2005 (8) TMI 112 - SC - Central Excise

Whether the benefit gained by the Respondents by reason of M/s. Visakhapatnam Steel Plant surrendering its licences and on such surrender the Respondents being issued licences, is additional consideration for the contract? Held that - The question then arises as to how the additional consideration is to be computed. In this case the benefit accrued to the Respondents is clearly ascertainable by virtue of the two letters of the Respondents. Had this additional benefit not flown to the Respondents, they would have sold the items as per their offer dated 9th September 1992. As the additional consideration was to flow to them, they have sold at the rates mentioned in the letter of 2nd March 1993. The additional consideration is the difference in prices between these two. The Commissioner had thus correctly worked out this difference. It may also be mentioned that the Respondents had also taken up a contention of limitation. The Tribunal has not considered this aspect in view of the fact that it has allowed the Appeal on merits. We were requested that the matter be sent back to the Tribunal so that the Tribunal can consider the question of limitation. We are agreeable to that. We, therefore, remit the matter back to the Tribunal. The Tribunal is, therefore, directed to only consider whether or not the extended period of limitation was available to the Department. With these directions, the Appeal stands disposed of with no order as to costs.

Summary

Issues:
1. Whether the benefit gained by the Respondents from the surrender of licences and issuance of new licences constitutes additional consideration for the contract.

Analysis:
The case involved an appeal against a judgment passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The Respondents, engaged in manufacturing refractories, entered into contracts with M/s. Visakhapatnam Steel Plant and availed the Duty Exemption Scheme under the Export and Import Policy, 1992. The Department contended that the benefit received by the Respondents through the issuance of Advance Intermediate Licences was additional consideration towards the value of the goods for excise duty purposes.

The Tribunal ruled in favor of the Respondents, emphasizing that the benefits derived from the Duty Exemption Scheme should not be considered as additional consideration from the buyer. The Tribunal highlighted that the lower cost of the final product due to customs duty benefits did not constitute additional consideration flowing from the buyer to the seller.

Regarding the controversy over deductions for Central Excise duty and Central sales tax, the Tribunal also ruled in favor of the Respondents. However, the Appellants did not make any submissions on those points before the Supreme Court.

The main issue for consideration was whether the benefit obtained by the Respondents from the surrender of licences and issuance of new licences constituted additional consideration for the contract. The Court noted that any additional consideration received from the buyer in connection with the sale of goods should be included in the price for excise duty purposes.

The Court found that the surrender of licences by M/s. Visakhapatnam Steel Plant and the issuance of new licences to the Respondents resulted in additional consideration flowing from the buyer to the seller. The Court disagreed with the Tribunal's view that such arrangements could not be considered as additional consideration, emphasizing the direct flow of benefit from the buyer to the seller due to the contract terms.

The Court also addressed the computation of the additional consideration, highlighting the price difference between the original offer and the revised proposal made by the Respondents. The Court upheld the Commissioner's calculation of this difference as the additional consideration received by the Respondents.

Additionally, the Court noted that the issue of limitation raised by the Respondents was not considered by the Tribunal due to the decision on merits. The Court directed the matter to be remitted back to the Tribunal solely to determine the availability of the extended period of limitation for the Department.

In conclusion, the Supreme Court disposed of the appeal with directions to the Tribunal for further consideration on the limitation issue, without any order as to costs.