2014 (8) TMI 775 - AT - Central Excise

Valuation of goods - subsidy received by fertilizer companies from the Government - Introduction of Concession Scheme for decontrolled Phosphatic and Potassic (P & K) fertilizers on adhoc bass w.e.f. 1.10.1992 - Held that - Circular No.983/7/2014-CX dated 10.7.2014 , the Board has clarified that the subsidy given by the Government is not includable in the assessable value and Central Excise duty is not payable on the subsidy component provided by the Government. The grant of subsidy is given pursuant to an administrative decision taken by Government of India and payment of subsidy to the manufacturer by the Government cannot be regarded as discharge of any liability or obligation by the Government towards the purchasers of the fertilizers. The definition of transaction value deals with only such elements which otherwise may form part of value which a buyer is liable to pay to the assessee either by reason of sale or in connection with sale himself or on behalf of the assessees. Subsidy paid by the Government cannot be considered as an additional consideration includable for excise duty in accordance with statute - issue is covered by the Board s Circular and in our opinion also the subsidy cannot be considered as an additional consideration - Decided in favour of assessee.

Summary

Issues involved: Government decontrol of Phosphatic and Potassic (P & K) fertilizers, imposition of duty demand, inclusion of subsidy in assessable value for charging duty.

Analysis:
1. Decontrol of P & K Fertilizers: The Government decontrolled P & K fertilizers in 1992, leading to price increases affecting demand and soil productivity. A Concession Scheme was introduced to provide fertilizers at subsidized prices, later replaced by a nutrient-based subsidy policy. The purpose was to support farmers by ensuring MRP indication and constant prices till 2010.

2. Imposition of Duty Demand: The Department initiated proceedings to add subsidy received by fertilizer companies to assessable value for duty. Duty demand of Rs. 25,35,88,216 was confirmed, with penalties under Central Excise Act and Rules. The Department argued that subsidy forms part of 'transaction value' as it's an additional consideration received by manufacturers.

3. Appellant's Contentions: The appellants contended that subsidy received should not be included in assessable value. They argued that subsidy is not an additional consideration but a larger public interest measure, as clarified by Circular No.983/7/2014-CX. The subsidy was deemed not part of 'transaction value' for excise duty purposes.

4. Judgment: The Tribunal upheld the appellant's submissions based on the Board's Circular, which clarified that subsidy is not an additional consideration for excise duty. The subsidy was deemed to be in public interest, not providing extra commercial advantage to manufacturers. Therefore, the appeal was allowed, providing relief to the appellant.

In conclusion, the judgment focused on the inclusion of subsidy in the assessable value for charging duty on P & K fertilizers. The Tribunal ruled in favor of the appellant, citing the Board's Circular and the nature of the subsidy as not constituting an additional consideration for excise duty purposes.