2018 (12) TMI 1031 - AT - Central Excise

Valuation - additional consideration flowing for the goods arising out of the difference in price between the clearances made to buyers who surrendered Advance License and others who did not - Rule 6 of the Central Excise Valuation Rules, 2000 - whether the transfer of advanced licenses are to be considered as a consideration for sale of the goods by the appellant to the buyers? Held that - The transferred advanced licenses, can be beneficially used by the appellant for duty free import of the rawmaterials required for the manufacture in the appellant s factory. Naturally it is obvious that certain benefit accrues to the appellant through the transferred advanced licenses. From the record it is seen that the demand for differential duty has been confined to only those cases where advanced licenses have been transferred in favour of the appellant though such prices have been charged from buyers who are EOUs as well as Deemed Exports, no demand for differential duty has been raised. In addition to the price being paid for the goods, the transfer of advanced import license in favour of the seller by the buyer enable the seller of the good to effect duty free import of the raw materials and brings out the cost of production. Hence, this constitutes additional monetory consideration which has to be added under the provision of Rule 6 of the Central Excise Valuation Rules - the Revenue was justified in adding such monetory value attributable to the transfer of advanced lincenses in favour of the appellant by the buyers. Time Limitation - Held that - The show cause notice dated 24.10.2007 has raised the demand for the period November, 2002 to June, 2007; clearly the demand involves extended period of limitation - the appellant is entitled to a bonafide belief that such additional consideration is not required to be added - Revenue is not justified in invoking the extended period of limitation by alleging suppression of facts. Appeal allowed in part.

Summary

Issues:
Valuation of goods for Central Excise duty - Additional consideration for transfer of Advance License - Time bar for raising demand.

Analysis:
The appeal challenged an Order-in-Original regarding the valuation of goods for Central Excise duty. The appellant, a manufacturer of petrochemical products, was found to charge different prices based on whether buyers transferred Advance Licenses. The Department contended that the price difference should be considered as additional consideration under Rule 6 of the Central Excise Valuation Rules. The Order demanded differential Central Excise duty, interest, and penalty, leading to the appeal.

The appellant argued that prices were set based on Import Parity Price and buyers were classified into different classes. They emphasized that the benefit from license transfers was not explicitly deducted from prices. They also claimed that the demand was time-barred due to a bonafide belief following a Tribunal decision, which was later reversed by the Supreme Court.

The Department justified the Order, citing Supreme Court decisions that considered benefits from license transfers as additional consideration. They referred to Contract Act provisions to define consideration and argued that the Order needed no interference.

The Tribunal analyzed the case, noting that the appellant charged lower prices to buyers transferring Advance Licenses. The core issue was whether such transfers should be considered as a sale consideration. The Tribunal referenced the Supreme Court's IFGL Refractories Ltd. case, which held that license transfers constituted additional consideration under Rule 6. The Tribunal upheld the Department's position based on the Supreme Court's rulings.

Regarding the time bar, the Tribunal acknowledged the appellant's bonafide belief following the Tribunal's earlier decision. As the issue was in favor of the appellant until the Supreme Court's reversal, the demand was restricted to the normal time limit, and the penalty was set aside.

In conclusion, the Tribunal partly allowed the appeal, emphasizing the justification for adding the monetary value of license transfers as additional consideration for Central Excise duty valuation. The time bar issue was resolved in favor of the appellant, limiting the demand to the normal time frame and setting aside the penalty.