Incentives or subsidies received via the Net Present Value (NPV) scheme for deferred sales tax under the Package Scheme of Incentives (PSI) are not to be included in the assessable value for calculating Central Excise Duty.

Per: S.K. MOHANTY

This appeal has been filed by M/s Precision Shapes, Thane (herein after, referred to as ‘the appellants’, for short), assailing the Order-in- Original No. PUN-EXCUS-003-COM-011-14-15 dated 18.08.2014 (referred to as ‘the impugned order’) passed by the Commissioner of Central Excise & Service Tax, Pune-III Commissionerate.

2.1 Brief facts of the case, leading to this appeal, are summarized herein below:

2.2 The appellants having their factory at Survey No. 1072, Post Pirangut, Taluka Mulshi of Pune District, Maharashtra are engaged inter alia, in the manufacture of excisable goods viz., Coil Springs, Torsion Bars, Spring Roller etc., falling under Chapters 73 & 87 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 vide Central Excise Registration No. AAACT9025DXM001 and discharge appropriate Central Excise duty liability on removal of the aforesaid final products out of their factory premises.

2.3 In this case, the Government of Maharashtra had framed a Scheme, known as “Package Scheme of Incentives, 1993” (PSI), as a part of Industrial, Investment and Infrastructure Policy with objective of promoting fixed capital investment, employment generation and overall industrial growth in the State of Maharashtra. According to the said PSI scheme, eligible assessee can collect Sales tax/VAT/CST from its purchasers and pay the same to the Government of Maharashtra on the expiry of a deferred period. The appellants were one of the eligible units and granted the benefits of PSI. Under the said scheme, the eligible unit was permitted to charge sales tax for the sale of the goods and the amount of sales tax so collected was permitted to be retained by the appellants, subject to such sales tax amount should be paid in 5 equal yearly instalments on expiry of the 10th year, as computed from the last date of filing sales tax return.

2.4 Subsequently, vide Notification No.STR-12.02/CR-102/Taxation-I dated 16.11.2002, the Sales Tax Department of the Government of Maharashtra had introduced a Scheme for pre-mature repayment of deferred sales tax at Net Present Value (NPV) as per proviso to Section 38(4) all the Bombay Sales Tax Act, 1959/ Section 94(2) of the Maharashtra Value Added Tax, 2002 (MVAT). Under such provision, where the sales tax liability is paid by way of pre-mature payment as per NPV, then it would be deemed as if the full Sales tax/VAT/CST liability has been discharged. Accordingly, the eligible unit had an option of either retaining the Sales tax/VAT/CST so collected until expiry of the deferment period and pay it in its full value or to make a pre-mature payment at NPV rates fixed by the Government of Maharashtra. The appellants have opted for NPV scheme and started paying sales tax liability on their eligible sales under the deferment scheme as per NPV. 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 competent 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.60,42,454/- under Section 11A(1) of the Central Excise Act, 1944 along with interest and also proposed for imposition of penalty on the appellants under Section 11AC ibid. The show cause notice (SCN) dated 23.03.2007 issued in this regard was adjudicated vide the impugned order dated 18.08.2