2026-VIL-1770-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Includibility of 99% VAT Retained under State Industrial Incentive Scheme in Transaction Value under Section 4(3)(d) of Central Excise Act, 1944 - Appellant, a manufacturer of water storage tanks and MS pipes, was granted benefit under the Industrial and Investment Policy of Assam, 2008 and the Assam Industries (Tax Exemption) Scheme, 2009, under which 99% of the tax payable for each return period was allowed as partial exemption or remission and 1% was deposited - Revenue held the VAT retained to be includable in the assessable value relying on Super Synotex Ltd., and confirmed the duty demand with interest and equal penalty under Section 11AC - Whether the 99% VAT retained under the incentive scheme forms part of the price or consideration received from the buyer and is includable in the transaction value - HELD - Eligibility under the scheme depended upon investment and commencement of commercial production, and the benefit was limited by the fixed capital investment and the entitlement period. The assessment mechanism first quantified the tax payable and thereafter allowed the statutory benefit. The retained amount was not an additional amount paid by the buyer by reason of or in connection with the sale and is therefore not includible in the transaction value under Section 4(3)(d). Super Synotex Ltd. case is distinguishable, since the amount retained was not the Appellant's income but a subsidy given by the State Government under its industrial policy. A time bound and investment linked 99% VAT retention granted to an eligible industrial unit is a State incentive and not sale consideration, though those matters arose under the earlier 2003 policy and 2005 scheme - The remission of 99% VAT is a subsidy given by the State Government and is not includable in the assessable value - The demand of duty with interest and penalty is not sustainable - Extended Period of Limitation and Penalty under Section 11AC of Central Excise Act, 1944 on Valuation Dispute Arising from Audit - Demand was raised on the basis of an audit of the Appellant's unit, the audit had already noticed the retention of the 99% VAT benefit, and the Department sought particulars by letters to which the Appellant replied before the show cause notice was issued - Whether the extended period was validly invoked and the equal penalty under Section 11AC is sustainable - HELD - The retention of the 99% VAT benefit was known to the Department, and the Appellant furnished the particulars sought before the issuance of the show cause notice. The Appellant has not suppressed any information, and the extended period cannot be invoked. The CBEC Circular No. 1063/2/2018-CX has also recognised that the extended period is unavailable on this valuation controversy. Suppression of facts with intention to evade duty is not established, and the equal penalty under Section 11AC is therefore not sustainable - The demand cannot be confirmed by invoking the extended period, the penalty is set aside, and the appeal is allowed
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