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2019 (6) TMI 180 - AT - Central ExciseRefund claim - duty paid under protest - whether Chambal Fertilizers have to discharge duty liability on the MRP fixed by the Government for Urea for the period March, 2011 to October, 2012 and November, 2012 to April, 2013 or it should discharge duty liability on the transaction value which is the difference arrived at by deducting the commission of the dealer from the MRP? HELD THAT - The Central Government regulates the price at which Urea is sold and as the policy of the Government is to provide fertilizers to farmers at an affordable price for sustained agricultural growth, the MRP fixed by the Government is lesser than the cost of production. The Government, therefore, reimburses the value between the cost of production and the notified price in the form of a subsidy. Urea is sold to the farmers through a network of dealers. The dealers pay an amount to the Appellant after deducting their commission from the MRP fixed by the Government. Chambal Fertilizers has been discharging its Service Tax liability on the amount arrived at after deducting the commission of the dealer from the MRP. The case of the Department is that Chambal Fertilizers should discharge its Service Tax liability on the MRP fixed by the Government and not on the value it sells Urea to the dealers. Thus, what is required to be examined is whether the Chambal Fertilizers should pay Service Tax on the transaction value as contemplated under section 4 of the Act or on MRP as contemplated under section 4A of the Act. It is not in dispute that Urea was sold by Chambal Fertilizers at a price arrived at after deducting the commission of the dealer from the MRP. It would be this price on which Urea was actually sold to the dealer. This would, therefore, be the transaction value under section 4 of the Act on which value Chambal Fertilizers would be liable to pay Excise Duty. M/s. Chambal Fertilizers was required to pay Excise Duty only on Transaction Value and not on MRP . Such being the position, the refund claim filed by M/s Chambal Fertilizers could not have been rejected. This refund claim is, therefore, required to be examined afresh after considering the issue of unjust enrichment which was not considered by the Assistant Commissioner for the reason that the amount of Excise Duty was found to be correctly deposited. The matter needs to be remitted to the Assistant Commissioner for passing a fresh order on the refund claim after examining whether there has been unjust enrichment - appeal allowed by way of remand.
Issues Involved:
1. Whether Chambal Fertilizers should discharge duty liability on the 'MRP' fixed by the Government for Urea or on the 'transaction value' after deducting the dealer's commission from the MRP. 2. Whether the refund claim filed by Chambal Fertilizers for the amount deposited under protest should be allowed. Detailed Analysis: Issue 1: Duty Liability on MRP vs. Transaction Value - Background: The Department raised an audit objection alleging that Chambal Fertilizers short-paid Excise Duty by not including the commission of ?180/- per MT (March 2011 to October 2012) and ?230/- per MT (November 2012 to April 2013) in the duty calculation, paying only on the transaction value (MRP minus dealer's commission). - Department's Argument: The Department issued a show cause notice stating that the assessee had not paid Central Excise Duty on ?1,33,87,53,487/- given as dealer’s commission, resulting in a short levy of ?1,37,89,160/-. They argued that duty should be paid on the MRP fixed by the Government. - Chambal Fertilizers' Argument: Chambal Fertilizers contended that duty was payable on the 'transaction value' under Section 4 of the Central Excise Act, 1944, and not on MRP since Urea was not a notified item under Section 4A. They emphasized that the Circular dated 10 July 2014 clarified that duty was not required on the subsidy amount, which was not part of the sale consideration. - Commissioner's Findings: The Commissioner (Appeals) held that the Circular was intended to clarify that duty should not be charged on the subsidy given by the Government and that the actual transaction value should be the basis for charging duty. The Commissioner concluded that the price charged by Chambal Fertilizers to the dealers (MRP minus dealer margin) should be the basis for determining the transaction value, fulfilling the conditions of Section 4 of the Act. - Tribunal's Conclusion: The Tribunal affirmed the Commissioner's findings, stating that the Circular dated 10 July 2014 was not applicable for levying duty on MRP. The Tribunal emphasized that the excise duty should be determined based on the 'transaction value' as defined under Section 4 of the Act, where the assessee and the buyer are not related, and the price is the sole consideration for the sale. Issue 2: Refund Claim for Amount Deposited Under Protest - Background: Chambal Fertilizers deposited ?1,35,72,628/- on 21 August 2014 and ?2,16,522/- on 5 September 2014 under protest due to the audit objection. They later filed for a refund of this amount. - Assistant Commissioner's Decision: The Assistant Commissioner rejected the refund claim, asserting that duty was correctly paid on MRP without deducting dealer's commission. - Commissioner (Appeals) Decision: The Commissioner (Appeals) upheld the Assistant Commissioner's order, stating that the duty was rightly deposited pursuant to the audit objection. - Tribunal's Conclusion: The Tribunal held that since Chambal Fertilizers was required to pay duty only on 'transaction value' and not on 'MRP', the refund claim should not have been rejected. The Tribunal remitted the matter to the Assistant Commissioner to re-examine the refund claim, specifically addressing the issue of unjust enrichment. Final Orders: 1. Excise Appeal No. 51517/2018: Dismissed. The Tribunal upheld the Commissioner's order that duty should be paid on the 'transaction value' rather than MRP. 2. Excise Appeal No. 52966/2018: Allowed. The Tribunal set aside the Commissioner (Appeals) order and directed the Assistant Commissioner to pass a fresh order on the refund claim, considering the issue of unjust enrichment. (Dictated & pronounced in open court)
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