Custom, Excise & Service Tax Tribunal
Central Up Gas Ltd vs Cgst & Ce Kanpur on 5 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.52312 of 2015
(Arising out of Order-in-Appeal No.38/CE/ALLD/2015 dated 11/03/2015
passed by Commissioner (Appeals) Central Excise & Service Tax, Allahabad)
M/s Central UP Gas Ltd., .....Appellant
th
(7 Floor, UPSIDC Complex,
A-1/4, Lakhanpur, Kanpur-208024)
VERSUS
Commissioner of Customs, Central Excise &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-20805) APPEARANCE:
Shri Atul Gupta, Advocate for the Appellant Shri Manish Raj, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70314/2024 DATE OF HEARING : 07 February, 2024 DATE OF PRONOUNCEMENT : 05 June, 2024 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.38/CE/ALLD/2015 dated 11/03/2015 passed by Commissioner (Appeals) Central Excise & Service Tax, Allahabad. By the impugned order, the Order-in-Original No.06/ADC/CEX/2013/4051 dated 11.03.2013, wherein following has been held has been upheld:-
"ORDER
(i) I confirm the demand of Central Excise duty
amounting to Rs.30,74,603/- [Cenvat
Rs.29.85.051/- + Ed. Cess Rs.59,705/ + S & H Ed.
Cess Rs.29,847/] and order for recovery from M/s Excise Appeal No.52312 of 2015 2 Central U.P. Gas Limited, 7th Floor, UPSIDC Complex, A-1/14. Lakhanpur, Kanpur under 11A invoking the proviso for extended period with interest under Section 11AA (Section 11AB) of Central Excise Act, 1944.
(ii) I also impose a penalty of Rs.30,74,603/- [ Rs.
Thirty lacs Seventy Four thousand Six Hundred Three only] upon the party under Section IMC of Central Excise Act 1944."
2.1 Appellant is engaged in compression of natural gas received from GAIL (India) Ltd., such compression amounts to manufacture, resulting in a new product Compressed Natural Gas (CNG). Appellant was registered with Central Excise Department and was paying Central Excise duty under sub- heading No.27112100 of Central Excise Tariff Act, 1985. They were also availing Cenvat credit on inputs/capital goods and input services.
2.2 During the course of audit of the account of the appellant, it was observed that appellant was selling CNG through its own pumping stations [known as company operated CNG filled station (COCO)] and also through bulk buyers like BPCL and HPCL for sell to their petrol pumps.
2.3 The clearance of the gases out to the bulk buyers and the appellant on the basis of transaction value determined after deducting bulk discount determined as per the agreements entered with the said bulk buyers from the retail sale price of the CNG from petrol pump.
2.4 As per the agreements entered, bulk buyers provided free space and manpower for operation of the gas compression machines installed by the appellant at their petrol pumps. Revenue was of the opinion that these facilities provided by the bulk buyer were additional consideration for supply of the gases to them. Hence, in terms of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, these money value of this consideration should be added Excise Appeal No.52312 of 2015 3 to the assessable value for payment of duty on the clearance of CNG to bulk buyers.
2.5 Appellant by not including these charges, mis-declared the value for payment of duty and never disclosed these facts to department, thereby resorting to suppression of facts with intend to evade payment of duty.
2.6 A show cause notice dated 10.07.2012 was issued to the appellant asking them to show cause as to why-
"(1) The demand of Central Excise duty amounting to Rs.30,74,603.00 [Cenvat Rs.29,85,051.00 + Education Cess Rs.59,705.00+ S & H Education Cess Rs.29,847.00] should not be confirmed and recovered from them under Section 11A along with Interest under Section 11AA (Section 11AB) of Central Excise Act, 1944, and (2) penalty should not be imposed upon them under Section 11AC of Central Excise Act, 1944."
2.7 This show cause notice has been adjudicated as per Order- in-Original referred in para 1 above.
2.7 Appellant filed appeal before Commissioner (Appeals) which has been disposed of by the impugned order referred in para no.1 above. Hence this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellant and Shri Manish Raj Authorized Representative for the revenue. 3.2 Arguing for the appellant learned Counsel submits that- In absence of any evidence to support the allegation that there was any free supply, no notional amount may be added in term of Rule 6 of the Valuation Rules. o No evidence for supply of manpower-demand is not sustainable.
o No free supply of space- Demand is not sustainable. o The dispute which is raised in the impugned order is that the license fee to get the right to use the space is not a rent against the space provided by the bulk buyers.
Excise Appeal No.52312 of 2015 4 The issue that in such facts there is no free supply is no more res integra and stands settled by following decisions:-
o Mahanagar Gas Ltd. Vs CCE 2017 (348) ELT 175. The appeal filed against the above judgment by the department was dismissed by Hon'ble Supreme Court as Mahanagar Gas Ltd. Vs CCE 2018 360 ELT A133 (SC).
o Bhagyanagar Gas Ltd. Vs CCE Final Order No.A/30404/2023 dated 29.11.2023.
Extended period of limitation not invokable and the substantial demand is time barred. Reliance is placed by the following cases:-
o Accurate Chemicals Industries Vs CCE, Noida 2014 (300) ELT 451 (Tribunal);
o CCE, Noida Vs Accurate Chemical Industries 2014 (310) ELT 441 (Alld);
3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Impugned order records following findings:-
"I find that the appellants are selling the goods to M/S HPCL/BPCL (a public Limited Co) under an agreement dated 06.11.2009 and 23.03.2009 respectively. The terms and conditions are identical in both the agreements. I find that in para 4 of the said agreements the following have been agreed upon:
"In consideration of the space provided to it by HPCL/BPCL, CUGL shall pay a sum known as License Fee of Rs. 0.06 (six paisa) per kg of CNG sold (Taxes Extra), if any per month to HPCL/BPCL. Rate of License Fee shall remain fixed during the period of this agreement."
Excise Appeal No.52312 of 2015 5 It is observed that for the space on which installation of CNG is established at ultimate stage from where the CNG is being sold to the ultimate buyer, the HPCL/BPCL are charging License Fee.
The phrase "license" was defined in Section 52 of the Indian Easement Act, 1882 (Act No. 5 of 1882) as follows:
C "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a License". Whereas "Rental agreements are also referred to as tenancy or lease agreement. In rental agreements, there is a transfer of interest from a lessor to a lessee. If the premises are given on tenancy, there is an element of irrevocably by the owner except on the grounds for eviction mentioned under the Rent Act. From the above it is crystal clear that the License Fee is different from rent. Thus it can categorically be said that M/S HPCL/BPCL were not charging any rent for the commercial use of the property owned by M/S HPCL/BPCL or their dealers as case may be from M/S CUGL. The 72 agreed amount of Rs.0.06 per kg of CNG is inbuilt into the cost of the product, is known at the time of removal & is a condition for the sale of CNG to HPCL etc. The agreement allowed CUGL to market their products effortlessly with mutuality of interest between the saler and the buyer. In fact, it benefitted both the parties directly and indirectly. The amount is extra consideration otherwise CUGL would have to setup the infrastructure with huge financial involvement.
The appellant has contended that Section 4(1)(a) of Central Excise Act 1944 is applicable in their case. I find that Section 4(1) (a) reads as under:
Excise Appeal No.52312 of 2015 6 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; C Explanation- For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
In this context, I find that the appellant's case is not covered under the said section in as much as additional consideration is flowing back by way of rent of the installation of the dispenser of the CNG. It is mentioned in the para 4 of the agreement that the appellant will pay the Licence fee @ Rs.0.06 per kg but there is no mention of the rent in the agreement, which is the additional consideration flowing back, and thus the case of the appellant is not covered under Section 4(1)(a) of the Act ibid. Moreover, nonpayment of rent in the rented premises of the HPCL/BPCL, is an extra consideration. Licence Fee @ Rs.0.06 per kg of CNG is intrinsic to the product, petrol pumps being the place of removal. The abnormal arrangement is not a normal trade practice which benefitted both the manufacturer and the buyer with mutuality of interest. Therefore, the monitory consideration in the form of Licence Fee and free rental can safely be concluded as farming a part and parcel of the value of the product in the instant case. The expenses Excise Appeal No.52312 of 2015 7 incurred upto the place of removal is rightly included in the assessable value. By entering into the agreement the appellant was able to depress their selling price and became more competitive in the market. The appellant is able to circumvent many other restrictions involved, which is directly benefitting them.
In so far as Rule 6 of the CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000 is concerned, I find that Rule 6 of the said Rules reads as under:
"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."
In view of the above discussion I am of the opinion that the case of the appellant is rightly covered under the Rule 6 of the CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000 as held by the Ld Adjudicating Authority.
The appellant has contended in the appeal that the case is hit by limitation as they have regularly supplied the copies of the Balance sheet to the department. The Appellant have not adduced any evidence to prove their pleading. Even otherwise submission of balance sheet does not prove that the agreement & its contents were disclosed to the department. In absence any such evidences available before me, I am not inclined to accept it." 4.3 We find that the issue involved in the present case is vis-à- vis determination of the assessable value in terms of Section 4 of Central Excise Act read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Undisputedly, in the present case, appellants have cleared Excise Appeal No.52312 of 2015 8 the goods to the bulk buyers on payment of duty on the transaction value determined after deducting the bulk discount from the retail sale price of the CNG from the pumping stations or the petrol pump/pumping stations of BPCL and HPCL. 4.4 Compressed CNG is sold by the appellant through their own pumping stations referred as COCO and through the petrol pumps of the bulk buyers. The Retail Sale Price of the case is fixed for sale from both the outlets and is uniforms throughout the state irrespective of the fact whether the CNG is sold from COCO outlet or the petrol pump of the bulk buyer. Whatsoever is method for determination of assessable value the expenses incurred by the bulk buyers at their petrol pumps for selling CNG from their retail outlets (petrol pumps) cannot be added to the assessable value. Undisputedly the sale transaction in terms of the Central Excise Act, 1944 in case of the sale to the bulk buyers was completed at the point of clearance of the CNG by the appellant to the bulk buyer, which is the factory gate. Once the sale transaction has been completed at the factory gate, the expenses incurred by the bulk buyer cannot be made the part of the assessable value determined at the factory gate. These expenses have been incurred by the bulk buyer for selling the goods from their retail outlets. The petrol pumps of bulk buyers i.e. BPCL/ HPCL can by no stretch of imagination be considered as depot or sale point of the appellant.
4.5 The entire dispute is for addition of certain expenses which as per the revenue or additional consideration received by the appellant, though not in cash but in the form of benefits made available to the appellant in terms of Rule 6 of the valuation rules. The same issue has been considered by the Ahmadabad Bench of this Tribunal in the case of M/s Adani Gas Ltd. Vs CC, Ahmadabad Final Order No.A/10685/2019 dated 16.04.2019 placing reliance upon earlier orders, wherein the Bench has observed as follows:-
"5. The terms of the supply were negotiated on principal to principal basis and it specifically provides the responsibility of the Appellant and OMCs to do certain acts and services.
Excise Appeal No.52312 of 2015 9 Hence clearly it is a negotiated deal between the two parties. Para 14.2 of the agreement makes it clear that the appellant does not act as agent of OMCs or vice-versa. Para 8.8 of the agreement states that the trade margin is a genuine pre-estimate of the costs and expenses and commission to dealers, which means the OMCs can recoup their expenses and profit margin. Para 5 of the agreement provides a point of time at which the title to the goods pass from the appellant to the OMCs and thereupon to the consumers. It is at this passing of title to the goods from the appellant to the OMCs that the VAT payment is made by the appellant and the OMCs also paid VAT at the time that they made further sale of gas to the customer. The appellant issued sales invoice to OMCs and paid VAT on such value and the same value was also shown in the sales tax return at which the goods are sold to the buyers. Clause 3.6 of the agreement entered between the Appellant and Indian Oil Corporation on 25.4.2011 provides that the ownership of CNG is transferred from the appellant to OMCs at the Inlets of the CNG stations and therefore the Appellant had taken the insurance cover in respect of risk and liability for CNG delivered and stored at the retail outlets. Clause 8.8 of the agreement dated 25.4.2011 only provides the factors for considering the trade margin which are decided on assumptions basis and, therefore, they are not only the ultimate and final factors for such determination of trade margin and such expenses are actually not paid to OMCs. The agreement between the appellant and OMCs clearly shows that the trade margin were being decided at fixed level by the parties to such agreement. In terms of Clause 6.1 of the agreement, OMCs are not entitled to any remuneration or compensation of any nature whatsoever for installing equipment and other facilities at the site of the OMC. The Trade Margin is decided after considering the costs and expenses incurred by OMCs including their profits. The Excise Appeal No.52312 of 2015 10 above terms of the agreement clearly show that the transaction between the appellant and the OMCs is at arms length and cannot be doubted. Hence the Trade Margin cannot be included in the assessable value at the Appellant's end and hence the demand raised against the Appellant on Trade margin is not sustainable. Our views are also based upon the Tribunal judgment in case of Mahanagar Gas Ltd - 2017 (348) ELT 175 (Tri.), wherein in identical facts, the Tribunal held as under :
"5. We have considered the rival submissions and perused the records.
5.1 We find that the common issue involved in the above appeals is whether price charged for sale of CNG to OMCs can be considered as transaction value for the purpose of payment of duty under Section 4(1)(a) of CEA.
5.2 We find that entire period covered in all the appeals is post July, 2000, governed by amended Section 4. The new Section 4 essentially seeks to accept different transaction value, which may be charged by the assessee to different customers, for assessment purposes, so long as those are based purely on commercial consideration, where buyer and the seller are not related and price is the sole consideration for sale at the time and place of delivery. Thus, it enables valuation of goods for excise purpose on the value charged as per normal commercial practices, rather than looking for a notionally determined value which existed prior to amendment of Section 4 in 2000. The Adjudicating Authority has confirmed the demand on the differential value between MGL‟s sales price from their own outlets and/or the outlets of PPs and the sales price of MGL to OMCs, treating the difference as the charges for the services rendered by OMCs to MGL and the Department also claims that sale is not Excise Appeal No.52312 of 2015 11 taking place between the appellants and OMCs. We have perused the copies of Central Excise invoices issued by MGL to OMCs on daily basis for dispensing CNG from 6.00 am to 6.00 am showing the quantity supplied, assessable value, duty paid/payable, etc. We also find that there are joint tickets prepared outlet-cum-party-wise showing the sale period starting at 0600 hrs. on preceding day and ending at 0600 hrs. on the succeeding day and also show the quantity of CNG dispensed with opening reading, closing reading, total reading and total quantity supplied. Such joint-tickets are also signed by both parties, i.e. appellants and OMCs. Thereafter, the appellants are raising tax invoices upon OMCs on monthly basis with specific business days within which payment has to be made by OMCs and for any delay in payment, interest is also payable by OMCs. The appellants have paid VAT/sales tax on their sale of CNG to OMCs, as evidenced from the invoices. Further, sales invoices of OMCs for resale of CNG to ultimate buyers, VAT/sales tax is paid by them on their sales price. In nutshell, the appellants are paying VAT on its sales price to OMCs and OMCs are also paying VAT on their sales price to their customers. This clearly evidences that the AR‟s arguments that sale is not taking place between appellants and OMCs and also it is a paper transaction is incorrect and not supported by any evidence on record. It is noteworthy that this Tribunal in the case of BPCL/HPCL (supra), wherein the service tax demanded on the very same amount received by OMCs from MGL, claiming such amount as commission paid for rendering of services under Business Auxiliary Service for marketing of CNG manufactured by the appellants, has been set aside holding that the OMCs themselves are buying the Excise Appeal No.52312 of 2015 12 goods from MGL and MGL is charging VAT/sales tax while selling the CNG to BPCL/HPCL and BPCL/HPCL are also paying VAT/sales tax on the entire value, including the so-called commission and, hence, the transaction between them is sale/purchase transaction and VAT/sales tax has been paid at both ends the same cannot be considered as service contracts.
5.3 We find that the appellants‟ contention that OMCs, being bulk buyers, have been given higher discount also needs to be accepted in the absence of any allegation/substantiation of mutuality of interest between appellants and OMCs, as both are independent entities. We also find that there is a distinct difference in the transactions of the appellants with PPs, wherein MGL supply CNG through the outlets owned and operated by PPs and CNG is directly supplied by PPs to the ultimate consumers/vehicles users from their outlets for and on behalf of MGL, under the invoices/bills/cash memos of MGL and the price charged in those bills/invoices/cash memos are the retail sales price or maximum recommended price determined by MGL, from time to time. In a true sense, the customers/vehicle users at the outlets of PPs are buying CNG from MGL, through the PPs. The privity of contract is between MGL and those buyers and those sales are directly recorded in the Books of Account of MGL and not in the Books of PPs, as there is no sale and purchase of CNG by PPs and PPs act only as an agent of MGL on commission basis. The entire sales proceeds are remitted by PPs to MGL on daily basis. The contracts between MGL and PPs are that of "principal" and "agent" as the PPs are merely service providers and not buyers of CNG from MGL. Their obligation under the contracts is merely to Excise Appeal No.52312 of 2015 13 provide assistance for supply/sale of CNG to the vehicles by MGL. For acting as an agent of MGL, PPs get specified service charges on "per kg" basis of the CNG sold by them on behalf of MGL. Since the PPs are acting as agents of MGL for supply of CNG, PPs consider their activity as Business Auxiliary Service and pay service tax on the commission received from MGL. We find that sale of CNG by the appellants to OMCs is on principal-to-principal basis, which is clear from various terms/covenants of the agreements between MGL and OMCs, i.e. retail sales price is the price at which CNG is to be sold to vehicles by the OMC as communicated by MGL to OMCs, from time- to-time; OMC shall sell CNG at the outlets situated at the site; Retail Price of CNG shall be fixed by MGL and the OMCs shall sell the CNG only at the retail price communicated by MGL to OMCs, from time-to- time; OMCs shall pay to MGL the retail price as reduced by profit margin/commission/discount; MGL shall, before 5th of every month, send to OMCs an invoice for the quantity of CNG sold by OMCs during the preceding month. Such invoices shall be based on the meter reading on CNG dispensers jointly taken by MGL and OMCs; OMCs shall pay to MGL the invoice value for CNG sold as stated in the invoice within ten days from the date of invoices; it is specifically stated in the agreements between OMCs and MGL that during the term of the agreements OMCs shall not hold out to be as agents of MGL and it is clearly understood that this agreement is on principal-to-principal basis and MGL shall not be liable for any of the acts of omission/commission of OMCs. We also find from record that when CNG is supplied by MGL through PPs, there is no sale between MGL and PPs, as the sale takes place between MGL and the ultimate customers/vehicle Excise Appeal No.52312 of 2015 14 users and the PPs act as agents of MGL; that the PPs were/are issuing cash memos/invoices/bills of MGL, when they supply CNG to customers/vehicle owners; that the PPs are acting as agents of MGL, for which they get specified service charges and the PPs are paying service tax on such amount; that, in contrast, as far as OMCs are concerned, sale of CNG takes place between MGL and OMCs at OMCs outlets and OMCs issue their cash memos/bills/invoices to their customers/vehicle owners and MGL do not have any role to play in such transactions; that commission paid to PPs was Rs. 1.20/kg, Rs. 1.74/kg, Rs. 1.90/kg and Rs. 2.45/kg during different periods, whereas discount given to OMCs was Rs. 1.20/kg, Rs. 1.40/kg, Rs. 2.42/kg, Rs. 2.62/kg and Rs. 2.74/kg during different periods. From the above discussions, we are of the view that the appellants‟ case is squarely covered under new Section 4(1)(a) of CEA which essentially permit different transaction values, unlike normal sales price existed prior to 1-7- 2000, which has also been explained by C.B.E. & C., vide its Circular No. 354/81/2000-TRU, dated 30-6- 2000 in Para 5.
5.4 We also find that the agreements between the appellants and OMCs were entered into in 1998 or 1999, when there was no levy on CNG, which came into effect only from 1-3-2001 and, hence, the appellants could not have thought that using certain expressions like commission/trade margin, etc. would create hassle at a future date from Central Excise point of view and also there would not have been any inducement to use any expression in the agreement with an intent to evade payment duty. The nomenclature like commission/profit margin used in the agreements when read with invoices raised by the appellants upon OMCs, it is clear that it Excise Appeal No.52312 of 2015 15 was the sale transaction on principal-to-principal basis and, hence, as held by Hon‟ble Supreme Court in Perfect Circle Victor - 1992 (60) E.L.T. 676 (S.C.) and D.C.M. Textiles - 2006 (195) E.L.T. 129 (S.C.), etc. trade discount allowed by whatever name called is an admissible deduction and the appellants are not liable to include the same for the purpose of payment of duty. In the present case, the appellants have charged mutually agreed price, which is transaction value between the appellants and OMCs in the normal course of their business for sale of CNG and no additional consideration, whatsoever, flows from OMCs to MGL. Further, by virtue of its technical necessity, the supply of CNG could have been done in the manner in which the appellants have done, as natural gas by the process of compression amounts to manufacture for the purpose of marketing as CNG for use as fuel which has been done at the time of dispensing. Inasmuch as NG is compressed at 210 bars pressure in Mother Stations and Online Stations and got stored in stationary cascades and dispensed by bringing the pressure to 200 bars to vehicles. Likewise, NG is compressed and filled at 230 bars pressure in cascades of cylinders mounted on light motor vehicles and transported to Daughter Booster Stations, wherein the same is dispensed by recompressing to the pressure at 200 bars pressure. Therefore, considering the technical necessity of the product, this was the only methodology which anybody could have adopted. Since the activity of manufacture takes place at each of the compression station the appellants are having centralized registration for each of the locations, which are the factories of MGL.
Excise Appeal No.52312 of 2015 16 5.5 The ld. AR‟s arguments that manufacture and sale is taking place simultaneously would not be correct, as CNG is drawn from stationary cascades and dispensed through dispenser. Further, even if the transaction of purchase and sale between the buyer and seller takes place simultaneously on account of peculiar nature of the product, such transaction has to be treated as sale on principal-to- principal basis based on the Hon‟ble Supreme Court judgment in the case of BayyanaBhimayya, Always Agencies, etc. cited supra by the appellants. 5.6 Since we are of the view that the appellants have a strong case on merits itself and are allowing the appeals on merits, we are not discussing the alternate propositions like non-applicability of extended period, etc. The penalties imposed on the appellants are also not sustainable. With the above discussions, we set aside the impugned orders and allow the appeals with consequential relief, if any, in accordance with law." The above Tribunal‟s judgment was affirmed by the Hon‟ble Apex Court, as reported in 2018 (260) ELT A187 (SC). Further same views were given by the Tribunal in case of BEHR India Ltd - 2014 (35) STR 367. The relevant paras of said judgment are as under:-
""Para 2. The appellant, M/s. Behr India Ltd. purchased Wire Harness from M/s. Tyco Electronics Corporation India (P) Ltd. and sold the same to their principal M/s. Behr Czech Republic. While selling the product to their principal, they marked up the price by 3% of the purchase price. Since the material has to be supplied to Czech Company, the appellant directed the Indian seller i.e. M/s. Tyco Electronics Corporation India (P) Ltd. to ship the goods to the Czech entity. However, the invoices for the same were made on the Indian entity and VAT liability was Excise Appeal No.52312 of 2015 17 also discharged on the transaction. The appellant raised export invoice on the foreign entity and received the export proceeds from their foreign principal as evidenced from the bank realization certificate dated 6-9- 2007 and the proceeds have been credited to the appellant‟s accounts and the commission paid or payable is shown as nil. However, in the books of accounts they had shown the mark up made in the transaction as „commission income‟. Therefore, the department came to the conclusion that the appellant was acting as a Commission agent for M/s. Tyco Electronics Corporation India (P) Ltd., and hence on the mark up made by them, they are liable to pay Service Tax under the category of "Business Auxiliary Service".
Accordingly, a notice was issued and the demands were confirmed vide order dated 16-12-2008 solely on the ground that the mark up made by them in the transaction was shown as commission income in their books of account. The appellant preferred an appeal against the said decision before the lower appellate authority, who rejected the appeal. Hence, the appellant is before us.
Para 6.1 We have also perused the purchase order and sale invoices issued by M/s. Tyco Electronics Corporation India (P) Ltd. The invoice clearly shows that VAT liability has been discharged which indicates the sales of wire harness by Tyco Electronics Corporation India (P) Ltd. to the appellants. The appellant has also issued an export invoice to the foreign buyer and has realised the export proceeds. These documents on records clearly evidence that the transaction involved is one of purchase and sale of goods by the appellant on a principal-to-principal basis and not as an agent of anybody else. Following the decision of this Tribunal Excise Appeal No.52312 of 2015 18 in the case of Pratap Singh & Sons cited supra, we set aside the impugned order and allow the appeal. The Tribunal in following cases has held that the agreement between the parties reflects the real state of affairs and hence the same is a guiding factor for determining the passing of title to the goods from one party to another:
(i) Mahindra & Mahindra Ltd - 1995 (76) ELT 481 (SC)
(ii) Hindustan Petroleum Corpn. Ltd - 2005 (187) ELT 479 (Tri)
(iii) Indian Oil Corporation - 2014 (300) ELT 539 (Tri, Del)
6. In the present case also the value of the goods between the Appellant and OMCs is fixed as per the agreement and hence the same cannot be disputed. The Revenue has relied upon the judgment of Maruti Udyog Ltd - 2010 (257) ELT 226 (Tri, LB) and Coromandal Fertilizers Ltd -
1984 (17) ELT 607 (SC), and Supreme Petrochem Ltd - 2009 (240) ELT 38 (Tri, LB). However, we find that the said judgments are not applicable to the present set of facts. The ratio of Maruti case supra is not applicable as the Revenue has not produced any evidence to show that there is any kind of direct or indirect consideration paid by the OMCs to the Appellant. It is also a fact that the OMCs are Public Undertakings and therefore, there is no iota of doubt that the transaction between the parties is the sole consideration and at arm‟s length. The order in case of Coromandel Fertilizers is also not applicable as in the said case, the issue involved was "whether the commission paid by way of remuneration for service rendered by the selling agent can be considered as discount" whereas in the present case, there is no commission being paid by the appellant to the OMCs and what has been provided by the appellant is only a trade discount, which is a normal business practice. Similarly the Tribunal Larger Bench Excise Appeal No.52312 of 2015 19 order in case of Supreme Petrochem is also not applicable as the issue involved in the said case was as to whether the expenses of loading of excisable goods within the factory for clearance to buyer are to be included in the assessable value or not, which is not the issue in the present case. We are of the view that the demand on „Trade Margin‟ confirmed against the Appellant is not sustainable and is required to be set aside.
7. We also find that the demands raised in the instant case are hit by limitation of time as the Appellant right from beginning made correspondences with the Department disclosing the price structure and the terms of agreement entered with the OMCs. The Revenue was in knowledge of the valuation method adopted by the appellant. The Appellant since 2005 had made correspondence with the department disclosing the price structure with bulk customers, retail customers and OMCs to the Revenue on 6.12.06, 1.2.2007, 27.7.08, 15.1.10, 19.2.10, 12.4.10, 17.9.10. The above correspondence clearly shows that the Appellant were disclosing the methodology of valuation and the Revenue never pointed out any irregularity. In such case, the bona fide of the appellant cannot be doubted. Since there is no ingredient of any malafide intention on the part of the Appellant to evade the excise duty, the extended period cannot be invoked for raising demand. Our views are also supported by the Tribunal, Hon‟ble Apex Court and High Court‟s judgments in cases of Pragati Concrete Products (P) Ltd - 2015 (322) ELT 819 (SC), Metal Tubes -2000 (126) ELT 1260 (Tri.), Simplex Infrastructures Ltd - 2016-TIOL-779-HC-KOL-ST, Blue Star Ltd - 2000 (120) ELT 415 (Tri.) and Amway India Enterprises Pvt. Ltd - 2017 (3) GSTL 69 (Tri.-Del)." 4.6 This decision has been followed by Hyderabad Bench of this Tribunal in case of M/s Bhagyanagar Gas Ltd. Vs CC, Guntur Final Order No.A/30404/2023 dated 29.11.2023.
Excise Appeal No.52312 of 2015 20 4.6 We also note that following decision of M/s Mahanagar Gas Ltd., Commissioner (Appeals) himself has given relief to the appellant, in similar circumstances by holding as follows:-
"4.1 I have gone through the facts of the case, the averments made at the time of the personal hearing and all other documents/material available on record. It is observed that:
(i) The Commissioner (Audit), Kanpur, vide the Orders/ Commr(A)/ CEx/APPL/ KNP / 2018 dated 07.03.2018 and 128/COMMR (A) / CEX / APPL/KNP/ 2018 dated
05.03.2018, had remanded the case pertaining to the periods April, 2012 to February, 2013 and March, 2013 to November, 2013 respectively, inter alia, to determine the money value of the space & man power provided by M/s BPCL/M/s HPCL, for the purpose of applicability of Rule 6 of the Valuation Rules on which basis demands of Central Excise duty had been raised; and
(ii) The Adjudicating Authority in the impugned Order, though observed that it was not possible to re- determine the money value, the amount worked out by the Department (on the basis of difference in the retail sale price of CNG sold by the appellant from their own outlet & that sold through the retail outlets of M/s BPCL/M/s HPCL) can be taken as the money value. Accordingly, he confirmed the demands of Central Excise duty, and
(iii) The Additional Director General, NACIN, Kanpur, vide the Orders-in-Appeal No. 35- 36-CE/APPL-KNP/ADG- NACIN/2017-18 dated 21.02.2018, dropped the demand of Central Excise duty for the subsequent periods from December, 2013 to August, 2014 & September, 2014 to August, 2015, after placing reliance on the decision of decision of Hon'ble CESTAT in the case of Mahanagar Gas Ltd. vs CCE, Mumbai-IV 2017 (348) E.L.T. 175 (Tri. Mumbai) Excise Appeal No.52312 of 2015 21 which was approved by the Hon'ble Supreme Court in the case of Commissioner vs. Mahanagar Gas Ltd. 2018 (360) E.L.T.A133 (S.C.). Thus, he held that the difference in the retail sale price of CNG sold by the appellant from their own outlet & that sold through the retail outlets of M/s BPCL/ M/s HPCL, is nothing but trade discount/ commission given to M/s BPCL/ M/s HPCL.
4.2 Thus, I find that in this case, the Adjudicating Authority has failed to determine the money value of space & man power supplied by M/s BPCL/ M/s HPCL and the amount which he has considered as money value, is nothing but trade discount/commission given to M / s BPCL/ M/s HPCL (as held, vide the Orders-in-Appeal No. 35-36-CE/APPL KNP/ADG-NACIN/2017-18 dated 21.02.2018, in respect of demands for the subsequent periods) which is permissible deduction from assessable value. Thus, when there is nothing on record, to show any money value, I find that Rule 6 of the Valuation Rules cannot be applied in this case and as such, the impugned Order is not sustainable."
4.7 As the issue is squarely covered by the above referred decisions, we do not find any merits in the impugned order and the same is set aside.
5.1 Appeal is allowed.
(Order pronounced in open court on- 05 June, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp