[Order per : Ramesh Nair, Member (J)]. - The present appeals have been filed by the Revenue against Orders-in-Appeal passed by the Commissioner of Central Excise (Appeals) Mumbai -I, LTU, Mumbai.

2. The brief facts of the case are that the Respondent M/s Welspun Corporation Ltd., were recovering sales tax/VAT from their customers on sales effected by them. The Respondent unit at that point of time was eligible to ‘Incentive Scheme 2001’ under Economic Development of Kutch District, Government of Gujarat. Under the said scheme they were allowed to recover the sales tax amount/VAT amount but to retain with themselves as an incentive. The revenue’s contention was that as per the provisions of Rule 6 of Central Excise Valuation Rules, 2000 read with Section 4(1) and 4(3)(a)(d) of the Central Excise Act, 1944 and Paras 10 and 11 of Board’s Circular No. M.F. (DR) F. No. 354/81/2000-TRU, dated 30-6-2000 the amount of sales tax retained by the Respondent as an incentive was required to be added/considered for levy of Central Excise duty as an additional consideration. The revenue also relied upon the judgment of Hon’ble Supreme Court in the case of M/s Super Synotex (India) Ltd. as reported in (S.C.)

2.1 The Appellant paid the excise duty on said incentive amount “Under Protest”, however subsequently claimed refund of the same. The Respondent pleaded that under the scheme they have opted for remission of sales tax which means that the Sales Tax/VAT was payable at the time of clearances of goods and therefore the same is not a part of the assessable value of the goods . They submitted that in case of M/s Super Synotex there was exemption from sales tax and since the said amount was not chargeable, the recovery thereof from the customer is liable for excise duty as being part of the assessable.

2.2 The adjudicating authority rejected the refund claim on the ground that the sales tax was collected by the Respondent from their customers and retained by them. That since the said amount was not actually payable, the same is liable to be included in assessable value and is liable for duty.

2.3 The Respondent filed appeals before the Commissioner (Appeals) who allowed the appeals filed by the Respondent. Now being aggrieved by the impugned order passed by the Commissioner (Appeals), the Revenue is before us with a prayer to set aside the Order-in-appeals.

3. Shri Ajay Kumar, Ld. Jt. Commissioner (AR) reiterates the grounds of appeal. He further submits that as per provisions in Rule 6 of Central Excise Valuation Rules, 2000 read with Section 4(1) and 4(3)(a)(d) of the Central Excise Act, 1944 as well as Paras 10 and 11 of Board’s Circular MF. (DR) F. No. 354/81/2000-TRU, dated 30-6-2000 the said amount of sales tax retained by the Respondent was required to be added/considered for levy of Central Excise duty. He relies upon the judgment in case of CCE, Jaipur v. M/s Super Synotex (India) Ltd. (S.C.). He submits that since the tax was not actually paid or payable the same is liable to be added to the assessable value. That as per Explanation to Section 4 of the Central Excise Act, 1944, it is implicit that “value” in relation to excisable goods 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 section does not allow deduction to subsidy earned by way of sales tax incentive. He submits that the Tribunal’s judgment of Uttam Galva Steels Ltd. - (TRI) is not applicable as the scheme involved was sales tax incentive in form of deferral which means that Sales tax is actually payable whereas in the present case the Incentive scheme, 2001 for Economic development of Kutch District (Kutch Package) is promulgated to subsidise the investment cost. The income from said scheme is Capital Receipt which is recovered by retaining the sales tax imposed by Government of Gujarat. The remission of sales tax is in the form of capital subsidy which adds value to the goods to an amount equal to sales tax remitted by the Government of Gujarat. He submits that being an additional consideration in terms of Section 4(3)(d) of Central Excise Act, 1944, it cannot be deducted from the assessable value, on which Central Excise duty is leviable.

4. On the other side Shri V.S. Nankani, Ld. Senior Counsel along with Shri Vipin Jain, Ld. Advocate appearing for the Respondent submits that under the Incentive Scheme they were eligible for incentive on account of fixed Capital Investments. The State Government instead of collecting the Sales Tax payable and thereafter separately granting the same in the form of incentive in exercise of the powers vested with it under the Gujarat VAT Act, 2003 has given effect to the said Incentive scheme by granting remission of the Sales Tax actually payable and adjusting it against the incentive. In their case not only Sales Tax was actually payable but in fact it stood actually paid, as the remission was nothing but adjustment of the Sales Tax paid by them against the incentive which the State Government granted with respect to the fixed capital investment made by it in the State of Gujarat. There is no blanket exemption from sales tax from the levy or payment of sales tax.

4.1 There is difference between the “remission” and “exemption” as while in the case of ‘exemption’ the levy itself is statutorily exhausted and no sales tax is paid or payable by the assessee, whereas in case of “remission” the sales tax is payable as there is no exemption from levy and/or payment of sales tax at the time of clearance and the same has to be statutorily discharged. That in terms of Section 41 read with Rule 18B of the Gujarat VAT Rules, remission does not grant exemption from the levy or payment of sales tax and the same is actually payable. The scheme of exemption as contemplated in Section 5(1) of the Gujarat VAT Act, the payment of tax is exempt under Section 5(2), is different from the scheme of remission provided under Section 41 of the Gujarat VAT Act. Under the remission scheme the Commissioner of Sales Tax may remit the whole or part of the tax payable. The provision for remission is independent provision and is separate and distinct from grant of exemption from Gujarat VAT. There have been different assessment orders by the sales tax officer. The Sales tax assessment orders as also the records maintained by the State Government recognize the remission granted as actual payment of sales tax. The revenue has erred in placing reliance upon the judgment of Hon’ble Supreme Court in case of CCE v. Super Synotex - (S.C.) as the same does not apply to the facts of the present case. The said case dealt with Sales Tax incentive and it exempt fully or partially from sales tax, the sale or purchase of goods or class of goods or any person or class of persons without any condition or with such conditions as may be specified in the notification. Exemption was granted from the levy/payment of sales tax in excess of 25% of the sales tax payable and the remaining tax was neither to be paid nor payable. That the Hon’ble Apex Court in the case of M/s. Purolator India Ltd. v. CCE 2015 TIOL 193 SC- CX = (S.C.) again explained the ratio laid down in case of M/s Super Synotex case by clarifying that in that case the Court was not concerned with Sales Tax actually payable in asmuchas in that case the sales tax was not actually payable. It is for this reason that the Apex Court’s judgment in the case of Super Synotex is concerned only with actually paid and not actually payable and consequentially there is no infirmity in the deduction claimed by them in determining the transaction value. He further submits that the entire amount of excise duty paid by them on sales tax amount was borne by them and is appearing as recoverable in their books of accounts.

4.2 He submits that the transaction value, as defined in Section 4 of the Central Excise Act, 1944 does not include any amount of sales tax and other taxes which are ‘actually paid’ or ‘actually payable’. In the instant case, there cannot be any dispute that Sales Tax was actually leviable and payable in respect of the clearances made inasmuch as there is no exemption in respect of the said clearance. In the absence of any exemption from the levy and/or payment, it cannot be said that Sales Tax was not payable on the transaction in question. Hence they are entitled to deduction of the entire Sales Tax actually payable from the assessable value. He submits that the Tribunal in the case of CCE v. Uttam Galva Steels Ltd. reported in 2015-TIOL-2242-CESTAT-MUM = (Tri.-Mum.) considered the difference between the “exemption” and “deferral” of sales tax and held that it is only in case of exemption that the said amount is not excludible from the transaction value. It clearly comes out of the said judgment that deduction towards sales tax from the price would be available in respect of sales tax “actually paid or actually payable”. In the present case the sales tax was actually payable and they were eligible to exclude from the price as no exemption was available. They have opted for the remission scheme under the Incentive Scheme of 2001. Under the remission scheme in respect of the goods cleared by them, sales tax is leviable and payable and there is no exemption from the levy or payment of sales tax. That since sales tax is leviable as also actually payable under the remission scheme, they have correctly claimed refund of the excise duty paid on the amount of sales tax actually payable.

4.3 That sub-Section (7A) of Section 11 of the VAT Act also clearly provides that “notwithstanding anything contained where tax is levied or is leviable under this Act, or any other law, is remitted or to be remitted or deferred or is deferrable under any tax incentive scheme granted by the Government of Gujarat, then tax shall be deemed to have been paid to the Government treasury....”. A reading of the said section would clearly show that the tax that has been remitted is deemed to be statutory paid.

5. We have carefully considered the submissions made by both the sides and perused the records.

5.1 We have gone through the relevant clauses of Chapter IV-A of the Gujarat Value Added Tax Act, 2003. We find that the Government of Gujarat had declared “Incentive Scheme 2001” wherein benefits provided under Economic Development of Kutch District, Government of Gujarat, Industries of Mines Department. Subsequently under the Gujarat Value Added Tax Act, 2003, the scheme was defined as per Rules 18A, 18B, 18 C & 18D. The Respondent company opted for “Remission of Tax Scheme” and was thus eligible for the Capital subsidy in the form of remission of Sales Tax subject to the conditions to be fulfilled. After applying to the Commissioner of Sales Tax/VAT, the eligible units were issued entitlement certificate and Form 110 to make them entitle to the benefit of tax deferment or tax remission as the case may be. The subsidy in the form of remission of sales tax was in fact percentage of capital investment. The intention of the State Government was, thus, instead of granting the capital subsidy to the units setting up their manufacturing facility, the subsidy be granted by remitting sales tax amount. Separate assessment orders were thus issued by the assessing officer of the sales tax department from time to time towards the incentive scheme amount. The Competent Authority was required to necessarily pass order for remission of such tax separately for each tax period. The remission of tax is thus directly related to capital investment in fixed asset. There was no option to claim exemption from payment of sales tax. The quantum of remission was based upon the investment made in the fixed assets. The condition of the remission amongst others included to remain in production, employment of certain percentage of persons in assessee unit, and numerous other conditions as brought out in Para 9 of the impugned Order-in-Appeal.

5.2 The remission amount was adjusted against the incentive amount receivable as per the Eligibility Certificate. The Sales Tax assessment orders indicated that the finished goods cleared by the appellants were assessed to full rate of tax and allowed as remission under Section 41 of Gujarat Value Added Tax Act, 2003. This shows that the Sales Tax was actually payable to the Government. The revenue has relied upon the definition of ‘transaction value’ in Section 4 (3) of the Central Excise Act, 1944 and on the Board Circular No. 354/81/2000-TRU, dated 30-6-2000 and also on judgment of Hon’ble Apex Court in case of M/s Super Synotex case as reported in (S.C.).

5.3 We find that in the present case the tax was actually payable and there was as such no blanket exemption from sales tax. The term “remission” from sales tax itself means that the sales tax was actually payable at the time of clearance of goods but was remitted at a later date by passing of assessment orders by the Sales Tax authorities. We find that Section 4(c) and (d) of the Central Excise Act, defines “transaction value” and “Place of removal” as under :-

“place of removal” means -

(i) a factory or any other place or premises of production or manufacture of the excisable goods;

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;

(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;

from where such goods are removed;

“Transaction Value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; 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.”

In terms of above Section 4, the duty is chargeable on excisable goods on its value which is to be determined at the time and place of removal. Thus whatever transaction value of the goods prevailing at the time of its removal shall be liable to excise duty, which however shall not include the amount of duty of excise, sales tax and other taxes, if any, “actually paid” or “actually payable” on such goods. 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 the Sales Tax is “remitted”. Thus when the sales tax/VAT is payable at the time of removal in that case in terms of Section 4(d) of the Central Excise Act, the same is not includible in the transaction value. Further the sales tax amount was adjusted against the remission granted by the sales tax authority under an assessment.

5.4 The learned AR during hearing has relied upon the judgment of Hon’ble Supreme Court in case of M/s Super Synotex (India) Ltd. - (S.C.). We find that in the impugned order the learned Commissioner (Appeals) dealt with this Apex Court judgment in paras 11, 11.1 & 11.2, which are reproduced below : -

“11.  I further find that the adjudicating authority while rejecting the refund claims filed by the appellants held that since sales tax has been collected and retained by them their case is covered by the Hon’ble Supreme Court’s Order in CCE v. Super Synotex and hence their refund claims were rejected.

11.1. In the case of Super Synotex India Ltd (supra) referred by the lower authority, the Apex Court held that there being an exemption from the payment of Sales Tax, the same was neither “actually paid” nor was it "actually payable”, hence the same could not be excluded from the price while computing the transaction value. However, the adjudicating authority overlooked the fact that Apex Court in this case was dealing with the Rajasthan Sales Tax Incentive Scheme of 1989. This incentive scheme was in the nature of an exemption from the levy of Sales Tax III excess of 25% of the Sales Tax leviable, and consequently the balance 75% of Sales Tax was neither paid nor was payable. In the said case before the Hon’ble Supreme Court the issue concerned collection and retention of Sales Tax or deferred payment of Sales Tax where the tax initially collected was retained with the assessee for a certain period of years. As per the scheme of the State Government a lump-sum payment of a certain percentage of this amount of. Sales Tax collected during the years was assumed to be sufficient discharge of the entire amount so collected, thus allowing the differential amount of Sales Tax to accure to the benefit of the assessee. Hence, I find that the ratio of this ruling would not be applicable to the case of the appellants. The Instruction F. No. 6/S/2014-CX.1, Dated 17-9-2014 issued by the Board based on the ruling of Hon’ble Supreme Court in the case of Super Synotex India Ltd (supra) also would stand distinguished for the reason that in case of the appellants the amount of Sales Tax collected and allowed to be retained was deemed to be paid in view of the sub-section (7A) of Section 11 of the Gujarat Value Added Tax Act, 2003.

11.2. Even in the case of CCE, Jaipur v. Shree Rajasthan Syntex Ltd. - 2015 (31S) E.L.T. 626 (S.C.) the Hon’ble Supreme Court was seized of the Sales Tax Incentive Scheme, [1989] issued by the State of Rajasthan where full incidence of Sales Tax was allowed to be collected from the buyer, 75% thereof was retained by the respondent and the remaining 25% was paid to the State Government. Since the Incentive Scheme availed by the appellants was not of retention of sales tax but comprised of incentive equal to capital invested to be availed in any of 3 different ways as outlined at para 10.3 above. One of which i.e. its sub para (ii) is to avail incentive by way of remission of tax by retaining the amount of VAT collected and adjustment thereof as capital subsidy specified in the Eligibility Certificate equivalent to the capital investment made in fixed assets. This was further subject to the condition of re-investment of 50% of total incentive i.e. (i) to (ii) of para 10.3 above and not only (ii) incentive received in projects in State of Gujarat within a period of 10 years of the commencement of production. This is thus not an exemption of tax as was the issue before the Hon’ble Supreme Court in the above case, I find that the ratio laid down in this judgement cannot have any bearing on the present case of the appellants. Since the incentive Scheme, 2001 for re-development of Kutch Area affected by the earthquake in the year 2001 provided for incentive to the extent of investment made by the appellants in their industrial unit set up in Kutch area, it cannot be equated with the Rajasthan Sales Tax Incentive Scheme of 1989, Hence, I find that the reliance placed by the lower authority on the Apex Court judgment in the case of Super Synotex (supra) to reject the refund claim of the appellants, is unfounded.”

5.5 The Apex Court judgment of Super Synotex has already been distinguished by the learned Commissioner (Appeals) as above. However, the Revenue in the review order/appeal did not refute the above findings, therefore, now the reliance of learned AR on the judgment of Super Synotex (supra) is of no help to the Revenue.

5.6 In the case in hand it is very much clear that from the Scheme as well as from the Eligibility Certificate, that the amount of Sales Tax allowed to be remitted to the respondent was towards capital subsidy. Even the requirement to re-invest 50% of the incentive in projects in the State of Gujarat further emphasizes the point that the amount of Sales Tax retained was only as capital subsidy. We further find from the facts narrated in the impugned order that the incentive receivable as capital subsidy by the appellants was from the Department of Industries, whereas the Sales Tax amount collected was payable to the Department of Sales Tax but allowed to be retained and adjusted against such incentive by their very department which also granted refund of tax paid on raw materials and CST paid. This scheme was thus operated by Department of Sales Tax and accordingly Commercial tax officer has necessarily to pass order for each tax period. It implies that the State Government of Gujarat under which both the departments fall, would have put in place some mechanism whereby the incentive paid to the appellants by way of retention of Sales Tax collected from their customers and refund granted on other two items (VAT on purchases and CST) is reimbursed by the Department of Industries to the Department of Sales Tax. Hence for the above reason also we find that such amount, allowed to be remitted to the respondents as incentive which was otherwise payable to the Sales Tax department, cannot form part of the transaction value.

5.7 The respondents have argued that in similar situation in case of manufacturers of fertilizers, where the subsidy was being received by such manufacturers from the Department of Fertilizers the C.B.E. & C. vide Circular No. 983/7/2014-CX., dated 10-7-2014 has clarified that subsidy is not any additional consideration flowing directly or indirectly from the buyer to the seller and hence, is not required to be included in the assessable value. Applying the same analogy to the facts of the present case and agreeing with the contentions of the respondents, we are of the view that since in the present case the remission is incentive for setting up the unit is Kutch area, the same would not form part of transaction value.

5.8 The Respondent has cited the order of Tribunal in case of CCE v. Uttam Galva Steels Ltd. 2015-TIOL-2242- CESTAT-MUM = (Tri.-Mum.). We find that the fact of that case is different from the facts in the present case, therefore, we do not incline to take any inference from the said decision of this Tribunal.

5.9 We find that even sub-section (7A) of Section 11 of the Gujarat Value Added Tax Act, 2003 states that the tax that remitted is deemed to have been statutorily paid. The said provision is as under:-

“notwithstanding anything contained .... where tax is levied or is leviable under this Act, or any earlier law is remitted or to be remitted or deferred or is deferrable under any tax incentive scheme granted by the Government of Gujarat, then tax shall he deemed to have been paid to the Government treasury... “

5.10 Thus in our view, once the Sales Tax Department has assessed the Sales Tax as paid, the Central Excise Department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them. Hence, we find that once the Sales Tax Department assessed the Sales Tax as paid, the condition of Section 4(3)(d) of the Central Excise Act, 1944 stands fulfilled.

5.11 We also find that remission and exemption was separately considered by the Govt. of Gujarat. While, Section 5 of the Gujarat Value Added Tax Act, 2003 provides in sub-Section (1) thereto 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 paid, as the remission was nothing but the incentive or capital subsidy which the State Government granted with respect to the investment made by the appellants in the earthquake ravaged region of Kutch of State of Gujarat. Instead of recovering Sales Tax and then refunding the same as capital subsidy, the State Government had remitted the same to appellants. Consequently like CST since VAT which was payable was actually paid the same is required to be excluded from the transaction value. Hence for this reason also the sales tax remitted by the Government towards incentive of Capital investment cannot be a part of the transaction value.

6. In view of our above observations, we hold that the impugned order requires no interference. Accordingly, we uphold the impugned Orders. The Revenue’s appeals are dismissed. Cross-Objections and stay applications also stand disposed of.

(Pronounced in Court on 23-3-2017)