Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 1834 of 2006, Judgment Date: Aug 21, 2015

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  1834 OF 2006


COMMISSIONER OF CENTRAL EXCISE,                                         
NAGPUR-I                                                   .....APPELLANT(S)            

                                 VERSUS                                                              

M/S. INDORAMA SYNTHETICS (I) LTD.                         .....RESPONDENT(S)           



                               J U D G M E N T


A.K. SIKRI, J.
                 The respondent (hereinafter referred to as the  'assessee')
is engaged in the manufacture of polyester chips,  polyester  staple  fibre,
polyester filament yarn and other goods.  It had been clearing the  same  on
payment of central excise duty.  The period involved in this appeal is 1999-
2002.  During this period, the goods that were cleared as  'deemed  exports'
to advance licence holders were  at  a  price  lower  than  what  was  being
charged to the other buyers who did not hold an  advance  licence.   As  per
the Commissioner of Central Excise, Nagpur-I  (hereinafter  referred  to  as
the 'Revenue'), it found that the  reason  for  selling  the  goods  to  the
aforesaid particular class  of  buyers  at  a  lesser  price  was  that  the
assessee  had  received  'additional  consideration'  and,  therefore,   its
inclusion was  necessitated  having  regard  to  the  formula  provided  for
arriving at the 'transaction value' contained in the statutory scheme.

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  examining  the  matter,  the
Commissioner took the  view  that  price  was  not  the  sole  consideration
flowing from the buyer to the assessee.  Not  only  such  buyers,  who  were
sold the goods at a lower price, were  'related  persons',  even  the  goods
were sold at depressed price.  Therefore,  the  Commissioner  confirmed  the
demand of differential duty as mentioned in the show cause notices and  also
levied penalties and interest.  The assessee challenged  the  order  of  the
Commissioner by filing  appeal  before  the  Custom  Excise  &  Service  Tax
Appellate  Tribunal  (for  short,  the  'Tribunal')  taking  the  plea  that
'additional consideration' under Section 4 of the Act  refers  only  to  the
additional consideration flowing from the buyer to the assessee and  in  the
present case no such additional consideration flew from the advance  licence
buyers  of  the  'deemed  exports'.   The  Tribunal,  in  arriving  at  this
conclusion, relied upon its own decision in the case  of  IFGL  Refractories
Ltd. v. Commissioner of Central Excise,  Bhubaneswar-II[1]  wherein  it  was
held that statutory benefits allowed  by  statutory  authorities  cannot  be
considered as additional consideration flowing to a  manufacturer  from  the
buyer.  In the opinion of the Tribunal, the drawback was received  from  the
Government and not from the buyers and, therefore, such drawback  could  not
be treated as additional  consideration  for  the  purpose  of  arriving  at
'transaction value' as per the definition thereof under  Section  4  of  the
Act.

Pertinently, the decision of the Tribunal in IFGL's  case  stands  overruled
by this Court in Commissioner of Central Excise, Bhubaneswar –  II  v.  IFGL
Refractories Ltd.[2]   In  the  said  case,  this  Court  has  held  such  a
consideration, namely, duty drawback, to be the  'additional  consideration'
inasmuch as the benefit of duty drawback accruing  to  the  seller  was  the
result of surrender of advance licence by the buyers.   The  discussion  and
the rationale which goes into forming the aforesaid opinion is contained  in
para 9 of the judgment, which reads as under:
“9.  Ultimately it was agreed that M/s.  Visakhapatnam  will  surrender  its
advance licences and in lieu thereof the respondents will  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 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  buyer  to  the  seller.   At  the  cost  of
repetition it must  be  mentioned  that  had  the  respondents  had  advance
intermediate licence on their own  i.e.  without  M/s.  Visakhapatnam  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 the 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”.

In a matter  like  this,  this  Court  could  simply  follow  the  aforesaid
judgment and set aside the order of  the  Tribunal,  allowing  this  appeal.
However, Mr. V. Lakshmikumaran, learned counsel appearing for the  assessee,
made a fervent and passionate plea  that  the  aforesaid  judgment  of  this
Court in IFGL's[3] case  needs  re-consideration.   He,  thus,  pleaded  for
referring the matter to a larger Bench.  Detailed and elaborate  submissions
were made in this direction  which  were  stoutly  refuted  by  the  learned
counsel for the Revenue.  We may  immediately  record  that  the  assessee's
counsel has not succeeded in persuading us to refer the matter to  a  larger
Bench.  Hereinafter, we record our reasons for taking this view.   For  this
purpose, we may first state at this  stage  the  mechanism  that  goes  into
getting the benefit of duty drawback in the kitty of the assessee.

As mentioned above, the assessee had been selling polyester staple fiber  to
two classes of domestic buyers, in addition to exporting  the  same  in  the
international market.  One of the category of  domestic  buyers  were  those
who were having advance licence and the  other  category  without  any  such
licence.  The assessee had issued two different price lists.   Those  buyers
who had advance licence but agreed  to  surrender  the  said  licence,  were
offered price of ?37.50 per kg.  Other category, with no such licence,  were
sold the goods at ?50 per  kg.   As  per  the  assessee,  it  was  exporting
polyester staple fiber during the relevant period at  an  average  price  of
?36 per kg against its own advance licence for exports.

Advance licence is issued under the EXIM Policy.  The holder of the  advance
licence could 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.

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 manufacturers and on the supply of this material to such  buyers,
treating the same as 'deemed exports', thereby earning the benefits of  duty
drawback.  Para 7.11 of the EXIM Policy  facilitated  this  process  and  it
reads as under:
“7.11   Advance Licence for Intermediate Supplies  –   The  Advance  Licence
for intermediate supply shall  be  considered  by  the  licensing  authority
concerned.  The Advance Licence for  intermediate  supply  shall  be  issued
after making the licence invalid for direct import of items to  be  supplied
by the intermediate manufacture.  In such cases, a copy of the  invalidation
letter will be given to the licence holder and copy thereof will be sent  to
the intermediate  supplier  as  well  as  the  licensing  authority  of  the
intermediate  supplier  as  well  as  the   licensing   authority   of   the
intermediate supplier.  The licencee in such case has an  option  either  to
supply the intermediate product to holder of Advance  Licence  for  physical
exports/deemed exports or to export directly.”

The aforesaid narratives would demonstrate that the assessee could  get  the
duty drawback and it could happen when advance licence  holder  category  of
buyers got their  advance  licences  invalidated  thereby  surrendering  the
benefits accrued under such advance licence.  Issue for consideration is  as
to whether it would constitute 'additional consideration'  received  by  the
assessee as per the definition of 'transaction value' contained  in  Section
4 of the Act read with Rule 6 of the Rules.  We, therefore, shall  reproduce
the relevant portion of the provisions of Section 4  which  existed  at  the
material time, which read as under:
“4.  Valuation of excisable goods  for  purposes  of  charging  of  duty  of
excise. –  (1) Where under this Act, the duty of  excise  is  chargeable  on
any excisable goods with reference to their value, then, on each removal  of
the goods, such value shall –

(a)  in a case where the goods are sold by the  assessee,  for  delivery  at
the time and place of the removal, the assessee and the buyer of  the  goods
are not related and the price is the sole consideration  for  the  sale,  be
the transaction value.

                          xx          xx         xx

(d) “transaction value” means the price actually paid  or  payable  for  the
goods, when sold, and includes in addition to the amount charged  as  price,
any amount that the buyer is  liable  to  pay  to,  or  on  behalf  of,  the
assessee, by reason of, or in 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.”


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 sole  consideration  for  sale,  the
value of such goods shall be deemed to be the aggregate of such  transaction
value and the amount of money value of any additional consideration  flowing
directly or indirectly from the buyer to the assessee.

Explanation. - For removal of  doubts,  it  is  hereby  clarified  that  the
value, apportioned as appropriate, of  the  following  goods  and  services,
whether supplied directly or indirectly by the buyer free of  charge  or  at
reduced cost for use in connection with the  production  and  sale  of  such
goods, to the extent that such value has not  been  included  in  the  price
actually paid or payable, shall be treated to be the amount of  money  value
of additional consideration flowing directly or indirectly  from  the  buyer
to the  assessee  in  relation  to  sale  of  the  goods  being  valued  and
aggregated accordingly, namely:

(i)  value of materials, components, parts and similar  items  relatable  to
such goods;

(ii)  value of tools, dies, moulds, drawings, blue  prints,  technical  maps
and charts and similar items used in the production of such goods;

(iii)  value of material consumed, including  packaging  materials,  in  the
production of such goods;

(iv)  value of engineering, development, art work,  design  work  and  plans
and sketches undertaken elsewhere than in  the  factory  of  production  and
necessary for the production of such goods.”


Even when these goods are sold  by  the  assessee  at  different  prices  to
different classes of buyers (not being related persons), each such price  is
to be deemed to be the normal price of such goods in relation to each  class
of buyers.  However, as per the definition of 'transaction value'  contained
in this very section, i.e. Section 4(3)(d), certain charges can be added  to
the  price  at  which  the  goods   are   actually   sold,   under   certain
circumstances.  These include the provision for  advertising  or  publicity,
marketing and selling  organization  expenses,  storage,  outward  handling,
servicing, warranty commission  etc.   In  the  present  case,  we  are  not
concerned with this aspect.  However, Rule 6 of the Rules specifies that  if
the goods are sold in the circumstances specified  in  clause  (a)  of  sub-
section (1) of Section 4, then the value of such goods shall  be  deemed  to
be the aggregate of such transaction value plus the 'amount of  money  value
of any additional consideration flowing  directly  or  indirectly  from  the
buyer 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.

In the case of IFGL[4], 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 case by arguing that  the  advance  licence
for intermediate supply was granted by the DGFT to the  assessee  under  the
EXIM Policy and it had nothing to do with the buyer.  He  conceded  that  it
could happen only after buyers got their advance licences invalidated.   But
his explanation was that it was not necessary that such a licence  could  be
issued to the assessee merely because the advance licence in favour  of  the
buyer was invalidated.  He emphasized that DGFT could still refuse to  issue
the advance licence for intermediate supply to the assessee.

This argument does not convince us at all.  Fact remains that  the  issuance
of advance licence for intermediate supply to the assessee  was  facilitated
as a result of surrender of advance licence in favour or the  buyer  by  the
buyer.  Thus, getting the licence invalidated for direct import of items  in
favour of the buyer was the  trigger  point  for  issuance  of  the  advance
licence for intermediate supply in favour of the assessee.   Possibility  of
refusal on the part of DGFT to issue licence in favour of  the  assessee  is
only in the realm of conjecture.  Fact is that the assessee got the  licence
and it became possible only on account of  sacrifice  made  by  the  buyers.
Further, what is important is that the buyers  got  their  advance  licences
for direct import in their favour  invalidated  with  the  sole  purpose  of
purchasing the polyester staple fiber from the  assessee  at  lesser  price,
i.e. ?37.50 per kg.  Therefore, the argument of the  assessee  that  benefit
in the form of imports without payment of duty flows to  the  assessee  only
pursuant to and based on licence issued by DGFT to  the  assessee  and  does
not flow from the invalidation letter received by the customer from DGFT  is
too ingenuous an argument to be accepted.

Another argument which was advanced by the learned counsel for the  assessee
was that discounted  price  is  charged  from  the  advance  licence  holder
category of buyers by the assessee because of  saving  in  customs  duty  on
inputs due to statutory notification with consequent reduction  in  cost  of
production and, therefore, it is not a consideration flowing from  a  buyer.
In this  behalf,  the  submission  was  that  the  customs  duty,  otherwise
leviable on the inputs  going  into  the  manufacture  of  polyester  staple
fiber, is exempted by the  statutory  notification  issued  by  the  Central
Government, being Notification No. 31/1997-CUS, 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.

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 down the  benefit  so
as to reach the stream of the assessee.

Yet another argument  which  was  raised  by  Mr.  Lakshmikumaran  was  that
carving out this category of buyers, namely, those who are/were the  holders
of advance licence, to be eligible for purchase at a  discounted  price  was
only a 'condition for  sale  of  goods'  put  forth  by  the  assessee.   He
submitted that 'it was not a consideration for sale of  goods'.   He,  thus,
drew distinction between condition for sale and consideration  for  sale  of
goods and in support of this  submission  referred  to  the  celebrated  and
classic judgment of the English Court in Thomas v. Thomas[5]. This  judgment
has been analysed by Chitty on Contracts (31st Edition – Volume I)  and  Mr.
Lakshmikumaran made the said analysis as part of his submission.   That  was
a case where a testator, shortly before his death, expressed a  desire  that
his widow should, during her life, have the house  in  which  he  lived,  or
£100.  After his death, his executors  'in  consideration  of  such  desire'
promised to convey the house to the widow during her life or for so long  as
she should continue a  window,  'provided  nevertheless  and  it  is  hereby
further agreed' that she should pay £1 per annum towards  the  ground  rent,
and keep the house in repair.  In an action by the widow for breach of  this
promise, the consideration for it was stated to be the  widow's  promise  to
pay and repair.  An objection that the declaration omitted to state part  of
the consideration, viz. the testator's desire, was rejected.   Patteson,  J.
said: 'Motive is not  the  same  thing  with  consideration.   Consideration
means something which is of value in the eye of  the  law  moving  from  the
plaintiff'.  Commenting upon the aforesaid remarks, Chitty observes:
“This remark should not be misunderstood:  a  common  motive  for  making  a
promise  is  the  desire  to  obtain  the  consideration;  and  an  act   or
forbearance on the part of the promisee may (unless the  court  is  prepared
to “invent” a consideration)  fail  to  constitute  consideration  precisely
because it was not the promisor's motive to secure  it.   What  Patteson  J.
meant was that a motive  for  promising  did  not  amount  to  consideration
unless two further requirements were satisfied,  viz:  (i)  that  the  thing
secured in exchange for the promise was “of some value in  the  eye  of  the
law”; and (ii) that it 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.”

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[6]. The discussion in this behalf reads as under:
“On the other hand, in Re Soames A promised £3,000 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  consideration  for  A's
promise.  It seems that the distinction between consideration and  condition
depends, in such cases, on whether “a reasonable  man  would  or  would  not
understand that the performance of the condition was requested as the  price
or exchange for the promise.”  In Thomas v. Thomas  the  executors  had  not
requested the plaintiff to remain a widow; while in Re Soames a  request  by
A that B should establish the school could be inferred  from  A's  expressed
intention to participate in its management.   This  distinction  is  further
illustrated by Carlill  v.  Carbolic  Smoke  Ball  Co.  where  the  claimant
provided consideration for the defendants' promise by using the  smoke-ball;
but her catching influenza was a condition of  her  entitlement  to  enforce
that promise.”


We are afraid, such a distinction between consideration  and  condition,  as
sought to be drawn by the learned counsel for the assessee, would not  apply
to the instant case.  It was possible if the transaction between the  buyers
and the assessee was seen in isolation. However, in  the  present  case,  it
needs to be emphasized at the cost of repetition that the  resultant  effect
of invalidating the advance licence by the buyer  was  issuance  of  licence
for intermediate supply in favour of  the  assessee  and  the  said  licence
enured certain benefits in favour of the assessee.  In the present case,  on
these facts, we  have  to  simply  see  as  to  whether  the  definition  of
'transaction value', as contained in Section 4 of the Act read with  Rule  6
of the Rules, would  encompass  this  benefit  as  amounting  to  additional
consideration.  Our conclusion is that it would come  within  the  ambit  of
additional  consideration  indirectly  flowing  from  the  buyers   to   the
assessee.  Therefore, the instant case is more akin to the  decision  in  Re
Soames[7].

At this stage, we would like to recall the following findings arrived at  by
the Commissioner, which are not  upset  by  the  Tribunal  in  the  impugned
decision or even disputed by the assessee:

(a)  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.   It   is,
therefore, 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) enhanced sale and paid  less
duty on lower value; and (ii) imported duty free raw materials.

(e)  In this case, the right to procure duty free imported raw  material  is
being transferred to supplier by the buyer.  This indicates  the  flow  back
of additional considerations from  the  buyer  of  the  said  goods  to  the
seller, which is the assessee.

On the facts of this case, we are of the opinion that the  Commissioner  has
rightly come to the conclusion with  regard  to  the  fact  that  additional
monetary consideration, in addition to the price being paid for  the  goods,
i.e. transfer of advance import licence in  favour  of  the  seller  by  the
buyer enabling the seller of the goods to effect duty  free  import  of  the
raw materials and bringing down the cost  of  production/procurement,  is  a
consideration, the monetary value of which has to be  considered  under  the
provisions of the Rules, i.e. Rule 6 thereof.

Thus, we do not see any reason to deviate  from  the  decision  rendered  by
this Court in IFGL's[8] case.

Before we part with, one more aspect to which our  attention  was  drawn  by
Mr. Lakshmikumaran needs to be addressed.  Referring to another judgment  of
this Court in Commissioner of Central  Excise,  Bangalore  v.  Mazagon  Dock
Ltd.[9], a vain attempt was made to show that this judgment was contrary  to
the decision rendered by this Court in IFGL's[10] case. We do  not  find  it
to be so. Interestingly,  the  Hon'ble  Judges  {S.N.  Variava  and  Dr.  AR
Lakshmanan, JJ.} who comprised the Bench that decided IFGL's case  were  the
same who rendered  the  judgment  in  Mazagon  Dock  Ltd.'s  case.   Another
pertinent factor which is to be taken note of  is  that  the  two  decisions
were rendered within a short gap of a fortnight.  The  decision  in  Mazagon
Dock Ltd. was rendered on July 28, 2005 whereas IFGL's case was  decided  on
August 09, 2005.  Thus, at the  time  of  pronouncing  of  the  judgment  in
IFGL's case, the same  very  Bench  was  conscious  of  its  judgment  given
immediately before in Mazagon Dock Ltd.

A reading of the judgment in Mazagon Dock Ltd.'s case would reveal  that  in
the said case subsidy of 20% was received by the assessee therein  from  the
Government, which was sought to be included by the  Revenue  as  'additional
consideration' to arrive  at  the  transaction  value  for  the  purpose  of
central 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.

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[11]  case.   We,
thus, allow this appeal, set aside the decision of the Tribunal and  restore
the order passed by the Commissioner.  In the  facts  and  circumstances  of
this case, there shall be no order as to costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                     (ROHINTON FALI NARIMAN)

NEW DELHI;
AUGUST 21, 2015.

-----------------------
[1]
      2001 (134) ELT 230
[2]   (2005) 6 SCC 713
[3]   Note 2 above
[4]   Note 2 above
[5]   (1842) 2 QB 851
[6]   (1897) 13 TLR 439
[7]   Note 6 above.
[8]   Note 2 above
[9]   2005 (187) ELT 3 (SC) :: 2005 (127) ECR 268 (SC)
[10]  Note 2 above
[11]  Note 2 above