2020 (1) TMI 141 - AT - Central Excise

Valuation - Receipt of additional consideration - Duty amount of 5.92 Crores paid by the buyer towards import duty has effected the sale value of goods - manufacture of FRP tanks supplied as Capital Goods to the user holding EPCG Authorization - subsequent denial of benefit of EPCG Scheme to the buyer - recovery alongwith interest and penalty - Rule 6 of the Central Excise Valuation Rules 2000 - HELD THAT - The issue involved has been settled by the Hon ble Apex Court in case of COMMISSIONER OF CENTRAL EXCISE NAGPUR-I VERSUS M/S. INDORAMA SYNTHETICS (I) LTD. 2015 (8) TMI 947 - SUPREME COURT where it was held that Commissioner has rightly come to the conclusion with regard to the fact that additional monetary consideration in addition to the price being paid for the goods i.e. transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement is a consideration the monetary value of which has to be considered under the provisions of the Rules i.e. Rule 6 thereof. Though Commissioner has in impugned order upheld the demand to the extent of price differential between the goods supplied by availing the benefit of EPCG License and those supplied without availing the same the reason for limiting to the price differential is not explicit when investigations show that respondents have additional consideration much higher than the price differential. After the amendments made in Section 4 of Central Excise Act 1944 by the Finance Act 2000 the concept of transaction value has been introduced. Every transaction has to be examined separately and uniquely and the assessable value determined accordingly. In the case were additional consideration has been received against a particular supply then the exact quantum of additional consideration received to be added to the transaction value of that supply. Commissioner has given the benefit of Section 11A(2B) to the Respondents for not imposing any penalties etc. - since the respondents have not paid the amount of duty required to be paid with interest benefit of Section 11A(2B) could not have been extended to the respondents. Thus issue in respect of penal proceedings in terms of Section 11AC read with Rule 26 of Central Excise Rules 2002 needs to be considered afresh. The matter needs to be considered afresh by the adjudicating authority - appeal allowed by way of remand.

Issues Involved:
1. Validity of the Show Cause Notice (SCN) and the appropriateness of the Central Excise duty demand.
2. Liability to pay interest under Section 11AB of the Central Excise Act, 1944.
3. Appropriateness of dropping further proceedings proposed in the SCN.
4. Inclusion of additional consideration in the assessable value under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
5. Applicability of penalties under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Validity of the Show Cause Notice (SCN) and the Appropriateness of the Central Excise Duty Demand:
The Commissioner initially set aside the SCN as not maintainable and held that the Central Excise duty of ?45,17,372/- paid by the respondent was in accordance with Section 11A(2B) of the Central Excise Act, 1944. However, the appellate tribunal found that the Commissioner’s decision to limit the demand to the price differential between goods supplied under the EPCG scheme and those without it was not well-founded. The tribunal emphasized that the additional consideration received by the respondents was significantly higher than the price differential.

2. Liability to Pay Interest Under Section 11AB of the Central Excise Act, 1944:
The Commissioner directed the respondents to pay interest on the differential Central Excise duty under Section 11AB. The tribunal upheld this direction, noting that the respondents had not paid the required duty amount with interest, thereby making them liable for interest payments.

3. Appropriateness of Dropping Further Proceedings Proposed in the SCN:
The Commissioner dropped all further proceedings proposed in the SCN. However, the tribunal found this inappropriate, stating that the benefit of Section 11A(2B) could not be extended to the respondents as they had not paid the duty with interest. The tribunal held that the issue of penal proceedings under Section 11AC read with Rule 26 of the Central Excise Rules, 2002, needed to be reconsidered.

4. Inclusion of Additional Consideration in the Assessable Value Under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The tribunal found that the additional consideration received by the respondents, amounting to ?5,92,34,987/-, should have been included in the assessable value of the goods. Rule 6 mandates that any additional consideration flowing from the buyer to the assessee must be added to the transaction value. The tribunal cited the Supreme Court’s decision in Indorama Synthetics (I) Ltd, which held that any form of additional consideration, whether direct or indirect, must be included in the assessable value.

5. Applicability of Penalties Under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002:
The tribunal held that since the respondents had not paid the duty amount with interest, the benefit of Section 11A(2B) was not applicable, and the issue of penalties under Section 11AC needed to be reconsidered. The tribunal referred to the Supreme Court’s decision in Rajasthan Spinning and Weaving Mills, which provides guidelines for imposing penalties.

Conclusion:
The appeal filed by the revenue was allowed, and the matter was remanded back to the adjudicating authority for fresh adjudication. The Commissioner was directed to complete the adjudication within four months. The cross objections filed by the respondents were disposed of accordingly.

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