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2025 (3) TMI 959 - AT - Central ExciseLevy of Central Excise Duty on the subsidy received from the Government of India in relation to sale of their product Urea which is being sold as per the regulated price declared by the Government of India - HELD THAT - The issue regarding leviability of Central Excise Duty on subsidy amount given by the Government to the fertiliser company is clearly explained by the Board vide Circular No.983/7/2014-CX wherein inter alia it was clarified that in respect of fertiliser for which subsidy is provided by the Government Excise Duty will be chargeable on the MRP and not on the subsidy component provided by the Government. It is also noted that this clarification was issued in view of department issuing SCNs relying on the judgment of Hon ble Supreme Court in the case of CCE Mumbai Vs Fiat India Pvt. Ltd. 2012 (8) TMI 791 - SUPREME COURT . In the SCN the Adjudicating Authority also relied on the same judgment for drawing her conclusion that subsidy is in the nature of additional consideration therefore liable to Central Excise Duty. Therefore it is obvious that the Government has clarified the leviability of Central Excise Duty in respect of subsidy provided by the Government to the fertiliser company. Even a plain reading of the statutory provisions of section 4 would indicate that when price is not the sole consideration recourse can be taken to Valuation Rules i.e. Rule 6 to add the additional consideration. However this additional consideration must flow from the buyer to the seller either directly or indirectly. In this case Government of India is not the buyer and therefore the subsidy given by the Government of India cannot be considered as additional consideration flowing from buyer to the seller directly or indirectly. Therefore the subsidy is not leviable to Central Excise Duty. Conclusion - i) Subsidies provided by the Government for fertilizers as per policy measures do not constitute additional consideration for the purpose of excise duty valuation. ii) The transaction value should not include amounts not received from the buyer or on behalf of the buyer. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework primarily involves Section 4 of the Central Excise Act, 1944, which pertains to the valuation of excisable goods for the purpose of duty. The Central Excise (Determination of Price of Excisable Goods) Rules, 2000, particularly Rule 6, address situations where price is not the sole consideration. Precedents considered include the Supreme Court judgment in CCE, Mumbai Vs Fiat India Pvt Ltd and the Tribunal's decision in Maruti Suzuki India Ltd Vs CCE, Delhi. Court's interpretation and reasoning: The Tribunal examined whether the subsidy received from the Government of India constitutes additional consideration that should be included in the transaction value. The Tribunal noted that the Government's Circular No. 983/7/2014-CX clarified that subsidies provided by the Government for fertilizers should not be included in the transaction value for the purpose of levying excise duty. The Tribunal emphasized that the subsidy is not received from the buyer but is a policy measure by the Government, thereby distinguishing it from additional consideration. Key evidence and findings: The Tribunal relied on the Government's circular and previous judgments, particularly the case of CCE, Bangalore Vs Mazagon Dock Ltd, which established that additional consideration must be directly or indirectly received from the buyer. The Tribunal found that the subsidy was not received from the buyer but was a government policy initiative. Application of law to facts: The Tribunal applied Section 4 and the Valuation Rules to determine that the subsidy did not constitute additional consideration. It reasoned that since the subsidy was not paid by the buyer or on behalf of the buyer, it should not be included in the transaction value. Treatment of competing arguments: The appellant argued that the subsidy should not be subject to excise duty based on existing judgments and the Government's circular. The department contended that the subsidy was an additional consideration under Rule 6 of the Valuation Rules. The Tribunal found the appellant's arguments more persuasive, particularly in light of the Government's clarification and the legal precedents cited. Conclusions: The Tribunal concluded that the subsidy received from the Government of India should not be included in the transaction value for the purpose of levying Central Excise Duty. The demand for duty on the subsidy amount was found to be unsustainable. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal noted, "In this case, Government of India is not the buyer and therefore, the subsidy given by the Government of India cannot be considered as additional consideration flowing from buyer to the seller directly or indirectly." Core principles established:
Final determinations on each issue: The Tribunal set aside the impugned order, determining that the demand for Central Excise Duty on the subsidy amount was not sustainable. The appeal was allowed, and the penalties imposed were also set aside.
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