2017 (8) TMI 1042 - AT - Central Excise

Valuation - clearance of polyester staple fibre to some customers who were in possession of import licences for inputs that had been invalidated as a condition for such procurement - Held that - It would appear that the buyers of the respondent in the impugned transactions had been issued with licences for import of raw materials for use in the manufacture of export products, and instead of procuring from abroad, opted to source them from respondent. Needless to say, the licence, being rendered superfluous, was liable to be invalidated and the privilege of duty-free import by the licence holder no longer available. There is no evidence to arrive at the conclusion that respondent was a beneficiary in consequence of invalidation or was eligible for any incentives prescribed in the Foreign Trade Policy. Appeal dismissed - decided against appellant.

Summary

Issues:
Dispute over clearance of 'polyester staple fibre' to customers with invalidated import licences for inputs, lower price charged compared to other buyers, demand confirmation, penalty imposition, evidence requirement, reliance on Hon'ble Supreme Court decision, additional consideration, economic gain quantification, invalidation of licences, duty-free import privilege, absence of evidence for beneficiary status, reasoning of first appellate authority, differential pricing, rejection of appeal.

Analysis:

The appeal filed by the Commissioner of Central Excise, Nagpur concerns the clearance of 'polyester staple fibre' to customers possessing invalidated import licences for inputs, leading to a dispute regarding the price charged compared to other buyers. The original authority confirmed a demand of &8377; 29,74,609/- and imposed a penalty under rule 25 of the Central Excise Rules 2002. However, the impugned order set aside the demand due to the lack of evidence supporting the enhancement of the assessable value by &8377; 1,84,13,379/-. The first appellate authority distinguished the circumstances from a decision of the Hon'ble Supreme Court, resulting in the appeal.

The Hon'ble Supreme Court decision, along with the instruction from the Central Board of Excise and Customs, emphasizes that a benefit derived from government policies in a transaction should be considered as additional consideration. The appellant-Commissioner argued that the reversal of a Tribunal decision by the Hon'ble Supreme Court justifies imposing duty on the respondent based on the transfer of licences. However, the Court noted that the economic consequences of licence invalidation and the benefits to the recipient were not adequately demonstrated by the appellant.

The Court acknowledged that the transfer of licences for duty-free imports could result in economic gain for the recipient, but emphasized the need for evidence to quantify this gain. The buyers in the impugned transactions had licences for importing raw materials for export products, which became invalid when sourced from the respondent. The Court found no evidence to support the respondent being a beneficiary of the invalidation or eligible for incentives under the Foreign Trade Policy. The reasoning of the first appellate authority in distinguishing the case from previous decisions was upheld, leading to the rejection of the appeal.

In conclusion, the Court found no reason to interfere with the impugned order, as the judgment was considered thoroughly, and the distinction was clearly established. Therefore, the appeal was rejected.