2007 (11) TMI 106 - AT - Central Excise

Tribunal excludes MTOP charges from duty calculation, rules in favor of assessee

The Tribunal upheld the appellate Commissioner's decision to exclude Minimum Take or Pay (MTOP) charges from the assessable value of goods for duty ... Held that MTOP[Minimum Take or Pay] charges paid by the buyer to the assessee on account of the former’s failure to take the minimum guaranteed quantity of the excisable goods [Oxygen Nitrogen etc.] were not additional consideration for the goods actually sold and hence not to be included in assessable value Issues:1. Inclusion of MTOP charges in the assessable value of goods for the purpose of calculating duty.2. Imposition of duty and penalty on the assessee for collecting MTOP amounts from the buyer.Analysis:Issue 1: Inclusion of MTOP charges in the assessable valueThe case involved the question of whether the Minimum Take or Pay (MTOP) charges received by the assessee from the buyer should be included in the assessable value of the goods for calculating duty. The Commissioner (Appeals) held that the MTOP clause was merely a provision for compensation and not additional consideration for the goods sold. The Tribunal referred to previous decisions such as Jindal Praxair Oxygen Co. Ltd. v. CCE and Inox Air Products Ltd. v. CCE, which established that such charges were not to be included in the assessable value. The Tribunal followed the precedent set by these cases and upheld the appellate Commissioner's decision to vacate the demand for differential duty.Issue 2: Imposition of duty and penalty on the assesseeThe assessee had collected MTOP amounts from the buyer for periods where the guaranteed quantities were not purchased. The department issued show-cause notices for levy of duty on these amounts, which was contested by the assessee. The Commissioner confirmed the demand of duty against the assessee, invoking the extended period of limitation and imposing a penalty equal to the total duty amount under Section 11AC of the Central Excise Act. However, the Tribunal, after considering the arguments and case law cited by the learned Counsel, set aside the Commissioner's decision and allowed the assessee's appeal. The Tribunal held that the MTOP charges were not to be considered as part of the assessable value, in line with established legal principles.In conclusion, the Tribunal dismissed the Revenue's Appeal No. E/72/2005 and allowed the assessee's Appeal No. E/534/2005 based on the legal precedent and interpretation of the relevant provisions.