AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 768
X X X X Extracts X X X X
X X X X Extracts X X X X
....es of Customs (SAD) which have been excluded from the computation of value of goods determined in terms of Section 4(1) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. 2.1 Brief facts of the case, leading to these appeals, are summarized herein below: 2.2. The appellants herein are engaged inter alia, in the manufacture of final products viz., 'Erucic acids, Stearic acid, Oleic acid' etc., falling under Chapter 38 of the First Schedule to the Central Excise Tariff Act, 1985 at their factory premises. The appellants are the registered taxpayers holding Central Excise Registration No. AAACG2953RXM002 for manufacture of aforesaid finished products, payment of central excise duty thereon and for compliance with the central excise statute. 2.3 The appellants were supplying their finished goods/final products to various buyers including M/s Fine Organics Industries Private Limited, M/s Oleofine Organics (India) Private Limited, who in turn were manufacturing organic chemicals and miscellaneous chemical products, and exporting the same on payment of Excise duty or under bond movement without....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../- after giving allowance to reduction of value on account of CVD, Cess, SAD benefits available as credit to the appellants. Besides the above, he had also imposed penalty for an amount equal to the duty demanded on the appellants under Section 11AC ibid. Feeling aggrieved with the impugned order, both the appellants-assessee and the revenue have filed these appeals before the Tribunal. 3.1 Learned Advocate appearing for the appellants-assessee had stated that the Revenue had initiated proceedings against the appellants on the ground that they have undervalued their final products to the extent of 'additional consideration' flowing from the buyers who had provided invalidation letters against Advance License held by them. Department had initiated action against the buyers only on the ground that goods supplied by the appellants is fully exempted and therefore the appellants is not required to pay duty. He claimed that it is evident from the findings of the learned Commissioner at paragraph 20 of the impugned order that the duty paid by the supplier i.e., appellants-assessee is wrong and inconsistent with the EXIM policy. However, the Tribunal in its Final order dated 10.04.2013 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the buyers. Therefore, it is claimed by the Learned Advocate that there are no grounds for invocation of extended period for demand of duty on the part of the appellants. 3.4 Learned Advocate also submitted that the decision of the Hon'ble Supreme Court in the case of Commissioner of C. Ex. Vs. IFGL Refractories Limited - 2005 (186) E.L.T. 529 (S.C.) is not applicable in the present case, since unlike the referred case in which IFGL Refractories had agreed to sell the goods at a price lower than the normally quoted price, by taking into consideration the benefit derived from advance intermediate license obtained by IFGL consequent to the invalidation of advance license provided by the customer, the appellants-assessee do not have different two sale prices depending upon whether the customer has an advance license are not. Further, he claimed that there were no two set of sale prices for a single customer, and therefore he stated that the ratio of the aforesaid judgement of the Apex Court is not applicable in their Case. 4. Learned Authorised Representative (AR) appearing for the department, on the other hand, reiterated the findings made in the impugned order and submitt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... demands confirmed in the impugned order is legally sustainable. The disputed period in the present case is From January, 2009 to January, 2013. 7. On perusal of the records of the case, it transpires that the appellants are manufacturing the finished goods/final products upon payment of Central Excise duty. In respect of certain buyers of the finished goods, they had received 'Letter of Invalidation (LoI)/Advance Release Order (ARO)' which they have used for import of duty-free raw materials and have also received duty drawback benefits. Thus, in respect of sales of finished goods made to those buyers, from whom such LoI/ARO were received, it is necessary to establish that there were certain benefits accrued to the appellants, directly or indirectly, which could be considered as additional consideration. The learned advocate claimed that the appellants did not charge two set of sale prices for a single customer, meaning that the appellants did not charge different prices in respect of the buyers who provided LoI/ARO as compared to those who did not provide such benefits. However, the comparative chart provided in paragraph 8 of the impugned order show that the unit price of goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not provided by noticee. This amounts to suppression of facts." The facts about modus adopted by the appellants-assessee, following different practices in different jurisdictions, goes on to prove that they have not come with clean hands before the Department, to claim that there was no element of suppression of facts, willful mis-statement etc., on their side. Therefore, we are unable to agree with the appellants-assessee in view of the specific findings given by the learned Commissioner as above, in the impugned order. 8.2 In respect of the determination of transaction value of goods in terms of Section 4(1) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, the learned Commissioner in the impugned order had dealt in detail about the computation of additional consideration. In the impugned order, he had given a specific finding that even CVD, Cess thereon & SAD payable/paid was available as benefit (credit) to the appellants-assessee. The statutory provisions governing the CENVAT credit of duty paid on inputs, allows the duty paid on the goods to be taken as CENVAT credit, provided such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uing to the seller was the result of surrender of advance licence by the buyers. The discussion and the rationale which goes into forming the aforesaid opinion is contained in para 9 of the judgment, which reads as under : "9. Ultimately it was agreed that M/s. Visakhapatnam will surrender its advance licences and in lieu thereof the respondents will get the advance intermediate licences. Thus, without the advance licences of M/s. Visakhapatnam Steel Plant, being made available to the respondents, the prices would have been as were quoted earlier. It is only because of the advance licences being surrendered by M/s. Visakhapatnam Steel Plant and in lieu thereof advance intermediate licences being made available to the respondents that the respondents could offer lower prices. The surrendering of licences by M/s. Visakhapatnam Steel Plant and as a result thereof the respondents getting the licences had nothing to do with any Import and Export Policy. It was directly a matter of contract between the two parties. This resulted in additional consideration by way of "advance intermediate licence" flowing from M/s. Visakhapatnam Steel Plant to the respondents. The value received ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to source the materials from indigenous source in lieu of direct import had the option to source them against advance release orders denominated in foreign exchange/Indian rupees. In such a case, the licence was to be invalidated for direct import and permission in the form of ARO was to be issued entitling the supplier of the goods the benefits of deemed export. Para 10.2 of the EXIM Policy laid down the categories of supply which would be recorded as 'deemed exports' under the policy. The first such clause (a) was 'supply of goods against advance licence/DFRC under the duty exemption/ remission scheme. Under para 10.3, benefits for deemed exports were specified. Advance licence for intermediate supply/deemed export was specified as one of the benefits for deemed exports. 7. The advance licence holder category buyers got their licences invalidated/surrendered. Thereafter, DGFT issued licence in favour of the assessee herein permitting it to procure the goods duty free from indigenous manufacturers and on the supply of this material to such buyers, treating the same as 'deemed exports', thereby earning the benefits of duty drawback. Para 7.11 of the EXIM Policy facilitate....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." 9. As is clear from the reading of the aforesaid provision, the duty of excise is chargeable on the excisable goods with reference to the value of such goods. Generally, the price of the goods, i.e. the price at which such goods are ordinarily sold by the assessee to a buyer is to be the value of the goods. This value is called the 'transaction value'. The Central Government has also framed the Rules which, inter alia, lay down the provisions for determination of value. Rule 6 thereof, with which we are specifically concerned, reads as under : "RULE 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the transaction value. It is not necessary that such an additional consideration is to flow directly and even indirect consideration is includible. It is in this context we have to examine as to whether the consideration in the form of drawback, which accrued in favour of the assessee, could be connected with the buyer. To put it otherwise, though the immediate source of the duty drawback is the Government, whether 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. 11. In the case of IFGL, this Court has given the answer in the affirmative to the aforesaid issue. It is also conceded by the learned counsel appearing for the assessee that the said judgment was rendered on almost identical fact situation. That is why the endeavour of Mr. Lakshmikumaran is to impress upon us to take a different view. He sought to discredit the opinion of the Court in the said case by arguing that the advance licence for intermediate supply was granted by the DGFT to the assessee under the EXIM Policy and it had nothing to do with the buyer. He conceded that it could happen onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lding advance licence. Therefore, the additional discount offered to a customer, who is the exporter, is never an additional consideration. 14. The aforesaid argument of the learned counsel for the assessee may appear to be impressive, when taken in isolation i.e. without having regard to all the attending facts. However, when the argument is tested keeping in view the entirety of the circumstances, as already taken note of above, the hollowness of this argument stands exposed, inasmuch as, this argument glosses over the fundamental fact that the assessee had been able to get the benefit of Notification No. 31/1997-CUS based on licence issued by DGFT in its favour and the raison d'etre for issuance of said licence by the DGFT to the assessee was invalidation of the advance licence by the buyers. Therefore, the source or gangotri from where the benefit has ultimately reached the assessee is the advance licences which were held by the buyers and their act of invalidation made it possible to flow down the benefit so as to reach the stream of the assessee. xxx xxx xxx xxx 18. At this stage, we would like to recall the following findings arrived at by the Comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods 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. 20. Thus, we do not see any reason to deviate from the decision rendered by this Court in IFGL's case. 21. Before we part with, one more aspect to which our attention was drawn by Mr. Lakshmikumaran needs to be addressed. Referring to another judgment of this Court in Commissioner of Central Excise, Bangalore v. Mazagon Dock Ltd. - 2005 (187) E.L.T. 3 (S.C.) = 2005 (127) ECR 268 (SC), a vain attempt was made to show that this judgment was contrary to the decision rendered by this Court in IFGL's case. We do not find it to be so. Interestingly, the Hon'ble Judges {S.N. Variava and Dr. AR Lakshmanan, JJ.} who comprised the Bench that decided IFGL's case were the same who rendered the judgment in Mazagon Dock Ltd.'s case. Another pertinent factor which is to be taken note of is that the two decisions were rendered within a short gap of a fortnight. The decision in Mazagon Dock Ltd. was rendered on July 28, 2005 whereas IFGL's case was decid....