In a recent judgment, the New Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)has held that inclusion of subsidy amount in transaction value in terms of section 4(3)(d) of the Central Excise Act, 1944 is a matter of interpretation of the law.
M/s Rajasthan Digital Tiles (P) Ltd., the appellant –assesseeis engaged in the manufacture of glazed tiles and is registered with the Central Excise Department under Central Excise Registration.
The Department viewed that the appellant had undervalued the finished goods and short-paid the Central Excise duty by not including the amount of subsidy received from the Sales Tax Department for arriving at the transaction value of the goods cleared. Separate show causes were issued for the period April 2017 to June 2017 and April 2016 to March, 2017 respectively.
The show cause notices were adjudicated and separate Order-in-Originals were passed on confirmed the demand under the show causenotices. It was submitted that the subsidy received by them from the Government of Rajasthan does not constitute any consideration for the levy of excise duty.
The Government of Rajasthan introduced the Rajasthan Investment Promotion Scheme, in 2014 to promote investment in the State and generate employment opportunities through such investment. The scheme provided for various exemptions and at the same time provided for investment subsidies.
The appellant is covered by the investment promotion scheme of the Rajasthan Government and in terms thereof they are required to discharge their VAT liability by making payment of the same. The VAT so credited to the Government, a certain portion is disbursed as VAT to the appellant in the form of subsidies in the form of VAT 37B challan which can then be utilized in the subsequent period towards discharge of VAT liability
The Department has invoked the extended period of limitation on the ground that the assessee did not disclose the correct information to the Department. Thus, there was suppression of material facts with the intent to evade payment of duty. It was found that the issue of an extended period of limitation does not require any decision.
A single-member bench comprising Ms. Binu Tamta, (Judicial) observed that the issue of whether the subsidy amount was includible in the transaction value in terms of Section 4(3)(d) of the Central Excise Act was a matter of interpretation of law and therefore the allegation of suppression of fact is not applicable, consequently, neither interest nor penalty is leviable. The CESTAT set aside the impugned orders and allowed the appeal.
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