Case Law Details
M/s Maihar Cement Vs CCE & ST Jabalpur (CESTAT Delhi)
The present appeal is against the Order-in-Original No.26/2017 dated 28.09.2017. The appellant is a manufacturer of cement and clinker falling under chapter heading 2523 of the Central Excise Tariff. The Central Excise duty on the cement sold by the appellant was mostly discharged on MRP basis under Section 4A and partly by payment of Central Excise Duty on Transaction Value at Adv. Rates. During the course of audit of the record of the asessee, the departmental officers noticed that during the period 2014-16, the appellant was charging and collecting VAT at the applicable rate in their invoices from their buyers. As per MP Industrial Policy 2004 (MPIIPAS), refund of 25% VAT is provided to the units situated in the backward areas. It was noticed that appellant has received a refund of Rs.41,24,59,791/- under the MP Industrial Promotion Assistance Scheme, 2010. The refund/adjusted amount was deposited by the State Government towards future VAT payment on the appellant’s behalf. The department was of the view that deduction from VAT from Transaction Value is admissible only for the amount of tax actually paid or payable. In the instant case, the State Government deposited the subsidy amount admissible towards payment of VAT on behalf of the appellant but the appellant collected full VAT from their buyers. The department took the view that the difference is required to be included in the Transaction Value for payment of duty. Accordingly, the department issued SCN dated 21.04.2017 proposing to include the above refund amounts in the Transaction Value and demanding the differential amount of Central Excised duty. The adjudicating authority, vide impugned order, relied on judgement of the Hon’ble Supreme Court in the case of “Super Synotech-2014-TIOL-19 (SC) CX and upheld the demand. Aggrieved by the decision, present appeal has been filed.
2. With the above background, we heard Shri Sanjay Grover, ld Advocate to the appellant and Shri R.K. Mishra, ld DR representing the Revenue
3. The submissions made by the ld Advocate are summarized below:
(i) The SCN relied upon the decision of the Supreme Court in the case of Commissioner of Central Excise, Jaipur-II Vs Super Synotex (India) Ltd.,2014 (301) ELT 273 (S.C.)
The Hon’ble Supreme Court in the case of Super Synotex was examining the Incentive Scheme of the Rajasthan Government. Under that scheme, the assessee could collect 100% VAT from the customers, and was allowed to retain 75% as incentive. Only 25% was to be deposited with State VAT authorities.
The Hon’ble Supreme Court held that Transaction Value excluded the following, namely, “the amount of duty of excise, sales tax and other axes, if any, actually paid or actually payable on such goods. It held that:
“23. In view of the aforesaid position. Unless the sales tax is actually paid to the Sales Tax Department of the State Government, benefit towards excise duty can be given under the concept of “transaction value” under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of “transaction value” as substituted with effect from 01.07.2000, Therefore, the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book.”
The decision is applicable only on how Transaction Value is to be computed, and whether or not sales tax retained by an assessee should form part of the Transaction Value. The Show Cause Notice does not raise any other point. Hence the demand has to be restricted to goods cleared on Transaction Value and not those under Section 4A on the basis of MRP affixed on cement bags. The concept of Transaction Value does not apply to such clearances, and the Show Cause Notice makes no reference to the same.
(ii) On merits, it is submitted that the decision of Super Synotex is not applicable to the facts. In that case, the assessee would collect the full amount of VAT from the customers. Under the incentive scheme of the Government, only 25% of VAT would be deposited, and remaining 75% VAT was retained by the assessee. In the Appellant’s case, the entire amount of VAT collected is deposited with State authorities. Transaction Value, as defined under Section 4(3)(d), “ does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods”. In this case, the Sales Tax (VAT) is actually paid by the Appellant. Applying the aforesaid definition, it cannot form part of the Transaction Value, and must be excluded from Transaction Value.
(iii) They relied on the following case laws:
a) M/s FCC Clutch India Pvt Ltd Vs CCE, Alwar, Final Order No.50488/2018-EX(DB) dated 31.01.2018
b) Shree Cement Ltd Vs CCE, Alwar, Final Order Nos.50189-50191/2018-EX(DB) dated 18.10.2018.
c) Commissioner of C.EX. Mumbai-I, Vs Welspun Corp. Ltd, 2017 (358) ELT 630 (Tri.Mumbai)
d) Modipon Fibre Company Vs Commissioner of C.EX. Meerut, 2007 (218) ELT 8 (S.C.)
4. The ld DR justified the impugned order. He submitted that the judgement of the Hon’ble Supreme Court in the case of Super Synotex (supra) is clearly applicable in as much as the VAT collected by the assessee got refunded.
5. Heard both sides and perused the record.
6. The department has raised demands for payment of differential excise duty by including the amount received by the appellant from the State Govt. of MP under the MPIIPAS, 2004 Scheme. The demand has been made for the amounts received during the period 2014-16. Department has taken the view that deduction from Transaction Value is not admissible for the above amount since such amounts cannot be considered as the amount of tax actually paid or payable.
7. The Government of MP notified the MPIIPAS, 2004 (Madhya Pradesh Industrial Investment Promotion Assistance Scheme, 2004) for providing financial assistance to units located in backward areas. The amount of finance assistance was a portion of the amount of VAT deposit by a unit and was restricted to a maximum of 75% of the VAT paid. It is further seen from record that VAT charged and collected by the appellant stands immediately credited to the State Government. Subsequently, on the basis of their application, the financial assistance is sanctioned by MP Trade and Investment Facilitation Corporation Limited and paid in favour of Commercial Tax Office. Such amount is to be considered as advanced tax deposited by the assesee and the balance is required to be paid by the assessee.
8. We find that a similar issue has come up before the Tribunal in the case of Shree Cement Ltd V/s Commissioner decided by the Tribunal vide Final Order No. 50189-50191/2018 dated 18/01/2018 in which the Tribunal observed as follows:-
“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 assesse 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. There 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.”
9. The facts of the present case are similar. In the case of the Schemes under the Rajasthan Government, the subsidy amount is paid in the form of VAT Challan whereas in the case of the Scheme of the MP Government, the same is allowed by way of book adjustment against the VAT payable for the subsequent period.
10. Following the decision of the Tribunal in the cited case, we set aside the impugned order and allow the appeal.
(Order Pronounced in the open court on 05.04.2018)
