Custom, Excise & Service Tax Tribunal
M/S. Sail Refractory Company Ltd vs Cce, Salem on 8 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/355 & 356/2009
(Arising out of Order-in-Appeal Nos. 34 & 35/2009-CE (SLM) dated 4.3.2009 passed by the Commissioner of Central Excise (Appeals), Salem)
M/s. SAIL Refractory Company Ltd.
(formerly M/s. Burn Standard Company Ltd.) Appellant
Vs.
CCE, Salem Respondent
E/94/2010 (Arising out of Order-in-Appeal No. 138/2008- CE (SLM) dated 24.11.2008 passed by the Commissioner of Central Excise (Appeals), Salem) M/s. SAIL Refractory Company Ltd.
(formerly M/s. Burn Standard Company Ltd.) Appellant
Vs.
CCE, Salem Respondent
E/658/2010
(Arising out of Order-in-Appeal No.38/2010-CE (SLM) dated 21.7.2010 passed by the Commissioner of Central Excise (Appeals), Salem) M/s. SAIL Refractory Company Ltd.
(formerly M/s. Burn Standard Company Ltd.) Appellant
Vs.
CCE, Salem Respondent
E/40618/2013
(Arising out of Order-in-Appeal No.69/2012-CEX dated 14.12.2012 passed by the Commissioner of Central Excise (Appeals), Salem) CCE, Salem Appellant Vs. M/s. SAIL Refractory Company Ltd.
(formerly M/s. Burn Standard Company Ltd.) Appellant E/40776/2014 (Arising out of Order-in-Appeal No. 25/2014-CE dated 22.1.2014 passed by the Commissioner of Central Excise (Appeals), Salem) M/s. SAIL Refractory Company Ltd. Appellant Vs. CCE, Salem Respondent Appearance Ms. L. Maithili, for the Appellant-Assessee Ms. Indira Sisupal, AC (AR) for the Department CORAM Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member Date of Hearing / Decision: 08.07.2015 Final Order Nos. 40920-40925 / 2015 Per P.K. Choudhary The assessees have filed five appeals and the Department has filed one appeal against the orders passed by the Commissioner (Appeals).
2. As the issue involved is common in all these appeals, with the consent of both sides, all the six appeals are taken up together for hearing and disposal.
3. The impugned orders and the period of dispute in these appeals are as under:-
Appeal Nos.
Order-in-Appeal Nos.
Period of Dispute Bonus Received Duty Demanded E/355/2009 34 & 35/09 dt. 4.3.2009 Feb. 07 to May 2007 21,56,914/-
3,54,573/-
E/356/2009 34 & 35/09 dt. 4.3.2009 Sep. 07 to Dec. 2007 22,76,777/-
3,75,213/-
E/94/2010 138/2008 dt.24.11.2008 June 2008 31,26,840/-
4,50,891/-
E/658/2010 38/2010 dt.21.7.2010 Jan. 2008 & Feb. 2009 17,32,538/-
1,78,451/-
E/40618/2013 69/2012 dt. 14.12.2012 Jan. 2001 to Jan. 2004 2,31,11,204/-
36,97,793/-
E/40776/2014 25/2014 dt. 22.1.2014 April 2011 to March 2012 74,14,521/-
7,63,696/-
4. These appeals are in the nature of demanding differential duty on the bonus payments received by the assessee from its buyers with respect to clearance of refractory bricks on the ground that bonus claims were in the nature of additional consideration for the refractory bricks.
5. The brief facts of the case are that the appellant, M/s. SAIL Refractory Company Limited (formerly known as Burn Standard Company Ltd.), is interalia engaged in the manufacture of refractory bricks. The appellant-assessee has its manufacturing unit in Salem, wherein it manufactures refractory bricks for supply to Steel Plants. All the supplies are made to Public Sector Steel Plants. It is a common practice amongst manufacturers of refractory bricks to guarantee the period or the number of heats that the refractory bricks can withstand. In tune with this practice, the appellant-assessee entered into agreements with its buyers, incorporating a penalty clause and a bonus clause. In terms of the penalty clause, if the bricks do not perform within the guarantee period or do not withstand the number of heats guaranteed, the buyers would be entitled to charge penalty as stipulated in the agreement. Conversely, if the refractory bricks outperform the guarantee period or function beyond the stipulated heats, the appellant-assessee would be entitled to bonus charges based on the number of heats the refractory bricks survive beyond the guaranteed heats. Adjudicating authority confirmed the demand and the same was upheld by Commissioner (Appeals) in all the assessees appeals except in Order-in-Appeal No. 69/2012 dated 14.12.2012. Learned Commissioner (Appeals) allowed the appeal and set aside the demand and the Revenue preferred appeal.
6. The learned counsel for the appellant-assessee submits that bonus and penalty are post-removal charges and had no bearing on the price of the goods and hence the same are not includible in the assessable value. She also referred to the copies of the purchase orders from Steel Authority of India Limited, Visvesvaraya Iron and Steel Plant, Bhadravati along with Annexures to the purchase order which enumerates the terms and conditions. In para 3.2 of the Terms and Conditions, it is mentioned that the minimum guaranteed life of the converter lining shall be 1200 heats, Guarantee Certificate for the minimum guaranteed life should be provided by you, penalty/bonus will be applicable. Further, it was submitted by the learned counsel that the bonus/penalty applicable shall be paid on cost per heat basis which shall be calculated from dividing the landed price per set by minimum guaranteed life i.e. 1200 heats. Further, the learned counsel also drew our attention to the terms of payment wherein it is clearly mentioned that bonus will be paid for additional heats achieved over and above minimum guaranteed life of 1200 heats and further in case the life achieved is lower than the minimum guaranteed life, penalty would be levied for shortfall for number of heats. Further she submitted that in view of the terms and conditions of the purchase order, bonus or penalties on the basis of quality of goods are not concern with the sale price at the time of removal of the goods and hence are not includible in the assessable value as they are post-sales provisions. Central Excise duty is levied at on the normal price, at which the goods are ordinarily sold at the time of removal. Subsequent dealings on account of performance or otherwise of the goods is not of any concern in regard to the sale price at the time of removal. She relied on the following decisions of the Tribunal:-
(a) MPR Refractories Ltd. Vs. CCE, Hyderabad 2010 (262) ELT 474
(b) CCE, Chennai Vs. VRW Refractories 2008 (231) ELT 65
(c) Jalan Refractories (P) Ltd. Vs. CCE, Jaipur 2001 (138) ELT 327
(d) Indian Telehpone Industries Vs. CCE, Cochin 2004 (175) ELT 884
7. Regarding the Departments appeal, she reiterated the findings of the Commissioner (Appeals).
8. Learned AR for Revenue in respect of the assessees appeal reiterated the orders of the Commissioner (Appeals). Regarding the Departments appeal, she reiterated the grounds of appeal. She further submits that the transaction value has been defined under section 4(3)(d) of Central Excise Act, 1944 to include any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization 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. She further submits that Boards Circular F. No. 354/81/2000-TRU dated 30.6.2000 has clarified that any amount collected in connection with the sale of the excisable goods whether realized before or after the removal of the excisable goods shall be included in the transaction value and duty to be paid accordingly. The above circular without any ambiguity states that any amount collected by the appellants in connection with the sale of the excisable goods should form part of transaction value and the appellants are liable to pay duty on such value even if recovered subsequent to sale. She relied on the decision of the Honble Supreme Court in the case of Anjaleem Enterprises Pvt. Ltd. Vs. CCE, Ahmedabad 2006 (194) ELT 129 (SC) and the decision of the Tribunal in the case of Ubique Metamed Pvt. Ltd. Vs. CCE, Bolpur 2008 (224) ELT 106.
9. We have heard both sides and perused the records. The issue involved in these appeals is whether the amount received as bonus by the appellant-assessee from its buyers for the performance of converter bricks/refractory bricks would be included in the assessable value of the refractory bricks sold by the appellant-assessee. It is an undisputed fact that the refractory bricks were sold by the appellant-assessee based upon the terms and conditions as envisaged in the purchase orders. In the purchase order it is specifically stipulated for performance guaranteed bonus which indicated that the appellant-assessee should stand guarantee for the number of heat per set as per the agreements and bonus shall be awarded if the life achieved is above guaranteed heats and there is a penalty clause also that if the refractory bricks do not sustain the guaranteed heats then penalty would be recovered from the appellant-assessee. We find that the issue is no longer res integra as this Tribunal in the cases of MPR Refractories Ltd. Vs. CCE, Hyderabad (supra), CCE, Chennai Vs. VRW Refractories (supra), Jalan Refractories (P) Ltd. Vs. CCE, Jaipur (supra) and Indian Telehpone Industries Vs. CCE, Cochin (supra), has consistently held that subsequent dealings between the assessee and the buyer on account of performance or otherwise of the goods is not of any concern in regard to the sale price of the goods at the time of removal. We are, therefore, of the opinion that there is no justification for treating the bonus amount as part of the price of the goods and demanding duty on the basis of bonus received from the buyers for better performance of the bricks was not includible in the assessable value of the refractory bricks. The case laws relied by the learned AR for Revenue is not applicable to the facts of the present case. In appeal No. E/40618/2013, the Commissioner (Appeals) has relied this Tribunals decision and rightly allowed assessees appeal.
10. In view of the consistent view taken by this Tribunal on the issue before us, we set aside the impugned orders passed by the Commissioner (Appeals) in the assessees appeal and allow all the five appeals filed by the appellant-assessee. Since we do not find any merit in the appeal filed by the Department, the same is dismissed.
(Operative portion of the order was pronounced in open court on 8.7.2015) (P.K. CHOUDHARY) (R. PERIASAMI) Judicial Member Tehnical Member Rex 2 5