From the Apex Court
THE Supreme Court delivered two important judgements on Friday.
IFGL case affirmed, Mazagon Dock distinguished.
In the IFGL case (), the assessee had sold refractories to Visakhapatnam Steel Plant (VSP). VSP surrendered their advance licence they held for import of refractories. Against such surrender, the assessees were issued Advance Intermediate Licences for import of inputs. The assessee could thus import the inputs without payment of customs duty as well as get them at a lower price than what they would have paid had they purchased the same in India. The Department claimed that the benefit derived by the assessee under the Advance Intermediate Licence, issued to them as a result of surrender of licence by Visakhapatnam Steel Plant, was "additional consideration" towards the value of the goods and that this "additional consideration" formed part of the price for purposes of excise duty. the Supreme Court upheld the view of the Department.
The Supreme Court judgement was delivered on 09.08.2005.
Just a few days ago on 28.07.2005, the same Bench of the Supreme Court delivered another judgement in the case of Mazagon Dock (). In this case, the assessee supplied rigs to ONGC. As per the policy of the Government the assessee was entitled to receive a subsidy of 20% from Government and 10% from ONGC. Department claimed that this 30% formed part of the price and excise duty was payable thereon The contentions of the assessee was that they had already included 10% (received from ONGC), and that 20% price received from the Government was not includible in the value.
The Supreme Court held,
In this case it is to be seen that the subsidy was as per the policy of the Government. The subsidy of 20% was paid by the Government, 10% was paid by the buyer. In our view the subsidy of 20% from the Government cannot be said to be additional consideration as it is not received from the buyer either directly or indirectly. Therefore, that would not be includable in the price of the goods for the purposes of excise. However, it is an admitted position that 10% subsidy was received by the Assessee from the buyer. It is therefore additional consideration received by the Assessee from the buyer. The fact that it is received under a policy of the Government does not detract from the above position. It is therefore includable .
In the case decided by the Supreme Court Friday, the assessee had supplied goods to a particular type of buyers at much lower price than the price charged from the general buyers in the normal course of trade as it had obtained the facility of invalidating of advance licences from such buyers and procured imported raw material (duty free) against such licences for manufacturing of finished goods. Commissioner confirmed the demand of differential duty.
Now, in the Supreme Court, the advocate of the assessee pleaded that IFGL needed a relook as the Mazagon Dock was contrary.
The Supreme Court did not agree and confirmed the Commissioner's order.