9911796707
TMI Blog2019 (6) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,37,89,160/- that was deposited by it before the issuance of show cause notice under protest towards payment of Central Excise duty after an audit objection was raised by the Department. 3. M/s Chambal Fertilizers & Chemicals Limited (hereinafter referred to as 'Chambal Fertilizers'), is engaged in the manufacture of 'Urea', which is a fertilizer falling under Chapter 31 of the First Schedule to the Central Excise Tariff Act, 1985. It paid Central Excise duty @ 1% ad valorem in terms of the Notification No. 01/2011, as amended from time to time. The fertilizer policy of the Government of India is aimed at providing fertilizer to farmers at affordable prices for sustained agricultural growth and to promote balanced nutrient application. The manufacturers are mandated to sell the goods at prices notified by the Government. Since the Central Government regulates the prices at which the fertilizers are allowed to be sold to farmers and it is a crucial input for improving agricultural productivity, the fertilizers are invariably sold to farmers at less than the cost of production resulting in a loss which is compensated by the Government by giving a subsidy. The subsidy is basical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11(A)/Section 11A(4) of the Central Excise Act, 1944 along with interest under Section 11AB/11AA of the Central Excise Act, 1944 (as applicable during the relevant period). Since, the assessee has already paid the amount of Rs. 1,35,72,638/- (for the period 01.03.2011 to 31.07.2014) and Rs. 2,16,522/- (for the period 01.8.2014 to 19.8.2014) under protest, the same appears to be appropriated into Govt. account. The assessee also appears liable for penal action under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002. 9. Now, therefore, M/s Chambal Fertilizers & Chemicals Ltd., Village - Gadepan, District - Kota, are hereby called upon to show cause to the Commissioner, Central Excise Commissionerate, 142 B, Sector 11, Hiran Magri, Udaipur within 30 days of the date of receipt of this notice as to why : i) An amount of Rs. 1,37,89,160/- [Rs. 1,35,72,638/- (for the period 01.3.2011 to 31.7.2014 and Rs. 2,16,522/- (for the period 01.8.2014 to 19.8.2014)] should not be recovered from them (as applicable during the relevant period0. Since the amount of Rs. 13789160/- has already been deposited by the assessee, why the same should not be approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular was to clarify that Central excise duty will not be charged on subsidy given by the government and the actual transaction value at which these goods are being cleared after subsidy should be the basis of charging central excise duty. The board has used the word MRP loosely and it no where meant that Central Excise duty will be chargeable on MRP basis for clearance of fertilizer, which can only be done by specifying the commodity under a notification issued in this regards." [emphasis supplied] 10. The Commissioner further observed that urea was being sold to the dealers who were independent entities and, therefore, the 'transaction value' should be determined in the manner provided for in section 4 of the Act. The Commissioner, therefore, held that there was no short payment of duty and the relevant paragraph 7.1 of the order is reproduced below : "7.1 I am therefore inclined to agree with the contention of the appellant that declared MRP is for the purpose of sale to ultimate customer i.e. farmer. Urea is finally sold to farmers through a network of dealers. The dealers earn margin on sale of 'Urea', which they buy from appellants. The appellant sell 'Urea' to dealers at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Circular is in connection with the subsidy granted by the Government and not in connection with the commission of the dealers to whom fertilizers were sold by Chambal Fertilizers; and (iv) Chambal Fertilizers has been charging only that price arrived at after deduction of the dealer's commission from the dealers who are independent entities and no consideration other than the price charged has been received from the dealers and, therefore, the price for determination of the Excise Duty would be the 'transaction value'. 13. We have considered the submissions advanced by the learned Authorised Representative of the Department and the learned Counsel for the Respondent/Appellant. 14. The issue, therefore, that arises for consideration in this appeal is, as to 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. 15. As noted above, the Central Government regulates the price at which Urea is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." 17. Section 4A of the Act deals with 'valuation of excisable goods with reference to retail sale price' and the relevant portion is reproduced below : "Section 4A. Valuation of excisable goods with reference to retail sale price - (1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 (1 of 2010) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply. (2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of complex fertilizers. 2. Consequent upon the levy of excise duty @ 1% (without CENVAT facility) on chemical fertilizers in the Budget 2011-12, the Department of Revenue had clarified to the Department of Fertilizers that in the case of price-controlled fertilizers which are sold to distributors/wholesale dealers at MRP fixed by the Government at the time of their clearance from the factory the excise duty of 1% would be chargeable on the MRP and not on the total cost of production. In the case of fertilizers not subject to price-control, the excise duty would be chargeable on their wholesale price representing the transaction value at the factory gate. 3. Trade and Industry Associations have represented that inspite of the clarification issued by the Department of Revenue to the Department of Fertilizers, the field formations have issued show cause notices to the fertilizer companies seeking to levy excise duty on the subsidy component of price-controlled fertilizers in the light of the judgment of the Supreme Court in the case of CCE, Mumbai v/s/ M/s Fiat India Pvt. Limited [2012-TIOL-58-SC-CX = 2012 (283) ELT 161 (SC)]. 4. The matter has been examined in the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the subsidy given by the Government to the manufacturer is part of the consideration flowing from the buyer to the manufacturer. Likewise, it cannot be said that fertilizer manufacturers have under-declared the value with a view to penetrating the market or competing with the other manufacturers of similar fertilizers. 4.3 In the Fiat India case, it was a conscious decision on the part of the manufacturer to sell the goods below the cost of production to penetrate the market and to compete with the other manufacturers of similar cars. While dealing with the word 'consideration', the Supreme Court has observed that 'consideration' means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee and it is for the Excise authorities to show that the price charged to the buyer is a concessional or specially low price or a price charged to show favour or gain in return extra-commercial advantage. 4.4 From the above, it is clear that the facts at hand are clearly distinguishable from the facts and circumstances of the Fiat India case. The manufacturers of fertilizers do not gain any extra commercial advanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled fertilizers in view of the decision of the Supreme Court in Commissioner of Central Excise, Mumbai vs M/s Fiat India Private Limited, reported in 2012 (283) ELT 161 (SC). The Government noticed that M/s Fiat India Private Limited was selling cars at a price substantially lower than the cost of manufacture so as to penetrate the market and to compete with other manufacturers of similar cars. It is in this context that the Supreme Court held that such sales should not be regarded as sales in the ordinary course of sale or trade as the main reason for selling cars at a lower price than the manufacturing cost and profit was to penetrate the market. Thus, the price was not the sole consideration for sale of cars. The Government further noticed that in the case of fertilizers, the manufacturers were mandated to sell the goods at prices notified by the Government and the Government reimbursed the differential between the cost of production and the notified price to the manufacturer. The manufacturers of fertilizers, therefore, did not gain any extra commercial advantage vis-à-vis other manufacturers and the subsidy paid by the Government was in larger public interest and not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 2014 and Rs. 2,16,522/- on 5 September, 2014 under protest and before the issuance of the show cause notice in view of the audit objection raised by the Department that Excise Duty should be paid on MRP. Soon thereafter, M/s Chambal Fertilizers filed an application for refund of this amount. A show cause notice dated 03 February, 2015 was issued by the Assistant Commissioner requiring it to show cause as to why the claim should not be rejected for the reason mentioned in the notice, namely, that the audit had correctly required M/s Chambal Fertilizers to pay Central Excise Duty on the quantity of Urea cleared during March, 2011 to July 2014. A reply dated 24 February, 2015 was filed by M/s Chambal Fertilizers contending therein that it had correctly paid Central Excise Duty on the 'transaction value' and was not required to pay Central Excise Duty on the MRP and, therefore, the amount should be refunded. This reply was not accepted by the Assistant Commissioner, who by order dated 04 March, 2015 rejected the refund claim. The Assistant Commissioner observed that the refund claim filed by the assessee was not sustainable for the reason that the assessee was required to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
