2020 (8) TMI 225 - HC - Central Excise

Compliance with the clarification issued by the Central Board of Excise and Customs on 10.11.2014 bearing reference in F.No.6/03/2013/CX.1 - levy of excise duty on Fixed Facility Charges (FFC) and Minimum Take or Pay Charges (MTOP) - CENVAT Credit on purchase of Gas - HELD THAT - The 1st, 2nd, and the 4th respondent being officers under the Central Board of Excise and Customs are bound by its clarification dated 10.11.2014 bearing reference F.No.6/03/2013/CX.1. They cannot act contrary to the clarification issued by the Central Board of Excise and Customs particularly in the light of the fact that the clarification has been given pursuant to directions of the Bombay High Court - Even otherwise, if the Minimum Take or Pay Charges (MTOP charges) and the proportionate Fixed Facility Charges (FFC) were built into the transaction value of the gases supplied by the petitioner to the 3rd respondent on which Excise duty was paid by the petitioner, the 1st, 2nd and the 4th respondent are bound to allow the 3rd respondent to avail CENVAT Credit under the provisions of the CENVAT Credit Rules, 2004 to the 3rd respondent or to any other person with whom the petitioner has similar transactions. This writ petition was filed prior to the substitution of the Central Excise Act, 1944 with the Central Goods and Service Tax Act, 2017. Therefore, the writ petiton has become infructuous - the 4th respondent is directed to comply with the clarification of the Central Board of Excise and Customs 10.11.2014 bearing reference F.No.6/03/2013/CX.1 without any demur, equivocation or prevarication - petition allowed.

Summary

Issues:
1. Compliance with the clarification issued by the Central Board of Excise and Customs on 10.11.2014.
2. Applicability of excise duty on Fixed Facility Charges (FFC) and Minimum Take or Pay Charges (MTOP).
3. Availment of CENVAT credit by the 3rd respondent.
4. Arbitration award challenge under Section 34 of the Arbitration and Conciliation Act, 1996.
5. Refund of excise duty paid on FFC and MTOP.
6. Recovery of amounts refunded to the petitioner.
7. Decision of the Customs and Excise Service Tax Appellate Tribunal.
8. Valuation for the purpose of excise duty on gases supplied.
9. Reversal of CENVAT credit availed by the 3rd respondent.
10. Pending appeals before the Customs and Excise Service Tax Appellate Tribunal.

Analysis:
1. The petitioner sought a mandamus to direct compliance with the clarification issued by the Central Board of Excise and Customs on 10.11.2014. The clarification specified the inclusion of FFC and MTOP in the assessable value for excise duty payment on gas supplies. The petitioner's representation to CBEC led to a writ petition before the Bombay High Court, resulting in the clarification.

2. The issue revolved around whether excise duty was chargeable on FFC and MTOP amounts in the transaction value under Section 4 of the Central Excise Act, 1944. The petitioner also questioned the 3rd respondent's CENVAT credit eligibility on these charges. The CBEC's clarification highlighted the methodology for calculating assessable value, including FFC and MTOP components.

3. The 3rd respondent faced a show cause notice regarding CENVAT credit denial on taxed charges. An arbitrator's award against the petitioner led to a challenge under the Arbitration and Conciliation Act, 1996. The petitioner's excise duty refund on FFC and MTOP was subject to protective show cause notices and subsequent appeals.

4. The Customs and Excise Service Tax Appellate Tribunal directed a fresh decision based on the CBEC clarification, leading to the Commissioner's orders for recovery based on power costs and gas demand. The petitioner was held liable for excise duty on FFC and MTOP, with refunds to be recovered, and CENVAT credit reversal for the 3rd respondent.

5. Both the petitioner and the 3rd respondent appealed before the Tribunal, with pending hearings. The petitioner sought a directive for excise duty payment on FFC and MTOP for valuation purposes, enabling CENVAT credit for the 3rd respondent. The respondents contended that the petition exceeded CENVAT Credit Rules, 2004 provisions.

6. The Court emphasized adherence to the CBEC's clarification, directing compliance without hesitation. It highlighted the obligation of officers under CBEC to follow the clarification, especially post the Bombay High Court's intervention. The inclusion of FFC and MTOP in transaction value necessitated CENVAT credit allowance under the CENVAT Credit Rules, 2004.

7. The writ petition, filed pre-Central Goods and Service Tax Act, 2017 substitution, was deemed infructuous. However, pending matters with the 4th respondent required compliance with the CBEC clarification. The writ petition was allowed, with no costs incurred, and the connected Miscellaneous Petition was closed.