Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Nashik vs M/S Bharat Petroleum Corporation Ltd on 10 May, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. I
Appeal No. E/3450/05
E/CO/14/06
(Arising out of Order-in-Appeal No. 39/CEX/2004 dated 5.10.2004 passed by the Commissioner of Central Excise & Customs, Nashik ).
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri Raju, Member (Technical)
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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Commissioner of Central Excise, Nashik Appellant Vs. M/s Bharat Petroleum Corporation Ltd. Respondent Appearance: Shri Hitesh Shah, Commissioner (AR) for Appellant Shri Gajendra Jain, Advocate with Shri Rajesh Ostwal, Advocate for Respondent CORAM: SHRI M.V. RAVINDRAN, MEMBER (JUDICIAL) SHRI RAJU, MEMBER (TECHNICAL) Date of Hearing: 10.05.2016 Date of Decision: 10.06.2016 ORDER NO. Per: Raju
The respondents, M/s Bharat Petroleum Corporation Ltd., are engaged in the manufacture of petroleum products. The respondents were storing the excisable goods at Panewadi Terminal, Manmad District. At the time of clearance from the said terminal, the respondents were collecting Rs.44/- per KL over and above the assessable value declared as Free Delivery Zone (FDZ) charges. The respondents were also collecting charges @ 0.67/- per KL per Km for delivery of goods beyond the Free Delivery Zone. The Revenue alleged that the amount of Rs.44/- per KL collected by the respondents for sale within Free Delivery Zone was includible in the assessable value as the said charge was leviable for delivery just outside the factory gate also, where no transportation is involved. On the basis of this, it was argued that the said amount is not related to transportation but is an additional consideration. A show-cause notice demanding duty on this alleged additional consideration was issued to the respondents. The said show-cause notice was dropped by the Commissioner holding that basic prices of MS/HSD are inclusive of transportation charges. The Commissioner held that w.e.f. 1.7.2000, the valuation of excisable goods is the transaction value and transportation/freight charges are admissible for deduction provided that these charges are shown in the invoices separately. The Commissioner observed that in case of sale to retail outlet situated at a distance of 5 Km, and the outlet of a dealer at Nandgaon situated at a distance of 35 Km (within FDZ) freight charges shown uniformly @ Rs.44/- per KL. On the basis of above facts and relying on the CBE&C Circular No. M.F. (D.R.) F. No. 354/81/2000-TRU dated 30.6.2000, the cost of transportation is outside the purview of levy of duty when such cost is shown separately in the invoice. Aggrieved by the said order, the Revenue filed an appeal before the Tribunal seeking to set aside the order of Commissioner and to remand the matter for re-determination by Commissioner.
2. In the grounds of appeal, it was argued that the Circular of CBE&C F. No. 354/81/2000-TRU dated 30.6.2000 has not been interpreted properly. It was argued that equalized freight charges @ Rs.44/- per KL within the area of distance upto 39 Km has to pay these charges irrespective of the distance involved. Therefore, deduction of freight charges so recovered by the assessee is clearly not permissible as para 18 of the said Circular states as follows: -
18. If the assessee and the buyer are not related persons and the price is also the sole consideration for sale but only delivery of goods is made by the assessee at a place other than the factory/warehouse, then the assessable value shall be the "transaction value" without the addition of the cost of transportation from the factory/ warehouse up to the place of delivery. However, exclusion of cost of transportation is allowed only if the assessee has shown them separately in the invoice and the exclusion is permissible only for the actual cost so charged from his buyer. If the assessee has a system of pricing and sale at uniform prices inclusive of equated freight for delivery at factory gate or elsewhere, no deductions for freight element will be permissible. 2.1 The second ground raised by the Revenue is that deduction in respect of average freight i.e. the cost of transportation, is available as deduction. It has been argued that the Commissioner has accepted the amount of Rs.44/- per KL without examining the said figure is correct or otherwise.
3. Learned AR for the Revenue argued that Commissioner has confused between the delivery charges and the freight. He argued that the charges deducted as delivery charges are not freight. The Commissioner (AR) produced a photo copy of a Fax dated 29.9.2000 apparently issued by Oil Coordination Committee, wherein revision in Basic Selling Price of petroleum products from 29.9.2000 was communicated by the OCC. He specially pointed out to following two paras of the said Fax: -
At present excise duty on freight in case of MS is being absorbed in the Pool Account effective midnight of 29th/30th September, 2000. Excise duty on freight element included in the price built up of MS should be passed on to consumers. In respect of products where currently 5% duty on assessable value is being absorbed in the Pool Account, the same should be passed on in the settling prices.
OCC vide their Fax Message No. 4005 dated July 29, 2000 have advised that the delivery charges within FDZ for MS and HSD are revised to Rs.44/KL and for ATF to Rs.46.00/KL. Currently the delivery charges within FDZ included in the RPO Charges for MS is Rs.7/KL. For HSD Rs and in AFS charges is Rs.20/KL for ATF. This increase will be charged on for all customers in the selling prices.
It was also advised that the delivery charges outside FDZ for MS, HSD and ATF are revised to Rs.0.67/KL/Km. This increase will be passed on for all customers in the selling prices. However, in case of MS/HSD for the areas covered under the FTX scheme, the same will be borne by the Oil Pool Account. He argued that amount of Rs.44/KL collected in respect of delivery within the FDZ is already included in the price fixed by OCC. He argued that amount of Rs.44/KL collected by the appellant is an additional consideration.
3.1 Learned AR also produced certain invoices wherein delivery charges @ Rs.44/KL was collected as taxable delivery charges over and above the assessable value.
4. Learned Counsel for the respondent argued that when the buyers arranged their own transport, an amount of Rs.44/KL is not collected, however, if the respondent deliver the goods to the buyers within the specified distance, an amount of Rs.44/KL is collected. He pointed out that they had made specific averments in this regard to their reply dated 25.6.2004 to the Commissioner of Central Excise, Nashik.
4.1 Learned Counsel relied on the decision of the Tribunal in their own case as reported in 1999 (108) ELT 402 and affirmed by Hon'ble Supreme Court as reported in 2004 (174) ELT A78 (SC), wherein the Tribunal has observed as under: -
25. We now, therefore, come to the question of the? deductions claimed (from the total invoice value) on various counts. The appellants have submitted that RPO charges constitute two elements viz. transport charges and maintenance of outlet charges, both quantums being fixed by OCC and hence binding on them. Learned Additional Solicitor General of India at one point of his submissions, has graciously and fairly conceded that the transport charges may be excludible but as per law. The undisputed facts are that when goods are supplied from storage installations (depots) of appellants to pump outlets (petrol pump stations) beyond a distance of 39 kms, the transport cost involved is recovered from these `dealers as a part of the RPO charges. Revenue submits that these are not actual charges but fixed on an average basis and that since clearance operations being at M/s. Cochin Refineries Ltd.s gate and end at petrol pump only, therefore, freight charges may be includible. We find that it is not disputed that when these products are cleared from the factory gate of M/s. Cochin Refineries Ltd. to appellants designated depot (installation), a clear wholesale level sale is involved (irrespective of the movement being under duty bond), because the title of the goods changes hands from M/s. Cochin Refineries Ltd. to M/s. Bharat Petroleum Corporation Ltd. Therefore, there is no question of logically viewing the movements from M/s. Cochin Refineries Ltd. to the petrol pumps as one ongoing and continuous process. When goods are supplied to outlets by M/s. Bharat Petroleum Corporation Ltd., another sale takes place, which we may for the sake of convenience label as second level wholesale. Now, we find that the law on exclusion of transport charges from beyond the factory gate of excisable goods is a clearly settled one, as can be seen from the following decisions :-
1979 (4) E.L.T. (J 490) (Ker.) 1980 (6) E.L.T. 193 (Bom.) 1980 (6) E.L.T. 220 (Bom.) Learned Additional Solicitor General of India also fairly conceded. Therefore, the freight element in this second level wholesale (from installation/depot to pump) is clearly deductible from the assessable value under Section 4 irrespective of whether quantum thereof is fixed by OCC or not. The Revenues argument on averaging of transport costs also does not hold much water, as this issue is finally settled by the Honble Supreme Court in the case law of Baroda Electric Meters as reported in 1997 (94) E.L.T. 13 (S.C.) = 1998 (74) ECR 721 (S.C.). It is, therefore, now well-settled law, that where such freight charges are averaged on regional or national basis (to keep retail prices to specified levels throughout the country), then even such average freight is deductible. We, therefore, conclude that the freight element in RPO charges is deductible from the assessable value. He further pointed out that the Tribunal in the case of IOCL 2007 (217) ELT 134 has allowed deduction of the amount collected for delivery within the FDZ. He argued that similar relief has also been allowed by the Tribunal in the case of IOCL as reported in 2007 (219) ELT 567.
4.2 Learned Counsel for the respondent argued that the expenditure incurred by them on freight for delivery within the FDZ is much higher than the amount collected by them. He informed that the said data was submitted before the Commissioner along with their reply dated 25.6.2004. In alternate argument, he argued that even if the expenditure on the freight is lower than the amount collected by them, the same cannot be charged in view of the decision of the Tribunal in the case of IOCL 2013 (291) ELT 449. The Tribunal in the said case has observed as under: -
20. I find that in the case of Baroda Electric Meters Ltd. (supra) Honble Supreme Court has set aside the finding of Tribunal, that wherever freight actually paid was less than the amount collected by way of freight and transportation charges the difference was appropriated by the appellant and, therefore, the same would be a part of the assessable value. In other words, the Honble Apex Court has held that when the freight actually paid was less than the amount collected by way of freight, the difference if retained by the appellant, it would still not form a apart of the assessable value. This judgment has been followed by the various Benches of the Tribunal in following cases:
(i) Gujarat Guardian Ltd. v. CCE, Surat - 2005 (191) E.L.T. 641 (Tri.-Mum)
(ii) Britco Food Co. Ltd. v. CCE, Pune - 2003 (55) RLT 359 (Tri.-Mum)
(iii) Hindustan Petroleum Corpn. Ltd. v. CCE, Mangalore - 2007 (207) E.L.T. 605 (Tri.-Bang.)
(iv) CCE, Bhubaneshwar v. Idcol Ferro Chrome & Alloys Ltd. - 2007 (217) E.L.T. 373 (Tri.-Kolkata)
(v) Rine Engineering Pvt. Ltd. v. CCE, Chandigarh - 2008 (86) RLT 933 (CESTAT-Del.)
(vi) CCE, Mumbai v. Cable Corpn. Ltd. - 2008 (85) RLT 759 (CESTAT-Mum.)
21.I find that in? the case of Gujarat Guardian Ltd., the amount collected was in respect of freight, in the case of Britco Food Co., the amount collected was in respect of Insurance charges, in the case of Hindustan Petroleum Corpn. Ltd, the amount collected by the appellant was in respect of delivery charges charged by bottling plants for delivery of LPG cylinder up to dealer premises, in the case of Idcol Ferro Chrome & Alloys, the amount collected was in respect of transportation charges, and in the case of Rine Engineering Ltd., the issue was collection of freight charges and in the case of Cable Corporation of India Ltd., the issue was freight charges. I would like to mention here in the case of Cable Corporation of India Ltd., there was a difference of opinion and the matter was referred to 3rd Member. The 3rd Member, following the judgment of Honble Apex Court in the case of Baroda Electric Meters Ltd., agreed with the view taken by ld. Member (Judicial). It is also seen that in the recent judgment of co-ordinate Bench in the case of Mercedes Benz India Pvt. Ltd. 2010 (260) E.L.T. 149 (Tri.-Mumbai), the co-ordinate Bench has taken a view that post 1-4-2000, when the provision of transaction value was brought into, the law position remains the same. I may respectfully reproduce the relevant portions of the judgment.
6. We are also of the view that the decision of the Honble Supreme Court with regard to the nature of the excess freight would not have been different, had their lordships considered the case for any period after 1-7-2000. The reason is that the crucial question is one of fact rather than of law. The question of fact as to the nature of the excess freight stands determined for all times by the Apex Court and accordingly, we hold that the excess freight collected from the dealers was only a profit on transportation and not an additional consideration within the meaning of this expression used in Rule 6, nor an additional amount within the meaning of the definition of transaction value under Section 4(3)(d) of the Act. In this view of the matter, we further hold that the distinction drawn by the learned Consultant for the Revenue between normal value and transaction value is not relevant in this case. It can be seen from the above reproduced portion of Para 6 of the judgment, the nature of excess freight has been held as profit on transportation and not as additional consideration, was the ratio followed, will be applicable in the case before me as the nature of the amount collected by the assessee was in respect of sales tax which is paid to the supplier of the goods i.e. Reliance Industries Ltd. I find that the ratio of the judgment relied upon by the ld. Counsel clearly indicate that any amount excess collected from the buyer is not required to be added in the transaction value. I also find that reliance placed by ld. Member (Judicial) on the judgment in the case of Mather & Platt Ltd. is correct and there was no claim made by current appellant to that purchaser that the sales tax is required to be paid by them to Govt. of India or otherwise.
5. We have gone through the rival submissions. We find that while the learned AR has stated that the charges of Rs.44/KL are not freight charges, the grounds of appeal clearly recognize that the said charge is freight charge. We find that a large number of decisions of the Tribunal had allowed deduction of such charges collected for delivery of goods within the FDZ. We find that the grounds of appeal raise the issue of quantum of amount collected as freight. We find that the appellant had submitted the data before the Commissioner which shows that the amount of freight collected is less than the actual expenditure. We also find that the Tribunal and superior Courts in number of cases held that any amount of freight which is collected in excess of actual freight is not includible in the assessable value. The appellant is particularly relied on the decision of the Tribunal in the case of IOCL 2013 (291) ELT 449 which specifically deals with the issue.
6. In view of the above, we do not find any merit in the appeal filed by the Revenue. The appeal is therefore rejected. CO disposed off.
(Pronounced in Court on 10.6.2016)
(M.V. Ravindran) (Raju)
Member (Judicial) Member (Technical)
Sinha
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Appeal No. E/3450/05