Page 204 - ELT_15th August 2020_Vol 373_Part 4

538 EXCISE LAW TIMES [ Vol. 373

(vi) Whether penalty could have been imposed on the Appellant under
Section 114 of the Customs Act.
15. Each of the aforesaid issues shall be dealt with separately.
Miscellaneous charges of Rs. 17/- PMT
16. The findings of the Principal Commissioner on this issue are as fol-
lows;
“13.1 The first issue to be examined is, as to whether the service charges of Rs.
17/- per MT paid by GOI to STE is to be included in the assessable value or not.
The noticee have argued that the same is in the nature of ‘buying commis-
sion’ and hence should be excluded in terms of Rule 10(1)(a)(i) of CVR, 2007
and interpretative note to Rule 10. In support of their argument, they have
stated that GOI, while paying these charges to STE is deducing 2% TDS,
which in terms of Income Tax is required to be paid on payment of com-
mission and not on sale consideration.
… … …
13.3 As per SCN (para7.4), the STE imports urea in bulk purchasing the
same from the foreign sellers. It then enters into sale agreement with Minis-
try of Fertilizer, GOI on high sale basis. In addition to the purchase price,
GOI also pays an additional Rs. 17/- per MT as service charges. Thus, STE
has purchased the goods on its own and then sold the goods to GOI. In the
case of Hyderabad Industries, the canalizing agency was importing asbestos and
selling the same on high sale basis to the importer. The Supreme Court held that the
service charges paid by the importer to the canalizing agency is not buying com-
mission but service charges and hence includable in the assessable value.
13.4 In the instant case also, the canalizing agency i.e. STE has imported
Urea independently on commercial basis from purchasers abroad and then
sold to Ministry of Fertilizer, GOI on high sea sale basis. There is a further
sale from GOI to IFFCO on high sea sale basis. Thus, there are two high sea
sales. It is the price at which GOI has purchased goods from STE, on which
the import duty is being paid by IFFCO. It is because, the price which is be-
ing paid by GOI to IFFCO is not the transaction value, but the lower price
at which IFFCO has to sell the goods to farmers. The difference is being
born by GOI as subsidy. Therefore, the question to be decided is whether in
the first high sea sale, which forms the basis for arriving at transaction val-
ue, the service charges of Rs. 17/- per MT is to be added in terms of Rule
10(1)(e) of CVR, 2007. As held by Hon’ble Supreme Court in Hyderabad Indus-
tries case, this payment cannot be treated as buying commission, as the relationship
between STE and GOI cannot be treated as relationship between a principal and
agent. There is an independent sale between STE and GOI on high sea sale basis.
Further, deduction of TDS by GOI in terms of Income Tax Act, cannot be the basis
to decide, whether in terms of provisions of Customs Act, 1962, this amount is to
be added in assessable value or not.
13.5 In view of the above reasoning, I hold that service charges of Rs. 17/- per MT
paid by GOI to STE as service charges are to be added in the assessable value in
terms of Rule 10(1)(e) of CVR, 2007.”
(emphasis supplied)
17. The Principal Commissioner has observed that since the STE im-
ported urea independently on commercial basis from foreign purchasers and
then sold it to the Government of India on High Sea Sale basis and there is a

EXCISE LAW TIMES  15th August 2020  204