Investment-linked VAT remission granted as a State incentive is not includible in excise assessable value.

The appellant manufactured and cleared water storage tanks and MS pipes during February 2012 to March 2014.

Under Assam’s Industrial and Investment Policy, 2008 and the Assam Industries (Tax Exemption) Scheme, 2009, it was eligible for a time-bound, investment-linked incentive under which 99% of the VAT otherwise payable was allowed as partial exemption or remission, subject to an investment ceiling; the remaining 1% was deposited

The department treated the retained amount as part of the assessable value, relying on *CCE v. Super Synotex (India) Ltd.*, and confirmed excise duty of Rs. 7,32,981, interest and an equal penalty under Section 11AC.

The Commissioner (Appeals) upheld the demand.

The appellant appealed, also disputing the extended limitation period on the ground that the VAT benefit had been identified in audit and information had been supplied before the show-cause notice.

Whether the 99% VAT benefit retained under Assam’s investment-linked incentive scheme formed part of the transaction value under Section 4(3)(d) of the Central Excise Act, 1944

Whether the extended period of limitation and equal penalty under Section 11AC could be sustained where the VAT retention was known to the department and the appellant had supplied the requested information before the show-cause notice

Section 4(3)(d) of the Central Excise Act, 1944 concerns transaction value, including amounts paid or payable to or on behalf of the assessee by reason of, or in connection with, the sale; a State incentive that is not consideration paid by the buyer is not includible on that basis.

Section 11A provides for recovery of duty not levied or paid, while the extended period requires suppression of facts with intent to evade duty; Section 11AC provides for penalty where its statutory conditions are met.

The Tribunal distinguished *Super Synotex* on the facts and followed *United Packagers v. Commissioner (Appeals)* and *Sundaram Foods Pvt. Ltd. v. Commissioner of Central Excise*, which treated comparable 99% VAT retention under an industrial incentive scheme as a State subsidy, not part of assessable value.

It also referred to CBEC Circular No. 1063/2/2018-CX dated 16 February 2018 in addressing extended limitation.

The Tribunal found that eligibility for the Assam benefit depended on investment and commencement of commercial production, and that the benefit was subject to a fixed-capital-investment ceiling and a specified entitlement period.

The tax was first quantified and the statutory benefit then allowed; the retained amount was therefore an investment-linked State incentive, not an additional amount paid by the buyer in connection with the sale.

Applying *United Packagers* and *Sundaram Foods*, the Tribunal held that *Super Synotex* did not govern these materially different facts and that the VAT retention was not includible in transaction value.

Separately, it found no suppression: the audit had identified the retention, the department had sought particulars, and the appellant had supplied them before the show-cause notice.

It therefore held that the extended period was unavailable and that the basis for the equal penalty was not established.

It set aside the impugned order, allowed the appeal and granted consequential relief, if any, as per law.