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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

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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.

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 examining the matter, the Commissioner

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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-II1

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

1 2001 (134) ELT 230

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treated as additional consideration for the purpose of arriving at

'transaction value' as per the definition thereof under Section 4 of

the Act.

3) 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

2 (2005) 6 SCC 713

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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”.

4) 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's3 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 3 Note 2 above

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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.

5) 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.

6) 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

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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 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:

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“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.”

8) 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

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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.”

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  sole

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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.”

10) 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

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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

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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  IFGL4,  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.

12) This argument does not convince us at all.  Fact remains that the

issuance  of  advance  licence  for  intermediate  supply  to  the

4 Note 2 above

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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.

13) 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

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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.

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

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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.

15) 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.  Thomas5.

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

5 (1842) 2 QB 851

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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.

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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 Soames6.

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.”

17) We  are  afraid,  such  a  distinction  between  consideration  and

6 (1897) 13 TLR 439

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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

Soames7.

18) 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

7 Note 6 above.

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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

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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.

19) 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.

20) Thus,  we do not  see any reason to  deviate  from the decision

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rendered by this Court in IFGL's8 case.

21) 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's10 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.

22) 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

8 Note 2 above 9 2005 (187) ELT 3 (SC) :: 2005 (127) ECR 268 (SC) 10 Note 2 above

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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.

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's11

11 Note 2 above

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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.

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