.
5. He relied upon the decision of the Tribunal in the case of Commissioner of Central Excise vs. Welspun Corporation Ltd. (2017 TIOL 1287 CESTAT MUM). He submitted that the Tribunal in the above case has distinguished the decision of the Hon'ble Supreme Court in the case of Super Synotex India Limited reported as : 2014-301-ELT-273 (SC).
6. The Ld. DR justified the impugned orders. He relied on the decision of the Apex Court in the Super Synotex case (Supra). He argued that with effect from 1/7/2000 assessee was bound to pay excise duty on the amount retained by them out of what was collected by them as VAT. He also added that in the present case the Rajasthan Government has refunded to the appellants a part of the VAT paid which is required to be included in the assessable value.
7. We have heard both sides at length and perused the appeal record. As 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 of transaction value outlined in Section 4, with effect from 01/07/2000, any sales tax/VAT actually paid can be deducted from the transaction value for payment of excise duty. Revenue has taken the view that payment of VAT using 37B Challans cannot be considered as actual payment of VAT.
8. Both sides have referred to the decision of the Apex Court in the case of Super Synotex India Ltd. In the above decision the Apex Court has categorically held that after 01/07/2000, unless the sales tax/VAT is actually paid to the good, no benefit towards excise duty can be given in terms of Section 4(3)(d). However, we note that the Tribunal in the case of Welspun Corporation Ltd. (Supra) has distinguished the decision of the Apex Court in the light of Gujarat VAT Act, 2003. In the Welspun Corporation Ltd. case, the assessee had opted for remission of tax scheme under which a portion of the VAT paid was remitted back to the assessee. The Tribunal held that such subsidy amounts are not required to the included in the transaction value.
9. In the present case we know that for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered 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 scheme amount. The Competent Authority was required to necessarily pass order for remission of such tax separately for each tax period. The remission of tax is thus directly related to capital investment in fixed asset. Th
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ere was no option to claim exemption from payment of sales tax. The quantum of remission was based upon the investment made in the fixed assets. The condition of the remission amongst others included to remain in production, employment of certain percentage of persons in assessee unit, and numerous other conditions as brought out in Para 9 of the impugned Order-in-Appeal." 11. By following the decision of the Tribunal in the Welspun Corporation Ltd. case we conclude that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. 12. In the result, the impugned orders are set aside and the appeals are allowed. 13. [Order Pronounced in the open court on_18.01.2018_]