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TMI Blog2023 (3) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... cial) that the subsidy in question does not reduce the selling price of the goods. Nor does it amount to indirect flow from the buyer to the seller. (B) The amount of subsidy under dispute is an independent amount of subsidy received from the Government on the basis of the capital investment and employment generation/wages paid and thus, is not an additional sales consideration, as held by the Member (Judicial). OR The amount of subsidy under dispute is not an independent amount received by the appellant. Rather it is computed with reference to the sales tax paid and thus, is an additional consideration for sales, as held by the Member (Technical). (C) The facts in this appeal are similar to the facts in the case of Super Synotex India Ltd. (supra) as held by the Member (Technical) OR The facts in the present case are difference (should be different) and hence, ruling of the Apex Court in the case of Super Synotex India Ltd. (supra) is not applicable. (D) Under the facts and circumstances, the appellant have received VAT subsidy (directly affecting the selling price of the goods), as held by the Member (Technical) OR It is not a case of VAT subsidy, affecting or depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment subsidy under the promotion policy, a unit was required to submit an application and a Committee was required to issue the Entitlement Certificate in the prescribed format, if the unit satisfied the requirements. The units declared eligible for availing capital investment subsidy were then required to submit an application to the Assistant Commissioner/Commercial Tax Officer for claiming the capital investment subsidy, and the said subsidy was to be provided as per the orders of the State Government. However, the payment of capital investment subsidy (interest component) was to be made only for the period for which the unit deposited the State and/ or Central Sales Tax and/ or made regular payment of loan and interest to the financial institutions. 3. The appellant had been granted subsidy to the extent of Rs. 26,98,304/- during the relevant period by the State of Rajasthan in the form of Sales Tax VAT 37B challan and this amount of subsidy was adjusted by the appellant towards payment of VAT. The Department has included this amount of subsidy in the transaction value for the purpose of levy of central excise duty under section 4 of the Central Excise Act, 1944 (the Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the balance tax liability could be paid in cash by the appellant through VAT 37A challan. 7. To explain the method contemplated under the promotion policy, the following illustration has been provided by the department. Supposing an amount of Rs. 1000/- is sanctioned as subsidy for the first quarter, then for the subsequent quarter if the sales tax collected from the customers and payable to the government comes to Rs. 2500/-, the sales tax liability of Rs. 1000/- can be adjusted through VAT 37B challan and the assessee would have to pay the rest of the sales tax liability of Rs. 1500/- in cash through VAT 37A challan. Thus, though the assessee had collected an amount of Rs. 2500/- from the customers towards sales tax, it deposited Rs. 1000/- by utilizing the VAT 37B challan provided to it as subsidy and the remaining amount of Rs. 1500/- was paid in cash through VAT 37A challan. 8. The Department believes that this amount of Rs. 1000/- retained by the appellant from the amount of sales tax collected by the appellant from the customers should be included in the transaction value since the definition of transaction value in section 4(3)(d) of the Excise Act excludes only the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Uttam Galva Steels [2016 (331) E.L.T. 261 (Tri.-Mum.)], relevant and distinguished the same saying that decision was rendered in facts of that case. We observe that all the subsequent decisions rendered by the Delhi Bench listed above follow Welspun Corporation and not Uttam Galva Steels decision. Kolkata bench has refused to agree that in Welspun Corporation case, the bench has distinguished the decision of Hon'ble Supreme Court in case of Super Synotex (refer para 8). While all the decisions of Delhi Bench say that Welspun Corporation has distinguished. Further while considering the issue Delhi Bench has at no point of time considered the provisions of Section 9 of the Rajasthan VAT Act, 2003." 11. The learned Member (Judicial), however, disagreed with the views expressed by the learned Member (Technical) and the relevant paragraphs of the order passed by the learned Member (Judicial) are reproduced below:- "10. Thus, it is evident from the salient features of the scheme, that it is not a subsidy scheme directly providing for retention of part/full amount of sales tax collected, as in the case of Super Synotex India Ltd. (supra) decided by the Hon'ble Supreme Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government no benefit towards excise duty can be given in terms of Section 4(3)(d) of Central Excise Act. This ruling is not applicable in the instant appeals, as admittedly all the appellants have deposited tax or discharged the sales tax liability under the scheme of RVAT Act and the rules thereunder." 12. It is in such circumstances that the difference of opinion was recorded by the learned Members constituting the Bench. 13. Section 4 of the Excise Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise, provides that where the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods such value shall, in a case where the goods are sold by the assessee, be the transaction value provided the assessee and the buyer of the goods are not related and the price is the sole consideration. Transaction Value, in terms of section 4 (3) (d) of the Excise Act, means the price actually paid or payable for the goods when sold but does not include the amount of duty of excise, sales tax and other taxes, if any actually paid or actually payable on such goods. 14. The illustration which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers and was required to deposit only 25% with the Government. The Commissioner held that the assessee was availing partial sales tax exemption under the Sales Tax Incentive Scheme upto 75% of the tax liability and was paying only 25% of the sales tax, despite collecting the entire consideration from the customers and, therefore, the additional amount collected under the camouflage of incentive tax would form part of the value for levy of excise duty. The assessee claimed that as there is a difference between grant of incentive and extension of benefit of exemption, the amount retained by the assessee should be treated as an incentive by the State Government and such retention would be deemed payment of sales tax to the State Exchequer. It is in this connection that the Supreme Court observed:- "19. xxxxxx On a studied scrutiny of the scheme we have no scintilla of doubt that it is a pure and simple incentive scheme, regard being had to the language employed therein. In fact, by no stretch of imagination, it can be construed as a Scheme pertaining to exemption. Thus, analysed, though 25% of sales tax is paid to the State Government, the State Government instead of giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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." (emphasis supplied) 19. It is clear from the aforesaid decision of the Supreme Court that since 25% of the amount collected as sales tax from the customers was paid by the assessee and the remaining 75% of the amount collected was retained, it became profit or the effective cost paid to the assessee by the purchaser and this 75% was, therefore, to be treated as the price of the goods. The Supreme Court emphasised that the amount paid as sales tax was only 25%. 20. Under the promotion policy involved in these appeals, the subsidy does not reduce the sales tax that is required to be paid by the assessee. The entire amount of sales tax collected by the assessee from the customers is required to be paid. A portion is deposited through VAT 37B challan issued to the assessee by the State Government as subsidy under the promotion policy and the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tating that such an arrangement can never be placed upon the platform of additional consideration. In so stating the Tribunal has ignored and/or lost sight of the fact that it was in pursuance of the contract of sale between the respondents and M/s. Visakhapatnam Steel Plant that the licences were made available to the respondents. The Export and Import Policy had nothing to do with the arrangements/contract under which the licences flowed from the buyer to the seller. At the cost of repetition it must be mentioned that had the respondents had advance intermediate licence on their own i.e. without M/s. Visakhapatnam Steel Plant having to surrender its licences for the purposes of the contract, then the reasoning of the Tribunal may have been correct. But here, in pursuance of the contract of sale, there is directly a flow of additional consideration from the buyer to the seller. The value thereof has to be added to the price. We are thus unable to accept the broad submission that where parties take advantage of policies of the Government and the benefits flowing therefrom, then such benefit cannot be said to be an "additional consideration." (emphasis supplied) 23. In Indo Rama S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided has necessarily to be a definite amount. It could either be a fixed amount or it could depend on certain factors and one factor can be percentage of the tax paid. This would encourage investors to increase commercial production so that they are able to receive more subsidy, but this can possibly have no bearing on the consideration to be received by the appellant so as to include this value in the transaction value. 26. The learned Member (Technical) has referred to certain decisions of the Tribunal that have relied upon the decision of the Supreme Court in Super Synotex. The issue before the Tribunal in Jayaswal Neco Industries Ltd. vs. Commissioner of C. Ex. & ST, Raipur [2016 (344) ELT 578] was with regard to inclusion of VAT which was exempted and which was retained by the appellant under a Scheme of the State Government. In Insucon Cables and Conductors Pvt. Ltd. vs. Commissioner of Central Excise, Jaipur-I [2016 (344) ELT 607 (Tri-Del.)] exemption had been granted by the Sales Tax Department to the extent of tax paid on inputs used in the manufacture of final product and it was this amount that was in dispute for the purpose of valuation. In Commissioner of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax amount/VAT amount but it could be retained as an incentive amount. The Tribunal held that the liability to pay sales tax/VAT was not extinguished at the time of removal of goods since it is not exempted from payment of sales tax/VAT and it was clear from the Scheme as well as the eligibility certificate that the amount of sales tax allowed to be remitted to the respondent was towards capital subsidy. Thus, it was not a case where sales tax was not payable but was a case where it stood actually paid as the remission was an incentive or a capital subsidy which the State Government granted with respect to the investment made in the earthquake ravaged region of Kutch in the State of Gujarat. The observations of the Tribunal are as follows:- 5.3. xxxxxxxx In the present case we find that the 'sales tax' is 'actually payable to the Government at the time of removal of goods from the 'place of removal". The liability to pay the sales tax/VAT is not extinguished at the time of removal of goods since it is not exempted from sales Tax/VAT. It is only after the assessment of the sales tax officer and subject to the condition that the Respondent's liability to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereto that sales and purchase of goods specified in Schedule I shall be exempt from tax, sub-Section (2) empowers the State Government by a notification in the official gazette to exempt any specified class of sales or purchase or sales or purchases by any specified dealer or specified class of dealers from payment of the whole or part of the sales tax. On the other hand, the scheme of remission provided for under Section 41 of the Gujarat Value Added Tax Act, 2003, contemplates that the State Government/ Commissioner of Sales Tax may remit the whole or any part of the tax payable in respect of any dealer or class of dealers. It is clear from reading of Section 5(2) as also Section 41 of the Act that while Section 5 grants exemption from the levy/payment of sales tax, remission under Section 41 is granted in respect of any part of the tax payable by a dealer. 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. In the instant case as already discussed above it is not that Sales Tax was not only payable but in fact it stood actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax and adjusts the sales tax liability of Rs.1000/- from VAT 37B challan issued by the State Government as subsidy under the promotion policy and deposits the remaining amount of Rs. 1500/- towards sales tax in cash through VAT 37A Challan, then whether this 1000/- can be said to be an additional consideration. The decision of the Supreme Court in Super Synotex India would not be applicable to the facts of the present case as that was a case where 25% of the amount collected as sales tax from the customers was paid by the assessee and the remaining 75% of the amount was retained by the assessee, which amount was treated to be the price of the goods. In the promotion policy involved in the present case, the subsidy does not reduce the sales tax that is required to be paid by the assessee as the entire amount of sales tax collected by the assessee from the customer is paid. The subsidy amount, therefore, cannot be included in the transaction value for the purpose of levy of central excise duty under section 4 of the Excise Act. 32. In view of the aforesaid discussion, the reference is answered in the following manner: a- Subsidy under the promotion policy does not reduce the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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