Government subsidies received under a policy scheme, which do not flow directly or indirectly from the buyer to the manufacturer, cannot be treated as 'additional consideration' for the purpose of determining the assessable value of excisable goods under the Central Excise Act.

[ORDER PER: ANGAD PRASAD]

1. The present appeal has been filed by M/s GDS Chemicals & Fertilizers (P) Ltd., (hereinafter referred to as appellant) against impugned Order-in- Appeal No. VIZ-EXCUS-002-APP-117-16-17 dated 28.02.2017, whereby, the Learned Commissioner (Appeals), upheld the Order-in-Original dated 20.05.2014 confirming Central Excise Duty amounting to Rs. 4,39,213/-, along with applicable interest and penalty of Rs. 1,00,000/-, for the period from April, 2013 to December, 2013.

2. The brief facts of the case are that the appellant is engaged in the manufacture of fertilizers, namely Single Super Phosphate, and was discharging Central Excise Duty on the goods manufactured and cleared by it. The appellant was also receiving subsidy from the Government of India under the Nutrient Based Subsidy Policy (NBS) administrated by ministry of Chemicals and Fertilizers.

3. The appellant did not include the amount of such subsidy in the assessable value of the fertilizers on the ground that the subsidy was received directly from the Government of India under statutory/policy scheme and did not represent any consideration, either directly or indirectly, flowing from the buyers of the fertilizers.

4. The Department entertained the view that the subsidy received by the appellant constituted additional consideration towards sale of the fertilizers and, therefore, was liable to be included in the assessable value in terms of Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (determination of price of excise goods) Rule, 2000.

5. Accordingly, a Show Cause Notice dated 03.02.2014 was issued proposing recovery of Central Excise Duty amounting to Rs. 4,39,213/- along with interest and proposing imposition of penalty. The Adjudicating Authority confirmed the demand along with interest and imposed penalty. The said order was upheld by the Commissioner (Appeals). Hence, the present appeal.

6. Heard the Learned Counsel for the appellant and Learned Representative for the Revenue and perused the records with their submissions.

7. The short issue which arises for consideration is whether the subsidy received by the appellant from the Government of India under the Nutrient Based Subsidy Scheme is liable to be included in the assessable value of the fertilizers for the purpose payment of Central Excise Duty.

8. Section 4 of the Central Excise Act provides for valuation of Excise goods on the basis of transaction value where the assessee and the buyer are not related and price is the sole consideration for sale. Rule 6 of the Central Excise Valuation Rules, 2000 deals with a situation where price is not the sole consideration and contemplates addition of the money value of additional consideration directly or indirectly from the buyer to the assessee.

9. Thus, the essential requirement for invoking Rule 6 is that there must be an additional consideration which flows, directly or indirectly, form the buyer to the manufacturer. An amount received independently from a third party, particularly from the Government under a policy or subsidy scheme, cannot automatically be treated as additional consideration unless a nexus is established showing that the amount represents consideration flowing from the buyer to the seller for the sale of goods. In the present case, it is not the case of Revenue that the purchasers of the fertilizers have paid any amount over and above the declared sale price to the appellant. The subsidy in question is paid by the Government of India under the Nutrient Based Subsidy Policy for achiev