2018 (11) TMI 150 - AT - Central Excise

SSI Exemption - valuation - price escalation clause - Revenue was of the view that the escalation amounts are required to be added to the turnover of the respective years and the benefit of SSI exemption re-worked out - demand of differential duty alongwith Interest - Held that - The issue is settled in the case of C.C.E. DELHI-III VERSUS M/S HITKARI FIBRES LTD. 2015 (10) TMI 357 - SUPREME COURT OF INDIA , where it was held that it is difficult to hold that the aforesaid additional amount received at a subsequent stage was to be added for the purpose of arriving at the transaction value - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over the treatment of escalation amounts received by the appellant in 2004-05, related to goods cleared in 2001-02 and 2003-04, for SSI exemption eligibility and duty payment.

Analysis:
The appellant entered a contract with the railways for supplying goods, availing SSI exemption benefit under relevant notifications for the financial years 2001-02 and 2003-04. The dispute arose when the appellant received escalation amounts in 2004-05 for goods cleared earlier. The department contended that these amounts should be added to the turnover of the respective years when goods were cleared, affecting SSI exemption eligibility and demanding differential duty. The impugned order upheld this demand, leading to the present appeal challenging it.

The appellant argued that the escalation amount received in 2004-05 should be accounted for in that year, not reopening assessments for earlier years. Citing the Supreme Court's decision in Commissioner of Central Excise, Delhi-III Vs. Hitkari Fibres Ltd., the appellant emphasized that additional amounts received subsequently cannot be added to the transaction value at the time of goods clearance.

On the other hand, the Revenue justified the impugned order, asserting that the escalation amounts were related to goods cleared in 2001-02 or 2003-04. Referring to Supreme Court decisions in cases like Commissioner of Central Excise, Pune Vs. SKF India Ltd., it was argued that not only differential duty but also interest is payable from the original clearance date for such cases. The Revenue also relied on a pending matter before the Larger Bench of the Supreme Court and a decision of the Rajasthan High Court to support their stance.

Ultimately, the Tribunal analyzed the case in light of the Supreme Court's decision in Hitkari Fibres Ltd., where it was emphasized that unless malafides are alleged, additional amounts received subsequently should not be added for determining transaction value. As no malafides were alleged against the appellant, the Tribunal set aside the impugned order and allowed the appeal, following the Supreme Court's decision.