Alpha Industries Vs Commissioner of Central Excise (CESTAT Mumbai)
The Tribunal ruled that the demand raised was not sustainable, and Alpha Industries was not liable to pay additional excise duty on the VAT incentive amount.
Alpha Industries, engaged in manufacturing excisable goods, availed benefits under the Goa VAT NPV Scheme, 2005, which allowed tax deferment or partial payment of VAT/Sales Tax. The department contended that the difference between the collected tax and the Net Present Value (NPV) paid should be considered additional consideration for goods sold, making it taxable under Central Excise duty. A demand of ₹77,81,926/- was raised.
Tribunal’s Decision
1. No Additional Consideration: The Tribunal relied on precedents, ruling that VAT incentives/subsidies refunded by the State Government are not includable in the assessable value for excise duty.
2. Supreme Court Ruling: The Supreme Court dismissed a similar appeal by the Revenue, reinforcing that such subsidies are not part of the transaction value.
3. Appeal Allowed: The impugned order was set aside, and the appeal was decided in favor of Alpha Industries.
Final Outcome
The Tribunal ruled that the demand raised was not sustainable, and Alpha Industries was not liable to pay additional excise duty on the VAT incentive amount.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal has been filed by M/s. Alpha Industrie (herein after, for short, referred to as “the appellants”), assailing the Order-in-Original No. GOA-EXCUS-000-COM-005-15-16 dated 31.05.2015 (hereinafter, for short, referred to as “the impugned order”) passed by the Commissioner, Central Excise & Service Tax, Goa.
2.1 The facts of the case, leading to this appeal, are summarised hereinbelow:
2.2 The appellants are engaged inter alia, in the manufacture of excisable goods viz., Parts of ATMs, falling under Chapter 85 of the First Schedule to the Central Excise Tariff Act, 1985. As a manufacturer of excisable goods, the appellants are duly registered with the Central Excise department and also discharge appropriate duty liability on removal of the said final products out of their factory premises.
2.3 In this case, the Government of Goa had framed a Scheme, known as “Goa Value Added Tax Deferment-cum-Net Present Value Compulsory Payment Scheme, 2005” (for short referred to as “Goa VAT NPV”), as a part of Goa Government’s investment promotion and industrialization efforts undertaken with an objective to promote expansion of industries in the State of Goa, issued under Notification No. 4/5/2005-Fin(R&C)(13). The State government had framed an industrial policy by providing benefits or concessions in the form of tax exemption for a period of 15 years, operative during 01.07.1983 to 31.03.2000, reckoned from the date of its first sale of commercial production under Entry 68 of the Second Schedule of the Goa VAT/Sales tax law. Such exemption was periodically modified as per the policy in force in the State of Goa and this tax waiver for a limited period created a large contingent liability on the part of the industry to pay such accumulated tax liability after the tax holiday period. According to the Goa VAT NPV scheme, 2005, upon introduction of VAT w.e.f. 01.04.2005, the balance un-expired period of the aforesaid tax exemption for eligible manufacturing units were given an option to convert their liability into Net Present Value of such accumulated future payments. In other words, the eligible assessee can collect Sales tax/VAT/CST from its purchasers and pay the same to the Government of Goa on the expiry of a deferred period or were given an option to pay the Net Present Value of such deferred payment i.e., 25% of the sales amount prior hand as the same is being collected and the balance 75% of the amount were allowed to be retained by the eligible unit. The appellants were one of the eligible units and granted the benefits of Goa VAT NPV scheme, 2005.
2.4 The jurisdictional Central Excise Commissionerate had interpreted that the difference between actual sales tax collected by the appellants from their customers and the payment made towards Sales tax/VAT/CST at NPV i.e., the net gain component was in fact an additional consideration for the goods sold and therefore the same was liable to be included in the assessable value for the purpose of determination of Central Excise Duty, under the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. On the basis of such understanding, show cause proceedings were initiated by the department, seeking for recovery of the Central Excise duty of Rs.77,81,926/- along with interest. The show cause notice (SCN) dated 19.07.2011 issued in this regard was adjudicated vide the impugned order dated 31.05.2015, wherein the proposals made in the SCN were confirmed. Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal.
3. Heard both sides and perused the records of the case.
4.1 We find that the issue arising out of the present dispute is no more res integra, in view of the judgements relied upon by the appellants in the cases of Commissioner of Central Excise, Raigad Vs. Uttam Galva Steels Ltd. – 2016 (331) E.L.T. 261 (Tri.-Mumbai); PGP Glass Private Ltd., Vs. CCE & ST, Vadodara – 2023 (7) TMI 659 (CESTAT Ahmedabad); Rational Engineers Pvt. Ltd. Vs. Commissioner of Central Excise, Thane-I – 2023 (11) TMI 363 – CESTAT Mumbai; and Mahindra Steel Service Centre Ltd., Vs. Principal Commissioner of CGST & Central Excise, Bhopal – (2024) 17 Centax 241 (Tri. Del.). The issue decided in those cases was that incentives/subsidy of VAT/Sales Tax refunded by the State Government at a percentage of the tax paid by the assessee, under the NPV scheme, would not be includable in the assessable value for the purpose of payment of central excise duty thereon.
4.2 We further find that in the case of Mahindra Steel Service Centre Ltd. (supra), the Civil Appeal No. filed by Revenue was dismissed by the Hon’ble Supreme Court, reported in (2024) 17 Centax 242 (S.C.). The extract of the said judgement dated 05.04.2024 is given below:
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2024
[5 DIARY NO.13005 OF 2024]
PRINCIPAL COMMISSIONER OF CGST AND CENTRAL EXCISE, BHOPAL, M.P.
APPELLANT(S)
VERSUS
M/S MAHINDRA STEEL SERVICE CENTRE LTD.
RESPONDENT(S)
ORDER
Delay in filing the appeal is condoned.
We have heard learned senior counsel for the appellant and
learned counsel for the respondent-caveator.
We find no merit in this appeal.
Hence, the civil appeal stands dismissed.
Pending application(s), if any, shall also stand disposed of.
…………. ,J
[B.V. NAGARATHNA]
……………… ,J
[AUGUSTINE GEORGE MASIH]
NEW DELHI,
APRIL 05, 2024
5. In view of the settled position of law, as discussed in those referred cases, and in view of the above judgement of the Hon’ble Supreme Court dated 05.04.2024, the issue arising out of the present dispute is no more open for any debate and as such, the impugned order passed by the learned adjudicating authority is liable to be set aside. Therefore, the impugned order dated 31.05.2015 is set aside and the appeal is allowed in favour of the appellants.
(Operative part of the order pronounced in open court )
