At, Customs Excise Service Tax Appellate Tribunal Regional Bench, Allahabad
By, THE HONORABLE JUSTICE: P.V. SUBBA RAO
For Petitioner: N.V. Ramana, Advocate And For Respondents: Arun Kumar, Dy. Commissioner/DR
1. These appeals are against Order-in-Appeal No. VIZ-EXCUS-001-APP-258-17-18 dated 28.02.2018. Heard both sides and perused the records. The appellant herein are manufacturers of concrete railway sleepers under an agreement with the Indian Railways. The agreement, inter alia, provides for a price variation of the sleepers subsequent to removal of goods from the factory. In other words a certain price is fixed at the time of clearance of the railway sleepers which is subsequently varied depending upon various factors which are not known at the time of clearance. Price variation is as per formula given in the agreement. Whenever the assessee removed the goods from the factory, he paid duty as per the provisional price. After the final price is known, they in turn pay the differential duty if prices are enhanced. In the present cases, the price has actually been reduced in terms of the contract. Therefore they filed refund claims for the excess duty paid. These refund claims were rejected by the lower authorities relying on the case law of MRF Ltd : 1997 (92) ELT 309 (SC)] in which the Hon'ble Supreme Court held that "once the assessee has cleared the goods on the classification and price indicated by him at the time of removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and not on the price reduced at subsequent date and further observed that the subsequent fluctuation in the prices of the commodity have no relevance whatsoever, so far as the liability to the excess duty is concerned." This judgment of the Hon'ble Supreme Court was followed in subsequent cases also. It is pertinent to point out at this stage that the assessments in the present case are done on a self-assessment basis and no provisional assessment has been resorted to.
2. Aggrieved, the appellant preferred an appeal before Commissioner (Appeals) who upheld the Order-in-Original and rejected the appeal. This appeal is against the impugned Order-in-Appeal.
3. Learned Counsel for the appellant has produced before me copies of their agreements which clearly provide for price variation formula in clause 13.2 of the agreement. Among others, factors to be considered are indices such as whole sale price index and consumer price index which will not be known at the time of clearance of the goods. He argued that whenever there is an increase in the price they have been paying differential duty in majority of cases and the department has never objected to payment of excise duty over and above what was calculated at the time of clearance from the factory gate. These are two rare occasions where prices actually fell. Therefore, they filed an application for refund. It is his contention that they have not sought provisional assessment under pressure from the departmental officers who want assessments to be kept final. It is his further contention that all refund claims were filed within normal time limit under Sec. 11B.
4. Learned Departmental Representative on the other hand reiterated arguments made in the Order-in-Appeal and said that once the goods leave the factory gate, subsequent fluctuations of prices will not matter as far as the valuation rules are concerned as laid down by the Hon'ble Supreme Court in the case of MRF Ltd. (supra). It is his contention that there is nothing on record to show that the appellant was prevented from opting for provisional assessment by the department. If the final price is not known at the time of clearance, assessee could have sought and opted for provisional assessment.
5. Learned Counsel for the appellant relied on the case of CCE, Nagpur vs. Oriental Explosives P Ltd. [2008 (222) ELT 205 (Bom.)] in which the Hon'ble High Court of Bombay held that although assessment is not provisional, that by itself, could not dis-entitle assessee from claiming refund. He also relied on the case of PTC Industries Ltd. [2016 (340) ELT 536 (Tri.-Del.)] in which it was held that where there is price variation clause and the prices have been reduced subsequent to clearance, refund is admissible.
6. In both these cases the Hon'ble High Court of Bombay and Hon'ble CESTAT-Delhi, Principal Bench have distinguished these cases from the case of MRF Ltd. in which the Hon'ble Supreme court had held that post clearance fluctuations in prices do not alter the duty liability.
7. I have considered the arguments on both sides and perused the records. It is not in dispute that the assessment is not provisional. It is also not in dispute that there is price variation clause in the agreement. It is also not in dispute that whenever the prices have increased subsequent to clearance, assessee paid duty on differential amount. The only contention of the department is that the Hon'ble Supreme Court had held in the case of MRF Ltd. that post clearance reduction in price does not evade the duty liability. I have carefully gone through the MRF Ltd. case. This judgment was passed in a particular factual matrix. After the tyres were cleared from the factory gate, on advice from the Government, the tyre manufacturers reduced the prices of the tyres to relieve the pressure of inflation on the common man. They sought a reduction in excise duty on this account. The Hon'ble Supreme Court has held that once tax has been paid and goods are cleared from the factory gate, there is no question of varying that on basis of price variations post clearance. It is also found that this judgment was passed in the context of the valuation of goods under Section 4 of the Central Excise Act prior to 01.07.2000. During the relevant period, value was the normal price, i.e., price at which such goods were ordinarily sold in the course of whole sale trade at the time and place of clearance. There was paradigmatic shift in the valuation under Central Excise Act in 2000 when the valuation has been changed to "the value on each removal of goods shall be the price at which the goods are sold by the assessee". In other words, the concept of normal price has been replaced with the transaction price. There are no longer any price lists which are to be filed by the appellant/assessee or approved by the department. Every single invoice is a transaction by itself and has to be assessed as such. In the present case, the clearances were done as per the new section 4 of the Central Excise Act. In each of those clearances, the invoice price is known - provisional at the time of clefarance and final after the price is adjusted. The assessee could have opted for provisional assessment but he did not do so. Nevertheless once the goods' transaction price is revised upwards or downwards for each clearance, the duty has to be paid accordingly. Wherever there was an upward revision in the price, the assessee has been payi
Please Login To View The Full Judgment!
ng differential duty and when there is a revision in price, he will be entitled to refund provided it is within the time limit prescribed under Sec. 11B. If the assessee had opted for provisional assessment he could have claimed refund within one year from the finalization of provisional assessment but in this case he has claimed the refund within one year from the date of clearance of goods since the assessments were not provisional. The ratio of the cases of PTC Industries Ltd. (supra) and Oriental Explosives (supra) squarely apply to the present case. I therefore find that the assessee is entitled to refund and the Order-in-Appeal is liable to be set aside. The impugned Order-in-Appeal is set aside and the appeals are allowed with consequential relief.