CX - As per State Govt incentive scheme appellant allowed to recover sales tax and retain same - not 'additional consideration': CESTAT
By TIOL News Service
MUMBAI, JUNE 14, 2017: THE appellant manufactures MS Pipes and is availing incentive benefits given to them by State Govt. of Gujarat in Sales Tax exemption under Economic Development of Kutch District, Government of Gujarat. As per this incentive scheme, the appellant was allowed to recover the amount of sales tax involved on sales transaction of final product and retain the same.
According to the department, such an amount which has been retained by appellant is 'additional consideration' flowing from buyer and as per the provisions of Rule 6 of the Valuation Rules r/w section 4 of the CEA and Board's Circular dt 30th June 2000, central excise duty needs to be discharged on the same.
Differential duty demands were issued and confirmed along with penalties and interest by the adjudicating authority.
The appellant is before the CESTAT and submits that the subsidy received by appellant by way of sales tax remission is a "capital receipt" as held by High Court of Gujarat in the case of Ajanta Manufacturing Ltd - 2016-TIOL-1767-HC-AHM-IT ; that subsidy received is not a consideration flowing from buyer to seller and is, therefore, not includable in the AV. Reliance is also placed on the CBEC Circular No. 378/11/98-CX dt. 12.03.1998 and Circular No. 983/7/2014-CX dt. 10.07.2014 clarifying that subsidy provided by the Government of India under the fertilizer policy cannot be said to be a consideration flowing from the buyer to the manufacturer so as to be included in the assessable value. Moreover, extended period of limitation cannot be invoked, emphasized the appellant, as the issue was raised by the EA-2000 audit and based on the correspondence made by the appellant the stand of the appellant was accepted.
The AR justified the stand taken by the department and also placed reliance on the decisions in Super Synotex - 2014-TIOL-19-SC-CX and Maruti Suzuki - 2014-TIOL-74-SC-CX. It is also submitted that identical issue was before the Bench of the Tribunal in the case of Commissioner of CE & ST v. Welspun Corporation Ltd. in appeals No. E/87230-87410/16 which was heard and the matters were reserved.
The Bench enquired as to whether order has been passed in the case of Welspun Corporation Ltd. as mentioned by the AR and was informed that a final order has been passed on 23.03.2017 - 2017-TIOL-1287-CESTAT-MUM.
On perusal of the aforementioned order, the Bench observed that the issue in that case is identical to the issue in the present case except for a difference that in the case of Welspun Corporation Ltd. , the assessee had paid the excise duty 'Under Protest' on the amounts of the sales tax incentives remitted and filed a refund claim while in the case in hand there is a demand for the duty on the amount retained by appellant as sales tax incentives and subsequently remitted by the assessing officer under GVAT Act.
Noting that the ratio in the case of Welspun Corporation Ltd. is spelt out clearly in favour of the assessee appellant, the Bench extracted the relevant paragraphs viz. para 5.3 to 5.11 from the said order and concluded that the same being in consonance with the provisions of law, there were no compelling reasons to deviate from the view taken.
Inasmuch as in the cited case the Division Bench had held thus -
| CX - Valuation - Section 4 of the CEA, 1944 - Transaction value - 'Actually paid', 'Actually payable' - Once the Sales Tax Department has assessed the Sales Tax as paid, the Central Excise department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them - In case of exemption, no tax is actually paid or actually payable, whereas in the case of remission, tax is actually payable and paid which is allowed to be remitted by way of retention or by way of refund - Consequently since VAT which was payable was actually paid, the same is required to be excluded from the transaction value - Impugned orders require no interference, hence upheld - Revenue appeals dismissed: CESTAT [para 5.1 to 5.11, 6] |
The impugned order was set aside and the appeal was allowed.
(See 2017-TIOL-2002-CESTAT-MUM)
