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TMI Blog2015 (8) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... ion' and, therefore, its inclusion was necessitated having regard to the formula provided for arriving at the 'transaction value' contained in the statutory scheme. 2) We would narrate the details of purported 'additional consideration' at a later point of time at an appropriate stage. However, we may point out here that on surrender of advance licence with the aforesaid buyers, the assessee could receive drawback from the Government/Director General of Foreign Trade (DGFT) as per the Export-Import (EXIM) Policy and this was stated to be the additional consideration. Suffice it to point out at this juncture that the Revenue issued five separate show cause notices asking the assessee to pay the differential duty as the said additional consideration was to be included while arriving at the 'transaction value' of the said goods in terms of Section 4 of the Central Excise Act, 1944 (hereinafter referred to as the 'Act') read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (hereinafter referred to as the 'Rules'). The assessee challenged the stand of the Revenue by filing replies. After exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices would have been as were quoted earlier. It is only because of the advance licences being surrendered by M/s. Visakhapatnam Steel Plant and in lieu thereof advance intermediate licences being made available to the respondents that the respondents could offer lower prices. The surrendering of licences by M/s. Visakhapatnam Steel Plant and as a result thereof the respondents getting the licences had nothing to do with any Import and Export Policy. It was directly a matter of contract between the two parties. This resulted in additional consideration by way of "advance intermediate licence" flowing from M/s. Visakhapatnam Steel Plant to the respondents. The value received therefrom is includible in the price. The Tribunal was wrong in stating that such an arrangement can never be placed upon the platform of additional consideration. In so stating the Tribunal has ignored and/or lost sight of the fact that it was in pursuance of the contract of sale between the respondents and M/s. Visakhapatnam Steel Plant that the licences were made available to the respondents. The Export and Import Policy had nothing to do with the arrangements/contract under which the licences flowed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld procure imported raw material against the said licence for manufacture of finished goods. However, as per para 7.7 of the EXIM Policy 1997-2002, the advance licence holder intending to source the materials from indigenous source in lieu of direct import had the option to source them against advance release orders denominated in foreign exchange/Indian rupees. In such a case, the licence was to be invalidated for direct import and permission in the form of ARO was to be issued entitling the supplier of the goods the benefits of deemed export. Para 10.2 of the EXIM Policy laid down the categories of supply which would be recorded as 'deemed exports' under the policy. The first such clause (a) was 'supply of goods against advance licence/DFRC under the duty exemption/ remission scheme. Under para 10.3, benefits for deemed exports were specified. Advance licence for intermediate supply/deemed export was specified as one of the benefits for deemed exports. 7) The advance licence holder category buyers got their licences invalidated/surrendered. Thereafter, DGFT issued licence in favour of the assessee herein permitting it to procure the goods duty free from indigenous ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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." 9) As is clear from the reading of the aforesaid provision, the duty of excise is chargeable on the excisable goods with reference to the value of such goods. Generally, the price of the goods, i.e. the price at which such goods are ordinarily sold by the assessee to a buyer is to be the value of the goods. This value is called the 'transaction value'. The Central Government has also framed the Rules which, inter alia, lay down the provisions for determination of value. Rule 6 thereof, with which we are specifically concerned, reads as under: "RULE 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee'. The implication of this Rule is that any form of additional consideration which flows from the buyer to the assessee, monitory value thereof is to be included while arriving at the transaction value. It is not necessary that such an additional consideration is to flow directly and even indirect consideration is includible. It is in this context we have to examine as to whether the consideration in the form of drawback, which accrued in favour of the assessee, could be connected with the buyer. To put it otherwise, though the immediate source of the duty drawback is the Government, whether its flow can be traced back to the buyer? If it is so, it ay become a case of indirect consideration coming from the buyer and can be added to the transaction value. 11) In the case of IFGL Note 2 above, this Court has given the answer in the affirmative to the aforesaid issue. It is also conceded by the learned counsel appearing for the assessee that the said judgment was rendered on almost identical fact situation. That is why the endeavour of Mr. Lakshmikumaran is to impress upon us to take a different view. He sought to discredit the opinion of the Court in the said cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is because of the benefit availed by the assessee under this Notification that it is able to effect supply of polyester staple fiber on discounted price to an ultimate exporter holding advance licence. Therefore, the additional discount offered to a customer, who is the exporter, is never an additional consideration. 14) The aforesaid argument of the learned counsel for the assessee may appear to be impressive, when taken in isolation i.e. without having regard to all the attending facts. However, when the argument is tested keeping in view the entirety of the circumstances, as already taken note of above, the hollowness of this argument stands exposed, inasmuch as, this argument glosses over the fundamental fact that the assessee had been able to get the benefit of Notification No. 31/1997-CUS based on licence issued by DGFT in its favour and the raison d'etre for issuance of said licence by the DGFT to the assessee was invalidation of the advance licence by the buyers. Therefore, the source or gangotri from where the benefit has ultimately reached the assessee is the advance licences which were held by the buyers and their act of invalidation made it possible to flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t moved from the plaintiff. Consideration and motive are not opposites; the former concept is a subdivision of the latter. The consideration for a promise is (unless the consideration is nominal or invented) always a motive for promising; but a motive for making a promise is not necessarily consideration for it in law. Thus the testator's desire in Thomas v. Thomas was a motive for the executors' promise but not part of the consideration for it. The widow's promise to pay and repair was another motive for the executors' promise and did constitute the consideration for that promise." 16) From this very judgment, Chitty also explains the distinction between consideration and condition. According to him, the plaintiff's remaining a widow was not part of the consideration but a condition of her entitlement to enforce the executor's promise. This case is contrasted with another judgment in Re Soames (1897) 13 TLR 439. The discussion in this behalf reads as under: "On the other hand, in Re Soames A promised GBP3,000 to B if B would set up a school in the running of which A was to have an active part. It was held that, by establishing the school, B had provided c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged that the assessee and the buyers had mutuality of interest in the business of each other and there was a flow back and the price was not the sole consideration for sale in these cases in accordance with the provisions of Section 4(1)(a) of the Act. (b) Therefore, they were related persons in terms of provisions of the erstwhile Section 4(4)(c), presently Section 4(3)(b)(iv) of the Act. (c) It is observed that para 7.7 of the EXIM Policy on Advance Release Order speaks of mutuality of interest as the assessee had procured duty free imported raw materials against invalidation of advance licence of the consignees and in turn it sold the finished goods to the said consignees at lower prices as compared to other normal buyers. Thus, the price was not the only consideration. (d) Once the advance licence is invalidated, the said clearance to the buyers who were earlier holding the said licences need not be treated as deemed export and rightly the assessee had cleared the said goods to such buyers on payment of excise duty, but at lower value than the clearance made to the normal buyers. Thus, the assessee appeared to have derived double benefits in these transactions, i.e. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral excise. The Court held that this subsidy was not received from the buyer either directly or indirectly and, therefore, could not be included in the price of goods qua purpose of excise. On the facts of that case, the Court found that the respondent in the said case had entered into contract with Oil & Natural Gas Corporation Limited (ONGC) for manufacture and supply of jack-up rigs. For such a contract, as per the policy of the Government, 20% subsidy was to be received from the Government and 10% from ONGC. As far as 10% subsidy received from ONGC is concerned, the same was also to be includible in the transaction value as additional consideration flowing from the buyer. However, 20% subsidy from the Government was under the Government's own scheme with no role of ONGC (buyer in the said case). Obviously, it could not be said that this subsidy had any flow from the ONGC either directly or indirectly. The said judgment, therefore, has no bearing on the present matter. 23) In view of the foregoing, we are of the considered opinion that this case is squarely covered by the judgment of this Court in IFGL's Note 2 above case. We, thus, allow this appeal, set aside the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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