TaxTMI 
TaxTMI 
2008 (4) TMI 443
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....f valuation as to whether the additional discount offered to holders of advance license can be included in the assessable value or not and hence being dealt with by a common order. 2. Heard both sides. After hearing was over, written submissions were also filed by both sides, which also have been taken into account. 3. The relevant facts, in brief, are as follows:- (a) The appellant is a manufacturer of products falling under chapter 25, 26, 27, 28, 29, 38, 39, 73, 84; they are selling their products to various categories of customers including advance licence holders. (b) The appellants have been offering to their customers different types of discounts such as trade discount, cash discount, quantity discount; in particular to the category of 'deemed export customers' they have granted additional discounts varying from 20 to 30% and these buyers were required to invalidate the advance license held by them in favour of the appellant. (c) In the case relating to appeal No. E/228/2007, the Commissioner has confirmed a demand of duty of Rs. 8,26,38,101/- relating to the period 1-9-2000 to 31-3-2004 along with interest treating the additional discount given to them as additional co....
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....d the goods at a discounted price wherein discounts in addition to normal discounts which were given to the ordinary buyer were offered to exporters who were ready to comply with the conditions of surrendering their advance licences in favour of the appellants. (b) In terms of the Notification No. 44/2001, it was not for the manufacturer to choose to supply material without payment of duty, but it was to the buyer to opt for the procedure laid down under the notification, so long as the manufacturer concurred and agreed to supply the material. (c) The scheme of removal without payment of duty under Notification No. 44/2001 and clearance of goods on payment of duty and availment of Cenvat thereon are mutually exclusive schemes, which cannot be switched midway when a majority of duty has already been paid and Cenvat availed thereon. The buyers could also have availed of rebate on the goods exported by him. (d) In addition it would be difficult to decide either by the jurisdictional Commissioner of the appellants or his officers, whether the numerous buyers of the appellants had fulfilled all the 7 to 8 conditions laid down under the said notification. The primary condition of obta....
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....ve at duty demands, if any, and then penalties as proposed in the notice." The Tribunal further left open the claim by the appellant about the entire exercise being revenue neutral to be considered by the Commissioner in the de-novo proceedings. The Commissioner's finding in the de-novo proceedings on this issue is as follows:- "25. I agree that in terms of notification No. 44/2001 dt. 26-6-2001 supply of goods without payment of Central Excise duty to advance license holder is exempt from payment of central excise duty. This is one of the many schemes notified by the Government of India. However, benefit under these schemes is available subject to fulfilment of conditions specified therein. The benefit under Notification No. 44/2001 dt. 26-6-2001 is also subject to fulfilment of conditions laid down in the notification, which are to be fulfilled by the supplier manufacturer and buyer exporter both. In the case under reference RIL who are the manufacturer supplier and their buyer, for the reason best known to them, did not opt for the supply/receipt of the goods free of duty under this notification after observing the conditions laid down there in and chose to supply/receive the ....
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....ermediate licence holder. Such transfer of right could be for cash consideration. In this case, admittedly, the right to import duty free has been surrendered without receiving payments from the appellant. It is not disputed that the appellant was supplying the same materials at a higher price and in respect of advance licence holders who surrendered the rights to the appellant gave the same materials at a specially discounted price. Even after amendment of Section 4 w.e.f. 1-7-2000, the transaction value is acceptable only when the price is not influenced by other consideration. In this case, the additional discount given to the advance licence holders are clearly an additional consideration which influence the sale price and to that extent the ratio of the Hon'ble Supreme Court in the case of M/s. IFGL Refractories Ltd. cited supra will be relevant. The value enhancement for the purpose of demand of duty is legal and proper. 6.5 Advance licences are not transferable. The materials imported under advance licences are also not transferable even after completion of the export obligation. In other words, even a licence holder holding licence in post-exportation scenario can im....
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....en to the advance licence holders forms additional consideration for sale and therefore, needs to be included in the assessable value. (b). The question of applying Notification No. 44/2001 prior to 26-6-2001 does not arise. (c) Even for the period from 26-6-2001, extending the benefit would lead to over looking several conditions of the notification and all these conditions cannot be held to be procedural in nature. Such a wholesale relaxation would make the statutory regulation of duty free movement of excisable goods for specified purposes redundant. (d) The eligibility of refund of terminal excise duty from Commerce Ministry cannot lead to the conclusion that the demand by central excise authorities on the aspect of under valuation is a revenue neutral exercise. 9. In view of the above, on merits, the appeals are rejected. The demand within the normal period of limitation is to be upheld. As a result the duty demand in the case relating to appeal No. E/228/07 does not survive. The demand of duty and interest is confirmed in cases covered in appeal Nos. E/240 and 241/07. The penalties are set aside in all these cases. 10. The appeal No. E/228/07 is fully allowed and appeal ....
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....xamine the applicability of the said notification to the proceedings only and not to adjudge their entitlement at the first instance. The Tribunal, at the time of passing of the above order was aware of the fact that Notification No. 44/2001-C.E. (N.T.), dated. 26-6-01, did not stand claimed by the assessee, but still their claim at the time of appeal before Tribunal was entertained and the matter was remanded for examining the same. As such, it has to be concluded that notwithstanding the assessees's failure to claim the benefit of the notification at the time of clearance of the goods, it was accepted by the Tribunal and as such, denial of the same by the Commissioner in the impugned order on the ground that the same was not claimed initially at the time of clearance, is not appropriate and in consonance with the principles of jurisprudence. The same, in my view, would amount to travelling beyond the order of the Tribunal which has attained finality, not having been appealed against by the Revenue. 13. In fact, after going through the impugned order of the Commissioner, I find that he has agreed with the assessee that they would have been entitled to the benefit of the said rule....
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....that the demand of duty subsequently confirmed against an assessee by denying him the exemption, has to be adjusted against the Modvat credit otherwise available to him, even though the procedural conditions of filing of declaration and maintenance of record was not followed by the assessee. As such, the substantive benefit of Modvat credit, if the same can be established from other evidences like production of invoice showing payment of duty on the raw material has been held to be not deniable to the assessee. I would like to reproduce here the observations made by the Hon'ble Supreme Court in case of Mangalore Chemicals & Fertilizers Ltd. v. CCE, 1991 (55) E.L.T. 437. "11. We have given our careful consideration to these submissions. We are afraid the stand of the Revenue suffers from certain basic fallacies, besides being wholly technical. In Kedarnath's case, the question for consideration was whether the requirement of the declaration under the proviso to Sec. 5(2)(a)(ii) of the Bengal Finance (Sales-tax) Act, 1941, could be established by evidence aliunde. The Court said that the intention of the Legislature was to grant exemption only upon the satisfaction of the substantiv....
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.... the goods supplied to the holders of Advance Licence are used for export production or for replenishment of goods used in export production as stipulated in condition (iv). This requirement stood satisfied as undisputedly the goods cleared by the appellant were used in the manufacture of export goods or for replenishment of goods used in export product by the holders of Advance licence. (iii) Condition (iii) requires that the goods supplied should not be in excess of the entitlement in the DEEC of the Advance Licence holder. This requirement stood satisfied as the goods were supplied against specific Advance Licences, which give the precise quantities of raw materials permitted to be supplied. (iv) Condition (iv) relates to drawal of samples which is required for verifying whether the goods exported are as per the Advance licence. Since the discharge of export obligation under the Advance licences is not in doubt, the requirement of this condition also stands satisfied. (v) The next condition (vi) requires clearance of waste/by-product, if any, on payment of applicable rate of duty. This would be so in the case of any manufacture even in the normal course and therefore there is....
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....ntitled to the benefit of duty free clearances in terms of Rule 19(2) read with Notification No. 44/2001-C.E. (N.T.), dated 26-6-01, denying the benefit merely on the ground that the appellant has not chosen to follow the same at the time of clearance of the goods, is untenable. 18. In my view, only substantive condition of the notification is that the goods should be supplied to the holder of the advance licence for use or replenishment of goods to be exported or exported by the said advance licence holder. It is not in dispute that the clearance in question were to holders of advance licences, who having invalidated their licence for direct import, obtained the goods cleared by the appellant and there being no dispute as regards nature of the goods which were used in the manufacture of exported goods or that the goods supplied to advance licence holder were replenishment material for goods exported, I am of the view that the appellants should be extended the benefit of the notification in question. 19. As per the policy of Government, taxes on the goods cannot be exported. Pursuance to this policy, various schemes/procedures stand formulated, in terms of both the raw material r....
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.... view is revenue neutral in the context of the Union finance, as revenue neutrality does not depend upon the Ministries sanctioning refund. The duty paid on goods is eventually refunded and the fact that the same was required to be refunded by the Commerce Ministry or Finance Ministry is irrelevant. 20. I also note that the adjudicating authority has held that the benefit of refund of terminal excise duty was not available to clearances in question. We have been taken through the relevant para 8.2(a), 8.3(c) and 8.8 of the Foreign Trade Policy, and it stands demonstrated that if the supplies were made to the advance licence holders then the appellants themselves were entitled to the benefit of the refund of terminal excise duty. The Commissioner, has in fact, referred to the policy provisions for the previous period. Having observed that the duty paid by them was available as refund to the assessee as terminal excise duty, I agree with the appellant that the entire situation was revenue neutral and there can be no short levy in such a situation. 21. I further note that learned Member (Technical) in Para 6.6, while dealing with the above contention of the appellant, has observed t....
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....n only deal with the points on which the learned Members of the regular Bench differed and can endorse the conclusion arrived at by one of them, a legal position reiterated by the Hon'ble Bombay High Court in Kelkar Trading Corporation v. CCE, Mumbai-V in 2008 (223) E.L.T. 382 (Bom.) 25. The learned Member (Technical) has confirmed the demands of duty (with interest) against M/s. Reliance Industries Ltd. (hereinafter referred to as the assessee). In doing so, he has denied them the benefit of Rule 19(2) of the Central Excise Rules, 2002 read with Notification 44/2001-C. E. (N.T.), dated 26-6-2001 issued under the said rule, on the ground of non-compliance with the conditions of the said notification. Rejecting the assessee's plea of revenue neutrality, which was raised as an alternative plea to resist the demand of duty, the learned Member (Technical) has held that there is no revenue-neutral situation by reason of refund of terminal excise duty. He has stated certain reasons in this behalf. On the other hand, the learned Member (Judicial), in her dissenting order, observed that the adjudicating authority travelled beyond the Tribunal's remand orders by denying the aforesaid benef....
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....ank of revenue-neutrality. 27. For dealing with the first issue, certain essential facts require to be mentioned, though all these have been elaborately stated in the order recorded by the learned Member (Technical). The period of dispute relating to the present appeals is December 2003 to December 2004. During this period, the assessee supplied polymer granules to different categories of buyers, giving them cash discount, quantity discount, trade discount etc. Some of those buyers were holders of advance licences. In respect of the supplies made to them, additional discounts were given, which were not taken into account for payment of duty of excise. The relevant show-cause notices issued by the department alleged that the additional discounts offered by the assessee to advance licence holders represented additional consideration in the facts of the case and, therefore, the assessee was required to pay differential duty on the goods supplied to such buyers. This valuation dispute ultimately came up before this Tribunal, at which stage the assessee raised the new plea of revenue neutrality. The Tribunal remanded the cases to the Commissioner. The remand orders dated 20-7-2006 and ....
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....der dated 31-5-2006, it appears that the claim for the benefit of Rule 19(2) was not a new plea inasmuch as the same had been considered by the Commissioner in the first round. Only the plea of revenue neutrality was the new ground raised by the assessee before the remanding Bench and this plea was raised on the basis of the Tribunal's decision in Maruti Cottex Ltd. v. CCE, Hyderabad-III - 2005 (183) E.L.T. 393 (Tri.-Bang.). In the remand order dated 31-5-2006, this new plea was left to the adjudicating authority for its decision. Further, after holding that the benefit of Rule 19(2) was not liable to be denied on the ground that it was not claimed at the time of clearance of the goods, the remanding Bench asked the Commissioner to deal with the question afresh. In short, insofar as the question relating to Rule 19(2) is concerned, the remand order dated 31-5-2006 is more explicit inasmuch as it makes it obligatory for the Commissioner to deal with the assessee's claim for the above benefit on its merits. Obviously, this remand order presupposed the applicability of the notification to the transactions in question and required the adjudicating authority to examine whether the asses....
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.... consideration. According to condition (i) of the notification, the assessee should hold an advance intermediate licence or should have applied for such licence. It appears from the records that the assessee was holding such a licence. Condition (ii) of the notification says that the provisions of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 shall be followed, mutatis mutandis. The said Rules, made by the Central Government under Section 37 of the Central Excise Act, were issued under Notification 34/2001-C.E. (N.T.), dated 21-6-2001. Rule 2 of the said Rules made the rules applicable to a manufacturer who intended to avail of the benefit of a notification issued under sub-section (1) of Section 5A of the Central Excise Act, 1944 granting exemption from duty to excisable goods when used for the purpose specified in that notification. Applied mutatis mutandis, the rules are applicable to a manufacturer who intends to avail of the benefit of exemption from payment of duty under Rule 19(2) of the Central Excise Rules, 2002. Fairly enough, neither side has made this an issue before me. The 2001 Rules contain provision....
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....ed in the manufacture of finished goods for export. It has been submitted that, in any post-export scenario, the finished goods would be cleared for home consumption and otherwise they should be exported. According to him, it has never been a case of the Revenue that the holders of advance licences did not export their products or, in post-export scenario, did not receive goods from the assessee as a replenishment for raw materials already consumed in the manufacture of export goods. According to the learned counsel, in such situation, all other conditions of Notification 44/2001 should be considered to be procedural and should be relaxed, in terms of case law, to grant the benefit of Rule 19(2) to the assessee. In this context, the learned counsel has referred to certain decisions which find mention in the order recorded by the learned Member (Judicial). He has also cited certain decisions of the Government of India (Revisionary Authority). He has also relied on the Gujarat High Court's decision in Cosmonaut Chemicals v. UOI - 2009 (233) E.L.T. 46 (Guj.). The Government of India's decisions cited by the learned counsel vide 2006 (203) E.L.T. 321 (GOI), 2006 (204) E.L.T. 632 (GOI) ....
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....or the owner of the trade mark/trade name to use the goods in respect of the specified goods manufactured by the assessee. In the context of denying the benefit of the notification to the assessee, their Lordships also ruled that the exception carved out by paragraph 4 was not a technicality but it pertained to parameters of the exemption itself. The learned Commissioner has also pointed out that, in the case of Bhalla Enterprises (supra), the Hon'ble Supreme Court distinguished the old cases of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner - 1991 (55) E.L.T. 437 (S.C.) and UOI v. Wood Papers Ltd. - 1991 JT (1) 151 and, therefore, the reliance placed by the learned Member (Judicial) of the regular Bench on these two decisions of the Apex Court was not apposite. The learned Commissioner has also cited certain other decisions, e.g. MMTC Ltd. v. CC - 2001 (133) E.L.T. 310 (Del.), which are to the effect that exemption notifications should be strictly interpreted. 30. After giving careful consideration to the submissions, I find that it is not in dispute that mandatory conditions attached to exemption from payment of duty cannot be relaxed while conditions which are pu....
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....nt to be relaxable. In this context, certain decisions cited by the learned Commissioner are relevant. In Mihir Textiles Ltd. v. CC, Bombay - 1997 (92) E.L.T. 9 (S.C.) cited by the learned Commissioner, the question considered by the apex court was whether the importer was entitled to the benefit of project import under Heading 98.01 of the Customs Tariff Schedule. Having found that the contract entered into between the party and the foreign supplier was not registered with the customs department, their Lordships denied the benefit of project import to the importer with the result that the importer became liable to pay duty under Heading 84.66 of the Tariff Schedule. Prior registration of the contract was held to be a condition which required to be complied with by an importer claiming the benefit of project import. To the same effect was the decision in Dunlop India Ltd. v. CC, Calcutta - 1997 (95) E.L.T. 162 (S.C.). It may be useful to reproduce the following observations of the Hon'ble Supreme Court in Mihir Textiles case:- "This is not a case where a certain provision is mandatory or directory. Here the question is whether concessional relief of duty which is made dependent on ....
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.... advance licence in terms of paragraph 8.2(a) of the Policy, the supplier shall be entitled to advance licence for intermediate supplies." The learned counsel, in his rejoinder, has contested the above argument by submitting that a benefit granted by the EXIM Policy cannot be taken away by the procedure. In this connection, he has relied on Tribunal's decision in TIL Ltd. v. CC, Calcutta - 2001 (132) E.L.T. 445 (Tri.-Kolkata), wherein it was held that the Handbook of Procedure under an EXIM Policy merely prescribed certain administrative guidelines and that restrictions, if any, had to be found in the Policy itself. The controversy is whether the same person making deemed exports could claim the benefits under para 8.3(a), (b) & (c) of Chapter 8 of the EXIM Policy. As per para 8.3(a), the deemed exporter could obtain advance licence for intermediate supply; para 8.3(b) enabled him to claim deemed export drawback and 8.3(c) entitled him to claim refund of terminal excise duty. The para opened like this; "Deemed exports shall be eligible for any/all of the following benefits ...". The learned counsel argued that the EXIM Policy enabled a deemed exporter to claim any or all of the ben....
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....he larger period of limitation was not invokable to demand such duty from them. It has been submitted that para 122(c) of the old Import Policy is pari materia with para 8.3(c) of the Policy relevant to the instant case. This parity, however, is yet to be established. Moreover, the decision in IFGL Refractories case cannot be relied upon to show that, where no refund of terminal excise duty was admissible to the 'deemed exporter' it was admissible to the recipient of the goods. 32. In the result, the plea of revenue — neutrality is not sustainable with reference to refund of terminal excise duty. The issue again is held against the assessee. 33. What remains is whether the demand of duty can be resisted on the plea of revenue-neutrality with reference to CENVAT credit. The learned Commissioner has submitted that such a plea was never raised before the original authority or even before the Tribunal. The learned counsel has contested this submission. He has submitted that this plea was definitely raised before the regular Bench and the same was rightly considered by the learned Member (Judicial). I have to go by the texts of the orders recorded by the learned Members of the Bench....