By TIOL News Service

MUMBAI, SEPT 06, 2018: THE appellants manufacture phosphoric acid by reacting rock phosphate with sulphuric acid. In the said reaction, gypsum emerges as by-product.

The following are the facts for the period prior to August 2004.

The appellants have engaged M/s N.S.Shetty, a contractor to collect the slushy gypsum and transport the same to the appellant's yard.  The gypsum is sold by the appellant to cement companies on as-is-where-is basis.  The said agreement specifically stated that the transportation, loading and unloading would be by the customer.

The buyers make their own arrangement for taking and transporting the gypsum from the appellant's yard to the cement factory. The buyers independently appointed M/s N.S.Shetty as their authorized transport contractor for moving the gypsum by road to their factory and informed the appellant of the same in their purchase orders. The buyers paid M/s N.S.Shetty for loading and transportation.

The revenue proceeded against the appellants on the ground that the loading and leveling charges paid by the independent buyer of gypsum to M/s N.S.Shetty and also the amount incurred in shifting the gypsum within their factory are required to be included in the assessable value of the gypsum.

Incidentally, the department had earlier issued ten show-cause cum demand notices covering the period March 1997 to July 2004 by placing reliance on the judgment of the Supreme Court in the case of Indian Oxygen Ltd. - 2002-TIOL-263-SC-CX and the said demands were confirmed along with penalty on the appellants as well as the contractor.

The appeals of the assessee against the said orders were allowed by the CESTAT by its order dated 28 May 2007 - 2007-TIOL-858-CESTAT-MUM holding that the reliance on the aforesaid apex Court judgment was misplaced as the issue in that case had a question of deduction of loading charges incurred within the factory from the price of goods whereas in the present case the facts were different; there is no doubt that the appellants incurred the expenses for the above purpose and these expenses were taken into account while selling the gypsum to the buyers; that the contractor had undertaken the work in terms of contract between him and the buyers of the appellant and by no stretch of imagination it could be considered as an additional consideration received by the appellants.

Incidentally, the above decision of the Tribunal has been considered and agreed upon by the Larger Bench in the case of Supreme Petro Chem Ltd. - 2009-TIOL-1133-CESTAT-MUM-LB.

The present appeal covers the period August 2004 to October 2006. Five SCNs demanding CE duty of Rs.21,53,355/- were confirmed by the Assistant Commissioner vide orders dated 31.08.2006/March 2007 and the same were upheld by the Commissioner(A) by the impugned order dated 20.11.2009.

The issue herein relates to inclusion of loading and leveling cost incurred by the appellant's buyer i.e. M/s N S Shetty in transporting gypsum further to his buyers.

The appellant submits that the matter is no longer res integra in view of the decision in their case (supra) and as agreed by the Larger Bench (supra).

The AR supported the order of the lower authorities.

The Bench while agreeing that the issue is squarely covered by the decision cited in the appellant's own case further observed -

"6. …We find that the factual position, in the period covered by earlier show-cause notices is quite different form the present show-cause notices; whereas, in the previous set of show-cause notices the appellants were paying certain amounts to the contractor for undertaking transportation, loading and leveling of gypsum which was ultimately sold to cement manufacturer. In the instant case, the appellants are selling the gypsum as-is-where-is-basis to the contractor i.e. M/s N.S.Shetty himself who is selling the same to the cement manufacturers. In the instant case, therefore, no expenses are incurred by the appellants in the sale of cement (sic) to the contractor. Therefore, there is no question of includibility of such amount in the assessable value of cement (sic) sold by the appellants (to) M/s N.S.Shetty, it is pertinent to note that the earlier set of show-cause notices which also covered the part of period which is after 01.07.2000 where the appellants themselves have incurred such expenses where held to be non-includible in the assessable value. The present set of fact is more so placed favourable to the appellants on this count. No expenses are incurred by the appellants. As no flow back is alleged or evidenced, proposal to include the charges incurred by the buyer in respect of gypsum sold by the appellants to the contractor is by no stretch of imagination legally tenable."

The appeals were allowed with consequential relief.

(See 2018-TIOL-2725-CESTAT-MUM)