Custom, Excise & Service Tax Tribunal
M/S. Liebherr Machine Tools India Pvt. ... vs The Commissioner Of Central Excise ... on 27 October, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeals (s) Involved: E/365/2007-DB (Arising out of Order-in-Appeal No.19/2007-CE dated 31.01.2007 passed by Commissioner of Central Excise (Appeals-I), Bangalore.) M/s. Liebherr Machine Tools India Pvt. Ltd. Appellant(s) versus The Commissioner of Central Excise (Appeals) Bangalore. Respondent(s)
Appearance:
Smt. Rukmani Menon, Advocate For the Appellant Shri J. Harish, AR For the Respondent Date of Hearing: 20/10/2016 Date of Decision: 27/10/2016 CORAM:
Mr. Mohammed Yousuf, AR For the Respondent HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER HON'BLE SHRI V. PADMANABHAN, TECHNICAL MEMBER Date of Hearing: 30/09/2016 Final Order No. 21029_/ 2016 Per : V. PADMANABHAN The present appeal is filed against order passed by the Commissioner in Order-in-Appeal No. 19/2007 dated 31.1.2007. The appellant is engaged in the manufacture of various types of machineries falling under Chapter Heading 84 of the Central Excise Tariff Act. The dispute is regarding valuation of CNC Gear hobbing machine supplied to their customer M/s. Bajaj Auto Ltd., Pune. The customer had an EPCG license issued by DGFT for import of a similar item at concessional rate of duty. The customer invalidated their EPCG license and got an advance intermediate license issued to the appellant which was used by them to import parts and accessories without payment of duty. The appellant used these parts and accessories and manufactured and cleared the complete CNC machine to M/s. Bajaj Auto. The purchase order placed by the customer revealed that the agreed price was reduced to the extent of the benefit accruing to the appellant by way of import of components at concessional rate of duty using the advance license made available by the customer. The original authority demanded differential excise duty to the extent of Rs.3,66,279/- considering the monetary benefit as the additional consideration accruing to the appellant from the customer by way of advance license. When the issue was challenged before the Commissioner (A), he set aside the penalty and also set aside the portion of the demand of duty on the CVD portion of the value.
2. The impugned order is challenged on the following ground.
(i) The duty concession on the components imported by the appellant was in the nature of a statutory benefit which is not the same as additional consideration as contemplated under Rule 6 of the Valuation Rules and hence, cannot be considered as additional price accruing to the appellant.
(ii) The differential duty when paid will be available as CENVAT credit to their customer; consequently the situation is revenue neutral and consequently the demand is not justified.
(iii) They placed reliance on the following case laws.
a. Reliance Industries Ltd. vs. CCE, Rajkot: 2009 (244) E.L.T. 254 (Tri.-Ahmd.) for revenue neutrality b. CCE, Bhubaneshwar-II vs. IFGL Refractories Ltd.: 2005 (186) E.L.T. 529 (S.C.). Here the appellant contended that the Honble Supreme Courts decision will not be applicable to them inasmuch as the decision was delivered in the light of the old Section 4 prior to its amendment from 1.6.2007.
3. Heard Smt. Rukmani Menon, learned advocate for the appellant and Shri J. Harish, learned AR for the Revenue.
4. The learned advocate appearing for the appellant reiterated the arguments and prayed that the appeal should be allowed on the basis of the Larger Benchs decision of the Tribunal in the Reliance Industries case on the ground of revenue neutrality.
5. The learned DR on the other hand supported the impugned order. He submitted that the decision of the apex court in the case of IFGL Refractories case (supra) supports the decision of the authorities below. He further placed reliance on the apex courts decision in the case of CCE, Nagpur vs. Indoram Synthetics (I) Ltd.: 2015 (323) E.L.T. 20 (S.C.).
6. It is on record that the appellant has supplied CNC machines to the customer viz., M/s. Bajaj Auto Ltd.. The terms of the purchase order was such that the customer would invalid their EPCG license and make available an advance intermediate license to the appellant to enable them to import component parts at concessional rate of duty for use in the manufacture of CNC machines to be supplied to the customer. From the purchase order, it could be clearly inferred that the transaction value for the CNC machine stands depressed to the extent of benefit accruing to the appellant on account of concessional import of components. The issue for decision is whether the benefit accruing to the appellant by way of concessional import of components is to be considered as additional consideration received by them from the buyer of the goods. The appellants contention is that such a view will not be fair inasmuch as no consideration has been received directly from the buyer but has accrued by way of statutory benefit of concessional rate of duty.
6.1 The apex court in the IFGL Refractories (supra) case has considered a very similar situation. The case before the apex court also involved extending the benefit of advance intermediate license from the buyer to the manufacturer. The apex court held that the difference in prices on account of the transfer of additional intermediate license is to be considered as additional consideration. The learned advocate for the appellant tried to distinguish this judgment since it has been rendered in the context of Section 4 of the Act as it existed prior to its amendment on 1.7.2000. However, Revenue has placed reliance on the subsequent decision of the apex court in the case of Indoram Synthetics (supra) where the decision of the apex court is on the same lines but rendered in the context of Section 4 after its amendment. Going by the above decisions of the apex court, we have no doubt that the benefit accruing to the appellant by way of extending the benefit of concessional rate of duty for import of components is to be considered as additional consideration flowing from the buyer to the appellant. The charging of differential duty on such consideration merits no interference.
6.2 The learned advocate has sought to set aside the demand on the ground of revenue neutrality by placing reliance on the Three-Member decision of Ahmedabad Tribunal in the case of Reliance Industries Ltd. (supra). We are of the view that the plea of revenue neutrality comes into play when differential duty paid by one unit is available immediately as CENVAT credit to the same unit or to another unit of the same manufacturer or its sister unit. In the present case that is not so. We find that the machines have been supplied to another customer M/s. Bajaj Auto. It may well be that the differential duty, when paid, is also available to the customer. However, on such a plea the demand itself cannot be set aside.
7. In line with the above discussions, the impugned order is upheld and the appeal is rejected.
(Order was pronounced in Open Court on 27/10/2016.) V. PADMANABHAN TECHNICAL MEMBER S.S. GARG JUDICIAL MEMBER rv 6