By TIOL News Service

NEW DELHI, MAR 13, 2018: THE period of dispute is from 01/04/2010 to 31/12/2014.

The appellants have their factories situated in 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.

As per the scheme, the appellants were required to deposit VAT/CST at the applicable rate with the Government and would become 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 subsidy granted in form 37B cannot be considered as VAT “actually paid” for the purpose of Section 4 of the CEA, 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 appellants are before the CESTAT.

Both sides referred to the apex court decision in Super Synotex (India) Ltd. - 2014-TIOL-19-SC-CX wherein it is categorically held that after 01/07/2000, unless the sales tax/VAT is actually paid to the government,in terms of Section 4(3)(d)of the CEA, 1944 viz. the same cannot be excluded while arriving at the transaction value.

The Bench observed -

"5. In the present case, it is evident 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."

Following its earlier order passed in an identical case in Welspun Corporation Ltd.  -  2017-TIOL-1287-CESTAT-MUM,  the Bench held that there was no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans.

The appeal was allowed.

(See 2018-TIOL-800-CESTAT-DEL)