Subsidy received from State Government as Sales Tax Challan not to be included in Transaction Value for levy of Central Excise Duty u/s 4 of Central Excise Act: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the subsidy received from State Government as Sales Tax Challan not to be included in transaction value for levy of central excise duty under Section 4 of the Central Excise Act, 1944.

M/s Harit Polytech Pvt Ltd, the appellant received an investment subsidy under the Rajasthan Investment Promotion Policy-2003 and the same was adjusted by the appellant towards payment of Value Added Tax. The promotion policy was floated by the State of Rajasthan to promote investments in the State and to generate employment opportunities.

Naresh Gupta, Advocate appeared for the appellant and Rakesh Agarwal and Sanjay Kumar Singh, Authorized Representatives, appeared for the Department.

The appellant had been granted subsidy to the extent of Rs. 26 lakhs 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 Department believed that the amount of Rupees Thousand 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 amount of sales tax actually paid or payable on such goods.

Section 4 of the Excise Act, 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.

The Tribunal of Justice Dilip Gupta, President observed that “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.”

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