# COMMISSIONER OF CENTRAL EXCISE, BHUBAN.SSHWAR-11 v. MIS IFGT REFRACTORIES LTD

- **Citation:** [2005] Supp. 2 S.C.R. 480
- **Court:** Supreme Court of India
- **Decided:** 2005-08-09
- **Bench:** S.N. V Aria Va, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-bhuban-sshwar-11-v-mis-ifgt-refractories-ltd-20939
- **Pages:** 7

## Headnote

Central Excise Act, 1944/Export and Import Policy, 1992; Duty
Exemption Scheme :
Valuation-Refractories-Contract of sale between assessee-vendor
and vendee-Vendee surrendering Advance Licence for import in terms of
the contract-In lieu thereof the assessee availing benefit under
Duty Exemption Scheme---Revenue holding it is additional consideration
forming part of the purpose of levy of excise duty-Reversed by
the Tribunal-On appeal, Held : Price includes money value of
additional consideration flowing either directly or indirectly from buyer to
seller in a contract of sale of goods-Assessee did not have any advance
licence of their own for availing benefit under the Scheme-Assessee received
the benefit under the Scheme only due to surrender of the Import Licence
by the vendee-The benefit so received by the assessee could be termed as
E
additional consideration-Since there was a direct flow of additional
consideration from buyer to seller-the assessee, tribunal was wrong in
reversing the order of the Revenue-Since Tribunal did not consider the
aspect of limitation, the matter is remitted to Tribunal to decide only on the
issue of extended period of limitation-Sale of Goods Act.
F
G
Respondent-man!-'facturer of refractories entered into contract with
Mis. Vishakapatnam Steel Plan!-vendee for selling its product at certain
1
price. Jn lieu of the contract, vendee surrendered the Advance Licence
to enable the assessee to avail of benefit under the Duty Exemption
Scheme in terms of the Export and Import Policy, 1992. Revenue claimed
that the benefit accrued to the assessee was an additional consideration
towards the value of the goods and formed part of the price for the
purpose of excise duty. The Tribunal allowed the appeal of the assessees.
Hence the present appeal.
H
Disposing of the appeal, the Court
480
COMMR. OF C.E. v. lFGT REFRACTORIES LTD.
481
HELD : I. I. The Rules provided that "price" would be actual price
A
paid by the buyer plus the money value of additional consideration
flowing directly or indirectly from the buyer to the seller in connection
with the sale of goods. Such a provision has now been incorporated in
Section 4 of the Central Excise Act itself. Thus, if any additional
consideration is received from the buyer in connection with the sale of
goods, then the additional consideration forms part of the price for
purposes of excise duty. [483-G-H; 484-A-B]
B
1.2. It is only because of the Contract of Sale that the Vendee
surrendered their Advance Licences to enable assessee to get Advance
Intermediate Licences for purposes of meeting their obligations under the
C
contract. That the assessee have received an additional consideration/
benefit is clear from the letters written by the Respondents to the vendee
in pursuance of the tender floated. Had this additional benefit not flown
to the Respondents, they would have sold the items as per their earlier
offer. As the additional consideration was to flow to them, they have sold
at the rates offered subsequently. The "additional consideration" is the
difference in prices between these two. The Commissioner had thus
correctly worked out this difference. [484-B-C; 485-G-HJ
1.3. It is only because of the Advance Licences being surrendered
by the vendee and in lueu thereof Advance Intermediate Licences having
been made available to the assessee that the assessee could offer lower
prices to vendee. This resulted in additional consideration by way of
"Advance Intermediate Licence" flowing from the vendee to the assessee.
The value received therefrom is includable in the price. [485-A-C]
1.4. 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 had ignored and/or lost sight of the fact that it was
in pursuance of the contract of sale that the Licences were made available
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to the assessee. The Export and Import Policy had nothing to do with the
arrangement/contract under

## Text

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COMMISSIONER OF CENTRAL EXCISE, BHUBAN.SSHWAR-11
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v.
MIS IFGT REFRACTORIES LTD.
AUGUST 9, 2005
[S.N. V ARIA VA AND DR. AR. LAKSHMANAN, JJ.)
Central Excise Act, 1944/Export and Import Policy, 1992; Duty
Exemption Scheme :
Valuation-Refractories-Contract of sale between assessee-vendor
and vendee-Vendee surrendering Advance Licence for import in terms of
the contract-In lieu thereof the assessee availing benefit under
Duty Exemption Scheme---Revenue holding it is additional consideration
forming part of the purpose of levy of excise duty-Reversed by
the Tribunal-On appeal, Held : Price includes money value of
additional consideration flowing either directly or indirectly from buyer to
seller in a contract of sale of goods-Assessee did not have any advance
licence of their own for availing benefit under the Scheme-Assessee received
the benefit under the Scheme only due to surrender of the Import Licence
by the vendee-The benefit so received by the assessee could be termed as
E
additional consideration-Since there was a direct flow of additional
consideration from buyer to seller-the assessee, tribunal was wrong in
reversing the order of the Revenue-Since Tribunal did not consider the
aspect of limitation, the matter is remitted to Tribunal to decide only on the
issue of extended period of limitation-Sale of Goods Act.
F
G
Respondent-man!-'facturer of refractories entered into contract with
Mis. Vishakapatnam Steel Plan!-vendee for selling its product at certain
1
price. Jn lieu of the contract, vendee surrendered the Advance Licence
to enable the assessee to avail of benefit under the Duty Exemption
Scheme in terms of the Export and Import Policy, 1992. Revenue claimed
that the benefit accrued to the assessee was an additional consideration
towards the value of the goods and formed part of the price for the
purpose of excise duty. The Tribunal allowed the appeal of the assessees.
Hence the present appeal.
H
Disposing of the appeal, the Court
480
COMMR. OF C.E. v. lFGT REFRACTORIES LTD.
481
HELD : I. I. The Rules provided that "price" would be actual price
A
paid by the buyer plus the money value of additional consideration
flowing directly or indirectly from the buyer to the seller in connection
with the sale of goods. Such a provision has now been incorporated in
Section 4 of the Central Excise Act itself. Thus, if any additional
consideration is received from the buyer in connection with the sale of
goods, then the additional consideration forms part of the price for
purposes of excise duty. [483-G-H; 484-A-B]
B
1.2. It is only because of the Contract of Sale that the Vendee
surrendered their Advance Licences to enable assessee to get Advance
Intermediate Licences for purposes of meeting their obligations under the
C
contract. That the assessee have received an additional consideration/
benefit is clear from the letters written by the Respondents to the vendee
in pursuance of the tender floated. Had this additional benefit not flown
to the Respondents, they would have sold the items as per their earlier
offer. As the additional consideration was to flow to them, they have sold
at the rates offered subsequently. The "additional consideration" is the
difference in prices between these two. The Commissioner had thus
correctly worked out this difference. [484-B-C; 485-G-HJ
1.3. It is only because of the Advance Licences being surrendered
by the vendee and in lueu thereof Advance Intermediate Licences having
been made available to the assessee that the assessee could offer lower
prices to vendee. This resulted in additional consideration by way of
"Advance Intermediate Licence" flowing from the vendee to the assessee.
The value received therefrom is includable in the price. [485-A-C]
1.4. 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 had ignored and/or lost sight of the fact that it was
in pursuance of the contract of sale that the Licences were made available
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to the assessee. The Export and Import Policy had nothing to do with the
arrangement/contract under which the Licences flowed from the buyer G
to the seller. [485-A-C]
2. Since the Tribunal has not considered the limitation aspect in view
of the fact that it has allowed the appeal on merits, the matter is remitted
back to the Tribunal. The Tribunal is directed to only consider whether H
482
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
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or not the extended period of limitation was available to the Revenue.
1486-A-B)
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4472 of200 I.
From the Judgment and Order dated 29.7.2000 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal E.Z.B., Calcutta in F.O. No.
A-1138/CAL/2000 in A. No. EN/74/1998.
Harish Chander, A. Subba Rao, A. T. Rao and P. Parameshwaran for the
Appellant.
S.K. Bagaria, Pratik Jalan, A.T. Patra and Nipun Malhotra for M/s. O.P.
Khaitan & Co. for the Respondent.
The Judgment of the Court was delivered by
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S.N. V ARIA VA, J. : This Appeal is against the Judgment dated 28th
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July 2000 passed by the Customs, Excise and Gold (Control) Appellate
Tribunal (CEGA T).
Briefly stated the facts are as follows:
The Respondents manufacture, amongst other things, refractories.
They sold refractories to one Mis Visakhapatnam Steel Plant under a contract
entered into in 1992 at a particular price. They thereafter entered into four
contracts dated 9th September 1993, 11th July 1994, 24th February 1995 and
16th June 1995 to supply refractories to ti<e said M/s Visakhapatnam Steel
Plant. For the supply of refractories under these four contracts the Respondents
availed of the "Duty Exemption Scheme" contained in Chapter VII of the
Export and Import Policy, 1992. It must be mentioned that in order to enable
the Respondents to avail of the Duty Exemption Scheme Mis Visakhapatnam
Steel Plant surrendered the Advance Licences they held for import of
refractories. Against such surrender the Respondents were issued Advance
Intermediate Licences for import of inputs. The Respondents 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 Respondents
under the Advance Intermediate Licence, issued to them as a result of
surrender of licence by M/s Visakhapatnam Steel Plant, was "additional
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COMMR. OF C.E. v. IFGT REFRACTORIES LTD. [VARIA VA, J.] 483
consideration" towards the value of the goods and that this "additional
A
consideration" fonned part of the price for purposes of excise duty.
The Tribunal has allowed the Appeal of the Respondents by inter alia
holding as follows:-
" ...... In the instant case the appellant have availed the benefit from
the customs duty under the advanced intennediate licences issued
to them by the statutory authorities in accordance with the relevant
provisions of the import policy. Such benefits are under the duty
exemption scheme and have to be treated as statutory benefits
allowed by the statutory authorities. The same can never be placed
upon the platfonn of 'additional consideration' flowing to the
manufacturer from the buyer, directly or indirectly. It has so
happened that because of the benefit of the customs duty in tenns
of the said advanced licences, the appellants have been able to
import the inputs without corresponding payment of customs duty
which has resulted in lower cost of their final product. Ao the
appellants could afford to sell their goods at a lower price they have
offered the same to VSP, which was accepted by them and the
contracts finalized. In these circumstances it cannot be said that any
additional consideration has flown from VSP to the appellant, which
is a condition essential for discarding the contract price between the
buyer and the seller."
Before the Tribunal there was also a controversy regarding the granting
of deductions on account of central excise duty and central sales tax. There
also the Tribunal has held in favour of the Respondents. Before us the
Appellants have not made any submissions on those points.
Thus, the only question for consideration is whether the benefit gained
by the Respondents by reason of Mis Visakhapatnam Steel Plant surrendering
its licences and on such surrender the Respondents being issued licences, is
additional consideration for the contract.
It is an admitted position that, at the relevant time, the Rules provided
that "price" would be actual price paid by the buyer plus the money value
of additional consideration flowing directly or indirectly from the buyer to
the seller in connection with the sale of goods. Such a provision has now been
incorporated in Section 4 itself.
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A
B
484
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
Thus, if any additional consideration is received from the buyer in
connection with the sale of goods, then that additional consideration forms
part of the price for purposes of excisl! duty. Undoubtedly, the Government
had a "Duty Exemption Scheme". But the Respondents did not have any
Advance Intermediate Lict>nces of their own under the Scheme. If they had
had their own Licences, the reasoning of the Tribunal may have been correct.
It is only becaus~ of the Contract ofSale that M/s Visakhapatnam Steel Plant
surrendered their Advance Licences to enable Respondents to get Advance
Intermediate Licerices for purposes of meeting their obligations under the
contract. That the Respondents have received an additional consideration is
clear from the letters written by the Respondents to Mis Visakhapatnam Steel
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Plant in pursuance of the tender floated. The Respondents first offered; by
their letter dated 9th September, 1992 to sell at the following prices:
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Monoblock Stopper
Submerged Nozzle
Tundish Nozzle
Jointing and Sealing Compound
@ Rs. 5,650 each
@ Rs. 4,060 each
@ Rs. 3,080 each
@ Rs. 56,000 per MT
Thereafter, by a letter dated 2nd March 1993 the Respondents made a
revised proposal wherein it is, inter alia, stated as follows:-
"As per the Export & Import P0licy for 1992-97 under Chapter 10,
you can procure the goods against your Advance Licence from
domestic suppliers. If you utilize your Advance Licence for this
purpose, no Excise Duty and Sales Ta;.: will be charged to you. For
the domestic company the sales against your Advance Licence will
be treated as 'Deemed Export'.
Keeping this in mind, we now propose that instead of selling
Advance Licence to us you place your order on us against your
Advance Licence for which applicable rates will be as follows."
Monoblock Stopper
Submerged Entry Nozzle
Tundish Nozzle
Jointing and Sealing
Compound
@ Rs.3,085 per pc.
@ Rs.2,048 per pc.
@ Rs.1,264 per pc.
Free of cos: (for proportionate
quantity against order for item
Nos.I, 2 and 3 placed on us)"
.>
COMMR. OF C.E. v. IFGT REFRACTORIES LTD. lVARIAVA, J.]485
Ultimately it was agreed that Mis. Vishakapatnam will surrender its
Advance Licences and in lieu thereof the Respondents get the Advance
Intermediate Licences. Thus, without the Advance Licences of M/s
Visakhapatnam Steel Plant, being made available to the Respondents, the
prices would have been as were quoted earlier. It is only because of the
Advance Licences being surrendered by Mis 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 Mis Visakhapatnam Steel Plant to the Respondents.
· The value received therefrom is includable 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 Respondents and Mis Visakhapatnam Steel Plant that the Licences
were made available to Respondents. The Export and Import Policy had
nothing to do with the arrangement/contract under which the Licences flowed
from the buyer to the seller. At the costs of repetition it must be mentioned
that had the Respondents had Advance Intermediate Licence on their own
i.e. without M/s. Vishakapatnama Steel Plant having to surrender its Licences
for the purposes of the contract, then the reasoning of the Tribunal may have
been correct. But here, in pursuance of the Contract of Sale, there is directly
a flow of additional consideration from the buyer to seller. The value thereof
has to be added to the price. We are thus unable to accept the broad
submission that where parties take advantage of policies of the Government
and the benefits flowing therefrom, then such benefit cannot be said to be
an "additional consideration".
The question then arises as to how the "additional consideration" is to
be computed. In this case. the benefit accrued to the Respondents is clearly
ascertainable by virtue of the two letters of the Respondents. Had this
additional benefit not flown to the Respondents, they would have sold the
items as per their offer dated 9th September 1992. As the additional
consideration was to flow to them, they have sold at the rates mentioned in
the letter of 2nd March 1993. The "additional consideration" is the difference
in prices between these two. The Commissioner had thus correctly worked
out this difference.
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486
SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
It may also be mentioned that the Respondents had also taken up a
contention of limitation. The Tribunal has not considered this aspect in view
of the fact that it has allowed the Appeal on merits. We were requested that
the matter be sent back to the Tribunal so that the Tribunal can consider the
question of limitation. We are agreeable to that. We, therefore, remit the
matter back to the Tribunal. The Tribunal is, therefore, directed to only
consider whether or not the extended period of limitation was available to
the Department.
With these directions, the Appeal stands disposed of with no order as
to costs.
S.K.S.
Appeal disposed of.