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TMI Blog2020 (1) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Us engaged in the manufacture of HSD for exports, these capital goods were used by them in their petrol pumps/ filling stations (retail sale point) set up at various places all over India. Thus these Capital Goods imported in terms of EPCG Scheme as above were not eligible for the benefit under the said scheme. The Policy Interpretation Committee 9PIC) of the Ministry of Commerce in its meeting held on 30.11.2004 held that said equipment are generally used for retail outlets, not specifically covered under post production facility stipulated under EPCG scheme and hence, such goods are not eligible for this benefit. Accordingly M/s Reliance Industries, had vide their letter dated 18.10.2005 informed Commissioner Central Excise Goa, that they are paying the differential duty amounting to ₹ 5,12,28,882/- (Enclosing Demand Draft No 230495 dated 18.10.2005). Since the letter of M/s Reliance Industry was not accepted by the jurisdictional authorities, Goa. Respondents vide their letter dated 08.11.2005 addressed to Deputy Commissioner Customs, Marma Goa, deposited the same demand draft towards duty and interest payable under protest. 2.3 Respondents was supplying by the same good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of Central Excise Duty. They manipulated the aid amount in their books of account by showing the same as advance and not as credit received from the buyers namely M/s Reliance. Hence the Commissioner was not correct in dropping the penal proceedings against the respondents. 2.7 Respondents have filed cross objections supporting the impugned order. 3.1 Matter was listed for hearing on 12.12.2018, 24.01.2019, 24.04.2019, 01.08.2019, & 29.08.2019. Respondents did not attend the hearings on any of the appointed dates. 3.2 We have heard Shri N N Prabhudesai, Superintendent, Authorized Representative, for the revenue. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of argument. 4.2 The facts have been aptly narrated in para 11 to 13 of the Show Cause Notice which are reproduced below: "11. During investigations, a statement of Smt. Maya Dias, Finance Controller of M/s. Amiantit was recorded under Section 14 of CEA, 1944 on 18.08.2006. Smt. Dias, in her said statement deposed that, she was the Finance Controller of M/s. Amiantit and looked after all Central Excise matters of the company, that she was also the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced copies of the said letter and the proof of payment. 13. Smt. Dias agreed that the price variation/difference between the EPCG supply and non-EPCG supply was mainly due to duty benefit availed by M/s. Amiantit, which it passed on to M/s. Reliance as its buyer (through lesser price) and also agreed that the said difference, therefore, represent additional consideration received from buyer in relation to goods sold by M/s. Amiantit to it (i.e., M/s. Reliance)." 4.3 From the facts as stated above it is quite evident that for the supplies made against the purchase order, 18.03.2004, Respondents have over and above the contracted sale price received consideration of ₹ 5,92,34,987/-. Rule 6 of the Central Excise Valuation Rules, 2000 provide as under: 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons', even the goods were sold at depressed price. Therefore, the Commissioner confirmed the demand of differential duty as mentioned in the show cause notices and also levied penalties and interest. The assessee challenged the order of the Commissioner by filing appeal before the Custom Excise & Service Tax Appellate Tribunal (for short, the 'Tribunal') taking the plea that 'additional consideration' under Section 4 of the Act refers only to the additional consideration flowing from the buyer to the assessee and in the present case no such additional consideration flew from the advance licence buyers of the 'deemed exports'. The Tribunal, in arriving at this conclusion, relied upon its own decision in the case of IFGL Refractories Ltd. v. Commissioner of Central Excise, Bhubaneswar-II - 2001 (134) E.L.T. 230 wherein it was held that statutory benefits allowed by statutory authorities cannot be considered as additional consideration flowing to a manufacturer from the buyer. In the opinion of the Tribunal, the drawback was received from the Government and not from the buyers and, therefore, such drawback could not be treated as additional consideration for the purpose of arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of the contract, then the reasoning of the Tribunal may have been correct. But here, in pursuance of the contract of sale, there is directly a flow of additional consideration from the buyer to the seller. The value thereof has to be added to the price. We are thus unable to accept the broad submission that where parties take advantage of policies of the Government and the benefits flowing therefrom, then such benefit cannot be said to be an "additional consideration". 4. In a matter like this, this Court could simply follow the aforesaid judgment and set aside the order of the Tribunal, allowing this appeal. However, Mr. V. Lakshmikumaran, learned counsel appearing for the assessee, made a fervent and passionate plea that the aforesaid judgment of this Court in IFGL's case needs re-consideration. He, thus, pleaded for referring the matter to a larger Bench. Detailed and elaborate submissions were made in this direction which were stoutly refuted by the learned counsel for the Revenue. We may immediately record that the assessee's counsel has not succeeded in persuading us to refer the matter to a larger Bench. Hereinafter, we record our reasons for taking this view. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act read with Rule 6 of the Rules. We, therefore, shall reproduce the relevant portion of the provisions of Section 4 which existed at the material time, which read as under : "4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value. xx xx xx (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r its flow can be traced back to the buyer? If it is so, it may become a case of indirect consideration coming from the buyer and can be added to the transaction value. 12. This argument does not convince us at all. Fact remains that the issuance of advance licence for intermediate supply to the assessee was facilitated as a result of surrender of advance licence in favour or the buyer by the buyer. Thus, getting the licence invalidated for direct import of items in favour of the buyer was the trigger point for issuance of the advance licence for intermediate supply in favour of the assessee. Possibility of refusal on the part of DGFT to issue licence in favour of the assessee is only in the realm of conjecture. Fact is that the assessee got the licence and it became possible only on account of sacrifice made by the buyers. Further, what is important is that the buyers got their advance licences for direct import in their favour invalidated with the sole purpose of purchasing the polyester staple fiber from the assessee at lesser price, i.e. ₹ 37.50 per kg. Therefore, the argument of the assessee that benefit in the form of imports without payment of duty flows to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had supplied goods to a particular type of buyers at much lower price than the price charged from the general buyers in the normal course of trade as it had obtained the facility of invalidating of advance licences from such buyers and procured imported raw material (duty free) against such licences for manufacturing of finished goods. It is, therefore, alleged that the assessee and the buyers had mutuality of interest in the business of each other and there was a flow back and the price was not the sole consideration for sale in these cases in accordance with the provisions of Section 4(1)(a) of the Act. (b) Therefore, they were related persons in terms of provisions of the erstwhile Section 4(4)(c), presently Section 4(3)(b)(iv) of the Act. (c) It is observed that para 7.7 of the EXIM Policy on Advance Release Order speaks of mutuality of interest as the assessee had procured duty free imported raw materials against invalidation of advance licence of the consignees and in turn it sold the finished goods to the said consignees at lower prices as compared to other normal buyers. Thus, the price was not the only consideration. (d) Once the advance licence is invalidate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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