FIAT case is not applicable for Fertilizer subsidy - Board clarifies
IT seems after the FIAT case, several settled disputes are re-opened. One such dispute is whether the subsidy received from the Government by the Fertilizer manufacturers is includable in the assessable value. Trade and Industry Associations have represented that in spite of the clarification issued by the Department of Revenue to the Department of Fertilizers, the field formations have issued show cause notices to the fertilizer companies seeking to levy excise duty on the subsidy component of price-controlled fertilizers in the light of the judgment of the Supreme Court in the case of CCE, Mumbai vs M/s Fiat India Pvt. Limited 2012-TIOL-58-SC-CX.
Board now clarifies 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-a-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. 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.
The Supreme Court, in the Fiat India case, has not ruled that the subsidy component provided by the Government would tantamount to consideration flowing from the buyer to the seller and therefore, should be included in the assessable value an excisable good in terms of the extant Valuation Rules .
It is, therefore, clarified that in respect of fertilizers for which subsidy is provided by the Government, the excise duty will be chargeable on the MRP and not on the subsidy component provided by the Government.
CBEC Circular No. 983/7/2014-CX, Dated: July 10, 2014