Custom, Excise & Service Tax Tribunal
M/S. Coramandel International Ltd vs Commissioner Of Central Excise, ... on 21 July, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 21079 / 2014 Application(s) Involved: E/Stay/28863/2013 in E/28211/2013-DB Appeal(s) Involved: E/28211/2013-DB [Arising out of Order-in-Original No.21/2013 dated 22/08/2013 passed by Commissioner of Central Excise, Customs and Service Tax, VISAKHAPATNAM-I ] M/s. Coramandel International Ltd Sriharipuram, Malkapuram, VISAKHAPATNAM - 530011 AP Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Visakhapatnam-I CENTRAL EXCISE BUILDING PORT AREA VISAKHAPATNAM - 530035 ANDHRA PRADESH Respondent(s)
Appearance:
Mr. G. Shivadass, Advocate LAKSHMI KUMARAN & SRIDHARAN WORLD TRADE CENTRE NO.404-406, 4TH FLOOR, SOUTH WING BRIGADE GATEWAY CAMPUS NO.26/1, DR. RAJKUMAR ROAD, BANGALORE - 560 055 KARNATAKA For the Appellant Mr. Ganesh Havannur, Addl. Commissioner (AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 21/07/2014 Date of Decision: 21/07/2014 Order Per : B.S.V.MURTHY Both sides agree that appeal itself can be taken up for final decision since the issue involved falls within the narrow compass and does not require any detailed consideration at a later stage. Accordingly, the requirement of pre-deposit is waived and appeal is taken up for final decision.
2. The issue involved is that the Government of India decontrolled Phosphatic and Potassic (P & K) fertilizers with effect from 25th August 1992 on the recommendations of Joint Parliamentary Committee. Consequent upon the decontrol, the prices of the Phosphatic and Potassic fertilizers registered a sharp increase in the market, which exercised an adverse impact on the demand and consumption of the same. It led to an imbalance in the usage of the nutrients of N, P and K (Nitrogen, Phosphate and Potash) and the productivity of the soil. Keeping in view the adverse impact of the decontrol of the P & K fertilizers, the Department of Agriculture and Cooperation introduced Concession Scheme for decontrolled Phosphatic and Potassic (P & K) fertilizers on adhoc bass w.e.f. 1.10.1992, which has been allowed to continue by the Government of India up to 31.3.2010 with changed parameters from time to time. Subsequently, the Government introduced nutrient based subsidy policy w.e.f 1.4.2010 (w.e.f. 1.5.2010 for Single Super Phosphate) in continuation of the erstwhile concession scheme for decontrolled P & K fertilizers. The purpose of the concession scheme, according to the appellants, is to provide fertilizers to the farmers at subsidized prices. The concession was disbursed to the manufacturers/importers and State Government ensures that MRP is indicated in respect of SSP. The MRP so decided has been constant till 31.3.2010.
2.1 Taking a view that the subsidy received by fertilizer companies from the Government is required to be added to the assessable value and charged to duty, proceedings were initiated culminating in confirmation of duty demand for Rs.25,35,88,216/-. In addition, an equal amount has been imposed as penalty and penalty under Section 11AC of Central Excise Act, 1944 and penalty of Rs.2.5 crores has been imposed under Rule 25 of Central Excise Rules, 2002. The period involved is March 2011 to June 2012.
2.2 The case of the Department according to the appellant is as under:
(i) The sale price of the fertilizers collected by the appellants from their buyers did not represent the true and genuine price as sole consideration of sale since it is always less even compared to its cost of production.
(ii) In the subsidy scheme announced by the Government, the manufacturers of fertilizers received part of consideration from the buyers and the other part of the amount in the form of subsidy from the Government and hence both receipts are interlinked with each other and form part of the transaction value.
(iii) In terms of the definition of transaction value the amount of subsidy received from the Government is part of the transaction value as the sale price fixed by the Government is not the sole consideration for sale and the amount of compensation offered by way of subsidy is the additional consideration received by the appellants and it is the amount received on behalf of the buyers of fertilizers at the fixed rate by the Government.
(iv) The definition of transaction value excludes only the amount of duty of excise, sales tax and other taxes, if any, actually paid or payable on goods and not any additional consideration given by the Government by way of subsidy.
(v) Subsidy is different from discounts as it enhances the income of the manufacturer whereas discounts reduce the income of the manufacturers.
(vi) The nutrient based subsidy received from the Ministry of Chemicals and Fertilizers is an additional consideration and the same should form part of the transaction value under Section 4 of the Central Excise Act, 1944.
2.3 It was submitted that in Circular No.983/7/2014-CX dated 10.7.2014, the Board has clarified that the subsidy given by the Government is not includable in the assessable value and Central Excise duty is not payable on the subsidy component provided by the Government. The grant of subsidy is given pursuant to an administrative decision taken by Government of India and payment of subsidy to the manufacturer by the Government cannot be regarded as discharge of any liability or obligation by the Government towards the purchasers of the fertilizers. The definition of transaction value deals with only such elements which otherwise may form part of value which a buyer is liable to pay to the assessee either by reason of sale or in connection with sale himself or on behalf of the assessees. Subsidy paid by the Government cannot be considered as an additional consideration includable for excise duty in accordance with statute.
3. We find that the submissions have to be upheld. In para 4.4 in the Circular referred to by the learned counsel, the Board observed as follows.
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 advantage vis-`-vis other manufacturers because of the subsidy received from the Government. The subsidy paid by the Government to the manufacturer is in larger public interest and not for benefitting any individual manufacturer-seller and it is also not paid on behalf of any individual buyer or entity. In view of the above, it can be concluded that the subsidy component is not an additional consideration and hence, the MRP at which the fertilizer is sold to buyers by the manufacturers is the sole consideration for its sale. Even though the subsidy component has money value, it cannot be considered as an additional extra-commercial consideration flowing from the buyer to the seller. In view of the fact that the issue is covered by the Boards Circular and in our opinion also the subsidy cannot be considered as an additional consideration, we allow the appeal with consequential relief, if any, to the appellant.
(Operative portion of the order has been pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER rv 3