Custom, Excise & Service Tax Tribunal
Oil & Natural Gas Corporation Ltd vs Commissioner Of Central Excise on 6 May, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
LARGER BENCH
APPEAL NO. E/3191 to 3195/05 Mum
(Arising out of Order-in-Original No. 05-08 (02-03/RT)Commr./05-06 dated 21.07.2005 passed by the Commissioner of Central Excise Raigad)
APPEAL NO. E/2259/06 Mum
(Arising out of Order-in-Original No. 120/IDG(36) COMMR (ADJ)/RGD/05-06 dated 29.3.2006 passed by the Commissioner of Central Excise Raigad)
APPEAL NO. E/56/07 Mum
(Arising out of Order-in-Original No. 28/MS(07)COMMR/RGD/06-07 dated 19.09.2006 passed by the Commissioner of Central Excise Raigad)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri P.K.Jain, Member (Technical)
Honble Shri P.S.Pruthi, Member (Technical)
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 : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Oil & Natural Gas Corporation Ltd.
:
Appellant
Versus
Commissioner of Central Excise,
Raigad
Respondent
Appearance Shri V.Sridharan, Sr. Advocate with Shri Aziz Khan, Advocate Shri Rajesh Ostwal, Advocate for appellant Shri K.M. Mondal, Spl. Counsel For Respondent CORAM:
Shri M.V. Ravindran, Member (Judicial) Shri P.K. Jain, Member (Technical) Shri P.S. Pruthi, Member (Technical) Date of Hearing : 06.05.2015 Date of Decision : ..
ORDER NO.
Per : M.V. Ravindran This reference to Larger Bench is made to resolve the issue which is as under:-
Whether a manufacturer of LPG selling the product in bulk, post 1.7.2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price (APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f 1.7.2000.
2. Heard both sides and perused the records.
3. Learned Sr. Advocate appearing on behalf of the appellant submits that the Referral Order has not considered the issue which has been decided in the appellants own case. It is his submission that the issue involved in this case is whether the price at which the appellant sold the goods has to be considered for discharge of Central Excise duty on LPG or on the invoices raised by the appellant to Oil Marketing Companies. It is also his submission that the demand is for the period June 2002 to December 2004. He would submit that Refinery Transfer Price is the price charged in the commercial invoice by the Oil & Natural Gas Corporation Ltd. (ONGC) which is in accordance with the Administered Price Mechanism (APM)/Import Parity Price which has been worked out by Ministry of Petroleum and Natural Gases. It is his submission that the Referral Bench has opined that in MRPL case wherein identical issue was contested and decided by the Tribunal in favour of the assessee and upheld by the Apex Court is based upon an agreement between the Ministry of Finance and the Ministry of Petroleum and Natural Gas is not binding and law as per Central Excise Act needs to be applied. He would take us through the Referral Bench Order and submit that the Referral Bench has ventured into and took upon itself whether the decision of MRPL as passed by the Apex Court is sub silentio or otherwise is incorrect, as Apex Court considered the discussion held between the two Ministries of the Govt. of India on the self same issue for the period subsequent to the transaction value regime. He would submit that new Section 4 of Central Excise Act, 1944 came into picture from 01.07.2000 which requires the transaction value between purchaser and seller be considered for discharge of excise duty is the principle which cannot be faulted with, but in the case of ONGC, Liquefied Petroleum Gas (LPG) is sold to oil marketing company at a price which has been fixed by Govt. of India and excise duty is discharged on such prices, while in order to recover the cost which are more than the price fixed by the Govt. of India, ONGC issues the commercial invoices to Oil Marketing Company. He would submit that the commercial invoice of ONGC is definitely more than the value as mentioned for discharge of excise duty. He would read the decision of the Tribunal in the case of appellants own case pronounced on 06.08.2008 and submit that the Bench has taken into consideration all the angles and decided in favour of ONGC. He would submit that the Referral Order has not considered this judgement of the Tribunal in its entire reference. He would then draw our attention to the letter dated 01.01.2010 addressed to Secretary of the Ministry of Petroleum and Natural Gas by the Chairman, Central Board of Excise & Customs (CBEC) seeking to examine the issue and send the opinion of the Government in order to brief the Learned Attorney General in reply to such D.O letter, the Secretary of the Ministry of Petroleum & Natural Gas, vide letter 01.02.2010 replied that any change in the method of valuation for payment of excise duty on LPG for the period under reference would require equivalent compensation by the Government to the Oil Marketing Companies and would amount to transfer of money from one Government department to another. It is his submission that on this set of facts, referral to the Larger Bench needs to be disposed of in favour of the appellant.
4. Learned D.R. would submit that atleast in Appeal No. E/3346/06 the issue is little different and hence should not be considered as part of Larger Bench Referral. He submits that the Referral Order is self-explanatory and has correctly brought out the fact that post 01.07.2000 excise duty needs to be discharged on transaction value. It is his submission that ONGC supplies domestic LPG to Oil Marketing Companies and discharge excise duty on price which is less than the commercial invoice subsequently raised by the Oil Marketing Companies. The departmental representative would submit that the view taken by the Referral Bench that MRPL is sub silentio is correct and the view expressed in the MRPL case as has been upheld by the Honble Supreme Court will not be applicable and hence the Larger Bench has to decide whether transaction value needs to be applied in a situation like the one in this case. He would submit that the concept of valuation of products has undergone a change after 01.07.2000 and excise duty liability needs to be discharged on an amount/value received by the appellant herein. He would submit that in MRPL case heavy reliance was placed by the Counsel for the appellant is based upon the judgement of the Larger Bench which was in respect of the concept of the valuation prior to 01.07.2000.
5. On considering the submissions made by both sides, it is noted that the facts in the case are not much in dispute which has been brought out by the Referral Bench which we reproduce:-
The dispute in the present case relates to the valuation, for assessment of duty of LPG (domestic) cleared in bulk from the appellant factory (refinery) to Oil Marketing Companies, namely Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCK) and Indian Oil Corporation Ltd. (IOCL) during the period June 2002 to December 2004. The appellant sold the goods to the OMCs at a price which was referred to as Import Parity Price and the OMCs sold the same after bottling in cylinders to their dealers at price fixed under a scheme called Administered Price Mechanism (APM) by the Oil Co-ordination Committee under the Ministry of Petroleum, Govt. of India and the dealers in turn, supplied the goods in cylinders at the same APM price to the domestic consumers.
5.1 The Referral Bench has noted that the Tribunal in the case of the appellants own case has decided an identical issue vide final order No. A/1535-1541/WZB/AHD/08 dated 06.08.2008 but has not recorded anywhere in the findings, as to why the said view is not applicable in the case in hand. It is seen from the referral order that the Referral Bench has referred the matter to the Larger Bench considering the definition of transaction value as incorporated in Section 4 of the Central Excise Act, 1944 from 01.07.2000 and also referring to the MRPL case. It is recorded that MRPL case was decided by the Honble Apex Court on a circular issued by the CBEC and hence the judgement of Apex Court dismissing the civil appeal filed by MRPL is sub silentio; at the same time the Referral Bench records that the facts of the case in hand of ONGC are similar to the MRPL case. The Referral Bench has also referred to the Bench of the Apex Court in the case of Mazagon Dock Ltd. Wherein it was held that subsidy amount paid by the Government to ONGC needs to be included in the transaction value; applying the ratio for referring the issue to larger bench.
5.2 At the outset it has to be recorded that identical issue was considered by the Tribunal in respect of very same assessee i.e. M/s ONGC in appeal No. E/941 to 947/2006 vide final order dated 06.08.2008 this Tribunal disposed of all the appeals in favour of ONGC recorded as under:-
Identical issue of the very same appellant came up before the Bench in subsequent Appeal No.E/1438, 1439 and 1341/2006, vide final order No. A/2587-2589/WZB/AHD/2008 dated 26.11.2008, following the earlier order dated 06.08.2008 bench held in favour of the appellant herein. It can be seen from the above reproduced detailed order of the Tribunal in their own case and decided at Ahmedabad, that the facts in that case in hand is same and for more or less the same period for. It is also to be noticed that the Tribunal has considered the Boards Circular dated 04.09.2004 and reproduced that portion of the Boards Circular which was relevant for the issue in hand. The said relevance of the Boards Circular is also applicable in the case in hand of the same assessee, which would mean that even after amendment of Section 4 in the case of goods which are subjected to APM of the Govt. of India, assessment practice will have to continue as existed prior to amendment of the Section. It is also to be noted that the Tribunal in the above reproduced detailed order has also considered the judgement of the Tribunal in the case MRPL which has been relied upon by the Referral Bench to hold that transaction value needs to be added with the subsidy if any. In these peculiar facts and circumstances of the case, the Referral Bench should have followed the view expressed by the Tribunal in the appellants own case.
5.3 It is also to be noted that the Boards Circular dated 30.06.2000 which has been reproduced in its entittrity by the Referral Bench talks about an agreement reached between two Ministries of the Govt. of India. It is seen that the said CBEC Circular No.563/59/2000-CX dated 21.12.2000 in para 4 records as under:-
As the view taken by Tribunal did not appear to be strictly in accordance with the provisions of Section 4, the department filed a Civil Appeal in the Supreme Court, after obtaining the clearance from the Committee on Disputes and also after obtaining the opinion of the learned Attorney General. The Honble Supreme Court, however, during the course of hearing, desired that the matter should be resolved by the two departments i.e. Department of Revenue and Ministry of Petroleum. The matter was accordingly recently discussed first in the Board and thereafter in a meeting held between the representatives of Department of Revenue and Department of Petroleum and Natural Gas. The various aspects of the dispute were examined and it was inter alia noted that the product was being marketed under administered price regime and the producers/marketing oil companies had no choice but to sell the products at prices fixed by OCC. It was also a fact that LPG whether it was cleared in packed condition from refinery or when packed in an outside bottling unit, was sold at same price to consumers as fixed by OCC. It was felt, therefore, that it may not be appropriate to insist on Supreme Courts ruling as to whether as per Section 4 higher value (and resultant excise duty) in second category of cases is legally justified. Both the departments agreed that even if Supreme Court agreed with revenue view point the Oil Companies will not be able to recover any duty. After discussions with representatives of Ministry of Petroleum and considering Honble Apex Court direction to resolve the dispute essentially between Govt. and PSUs, it has been decided by the Govt. that in the special circumstances of production and marketing of LPG with Administered Price regime, we may accept the order of the CEGAT vide their No.1528 to 1538/99-A dated 27.10.1999 in the case of M/s. Gas Authority of India Ltd. v. Commissioner of Central Excise, Vadodara, subject to the condition that the refineries/oil companies who have already paid up the demands raised by the Central Excise Department and consequently may be entitled for refund will not be paid any interest on the refund amount held admissible subject to the principle of unjust enrichment being satisfied. It has also been agreed that the oil companies will scrutinize their records and wherever LPG has been cleared at lower price meant for LPG packed (domestic) but actually sold in bulk, they will forthwith pay differential duty on such LPG bulk. 5.4 It can be seen from the above reproduced paragraph 4 of the Boards Circular, it categorically records that there was a discussion between the representatives of Ministry of Petroleum & Natural Gas and Ministry of Finance and it was decided to accept the order of the Tribunal in the case of Gas Authority of India which is a Larger Bench decision with only condition that Refinery and Oil Company who has already paid the demands will be entitled for refund but no interest is to be paid. The said Circular is not a concession but has been issued after deliberating in detail the issue between the two Ministries of the Govt. of India and such Circular is binding on the Revenue. Revenue could not have argued against such Circular. It is to be noted that when there is an agreement between two Government departments on the same issue as it was in MRPL case, the view taken in the MRPL case will be applicable in the case in hand and more, so when on the same set of facts in the appellants own case the Tribunal has held in their favour.
5.5 We were informed by the learned Counsel for the appellant that the Ministry of Finance and the Ministry of Petroleum and Natural Gas were in correspondence regarding the very same issue and the said letters are brought to our notice, which we reproduce:-
5.5 It can be seen from the above reproduced letters of the Chairman of CBEC and the reply given by the Secretary of the Petroleum and Natural Gas, Govt. of India, the entire issue has been correctly put by the Secretary of the Petroleum and Natural Gas that it will be a transfer of money from one Govt. department to another. We were also informed that the appeals filed by the Revenue against the judgement of the Tribunal in the appellants own case are still pending in the Apex Court.
5.6 In view of the foregoing as recorded herein above, the Referral Bench ought to have followed the views expressed by the Tribunal in the appellants own case. Accordingly, it has to be held that the views expressed by the Tribunal in the appellants own case is the correct view and will be applicable..
6. Reference answered accordingly.
(Pronounced in Court on.) (M.V. Ravindran) Member (Judicial) (P.K.Jain) Member (Technical) P.S. Pruthi, Member (Technical)
7. I have carefully gone through the order prepared by my learned brother, Shri M.V. Ravindran, Member (Judicial) and received by me on 14th August 2015. However, I am unable to persuade myself to agree with the same for the reasons recorded hereinafter.
8. The main reasons cited by the referral bench for differing with earlier orders of coordinate benches are discussed in para 8.1 and 8.2 of the referral order. These relate to amended Section 4 of the Central Excise Act, 1944. However, I do not find any discussion or even mention of the same in the orders recorded by my learned brother, Member (Judicial).
8.1 The main reason recorded by my learned brother in para 5.2 is that this Tribunal in the appellants own case vide detailed order dated 6.8.2008 has taken a particular view and the facts in the present case are more or less the same and in that case the Tribunal has also considered Boards Circular dated 4.9.2004.
8.2 I have perused the said order of the Tribunal (which is reproduced in para 5.2). I find that para 2 of the Tribunals order lists out the submissions made by the counsel for the appellant. Para 3 lists out the submissions of the SDR and para 4 is the discussion and analysis made by the Tribunal. The said para 4 is reproduced below:-
4. We have considered the argument advanced by both sides in detail. We find that the issue already stands decided in the cases of Reliance Industries & MRPL cited above by the Tribunal in favour of the parties and facts circumstances are the same. There is no dispute that additional consideration which is paid by the oil marketing companies has been paid out of the subsidy from oil pool account and not received from ultimate consumers. In view of the facts the Larger bench has already decided the issue and two Benches of this Tribunal have followed the same, we respectfully follow the same and allow the appeals filed by ONGC. By no stretch of imagination, the above mentioned order of the Tribunal can be considered a detailed order. The issue in the present case relates to the valuation of goods. The whole order does not speak anywhere about the provisions of Section 4 i.e. which deals with the valuation of goods or the Valuation Rules or anything of that type. In few sentences, it comes to particular conclusion in view of Larger Bench decision (which was for period prior to 1.7.2000), Tribunals decision in MRPL case and RIL case.
8.3 The issue before the Larger Bench in the case of Gas Authority of India Ltd. was whether the LPG gas which when cleared in bulk from refinery/manufacturing place to bottling plant for bottling the same in the cylinder for household use, would be valued in the condition in which it is being cleared or after bottling. It may be mentioned that the price of LPG bulk was higher than the price at which the LPG was being sold to the domestic consumer. It would thus be seen that the issue before the Larger Bench was not the valuation of LPG cleared by manufacturer to oil marketing company. The Larger Bench of this Tribunal in the case of Gas Authority of India Ltd. (supra) which was pertaining to period prior to 1.7.2000 took the view that excise duty on LPG cleared in bulk for domestic consumption as per the price fixed by the OCC is the correct duty to be paid. Revenue was not satisfied with the decision and had filed appeal before Honble Supreme Court. However later on, the Board issued the circular dated 21.12.2000. Perusing the above circular, it is seen that even at the time of issue of this circular, the dispute was persisting between the Department of Revenue and the oil companies as to the price to be adopted for assessment purposes. This is quite apparent from para 1 of the Circular. Relevant portion of para 1 and 4 is reproduced below:
1. The Oil Co-ordination Committee (OCC) has been fixing from time to time different prices for LPG bulk and the LPG packed (domestic or industrial) which is meant for domestic or industrial supply. The price for LPG bulk is always higher than the price for LPG packed (domestic). As far as LPG cleared in packed form (generally in cylinders) from the refinery/extraction plant itself is concerned, these were assessed to duty on the price fixed by the OCC for LPG (packed domestic or industrial, as the case may be) and no disputes/difficulties arose in these cases. Similarly for LPG bulk cleared from the refinery/extraction plant for industrial users, duty was being charged and paid at the higher price fixed for LPG bulk. Difference of opinion however arose between the Department of Revenue and the Oil Companies/Extraction Plants about value to be taken for assessment purposess in respect of LPG cleared in bulk, but meant for packing in cylinders in separate bottling units for domestic use subsequently. The Audit and the Department took the view that as per Section 4 of the Central Excise Act, the duty has to be charged on the goods in the form in which they are cleared at the time and place of production. The OCC had fixed the price both for packed LPG for domestic purpose and the bulk LPG, and since the goods were cleared in bulk from the factory (i.e., refineries/extraction plants), they had to discharge duty at the prices fixed for the LPG in bulk.
4. As the view taken by Tribunal did not appear to be strictly in accordance?with the provisions of Sec. 4, the Department filed a Civil Appeal in the Supreme Court, after obtaining the clearance from the Committee on Disputes and also after obtaining the opinion of the learned Attorney General. The Hon'ble Supreme Court, however, during the course of hearing, desired that the matter should be resolved by the two Departments i.e. Department of Revenue and Ministry of Petroleum. The matter was accordingly recently discussed first in the Board and thereafter in a meeting held between the representatives of Department of Revenue and Department of Petroleum & Natural Gas. The various aspects of the dispute were examined and it was inter alia noted that the product was being marketed under administered price regime and the producers/marketing oil companies had no choice but to sell the products at prices fixed by OCC. It was also a fact that LPG whether it was cleared in packed condition from refinery or when packed in an outside bottling unit, was sold at same price to consumers as fixed by OCC. It was felt, therefore, that it may not be appropriate to insist on Supreme Courts ruling as to whether as per Section 4 higher value (and resultant excise duty) in second category of cases is legally justified. Both the Departments agreed that even if Supreme Court agreed with revenue view point the Oil Companies will not be able to recover any duty. After discussions with representatives of Ministry of Petroleum and considering Hon'ble Apex Court direction to resolve the dispute essentially between Govt. and PSUs, it has been decided by the Govt. that in the special circumstances of production and marketing of LPG with Administered Price regime, we may accept the order of the CEGAT vide their order No. 1528 to 1538/99-A dated 27-10-1999 in the case of M/s. Gas Authority of India Ltd. v. Commissioner of Central Excise, Vadodara, subject to the condition that the refineries/oil companies who have already paid up the demands raised by the Central Excise Department and consequently may be entitled for refund will not be paid any interest on the refund amount held admissible subject to the principle of unjust enrichment being satisfied. It has also been agreed that the oil companies will scrutinize their records and wherever LPG has been cleared at lower price meant for LPG packed (Domestic) but actually sold in bulk, they will forthwith pay differential duty on such LPG bulk. 8.4 From the above Boards circular dated 21.12.2000, it appears to me that the Revenue was not in favour of even accepting the Larger Bench decision of this Tribunal in the case of Gas Authority of India Ltd., therefore filed appeal before the Honble Supreme Court after taking opinion of Attorney General. However, the Honble Supreme Court desired that the matter be resolved by the two Departments and the appeal was dismissed as not pressed. In view of the direction of Honble Supreme Court, and various considerations elaborated in the circular, Larger Bench order was accepted. It is clear from the circular that Tribunals order was not accepted on legal/judicial consideration but administrative consideration. In my considered view, for future dispute, particularly when law itself was amended, in such a situation it is the duty of this Tribunal to examine the legal issues and give a verdict on the legal issue. If the circular was issued based upon legal analysis, this Tribunal will be justified to say that Revenue could not have argued against the circular. But that is not the case here. In case Government finds that Tribunals decision is not acceptable due to administrative considerations such as subsidy etc., Government is empowered to issue suitable exemption notification or bring change in law to align the law with administrative desirability.
8.5 The second reason for arriving at the conclusion in appellants case (para 8.1 above) was this Tribunals decision in the case of MRPL. I have also gone through the Tribunals decision in the case of MRPL reported in 2007 (78) RLT 508 (T). A perusal of the said decision of the Tribunal will indicate that para 1 of the order gives the brief facts of the case. In para 2, the submissions made by the senior counsel for the appellant and in para 3 that of JDR. The main contention of the senior counsel in the MRPL case was the Larger Bench decision of this Tribunal in the case of Gas Authority of India Ltd. The Tribunal did not independently analyse the issue with reference to Section 4 or Valuation Rules or any of the Boards circular, but simply reproduced para 7 to 13 of the judgment of this Tribunal in the case of Gas Authority of India Ltd. which was for period prior to 1.7.2000. The Larger Bench had no occasion to consider the concept of transaction value under Section 4(3)(d) of the Central Excise Act, 1944 and therefore, this Tribunal should not have applied this case law without legal analysis. The crucial aspect that the concept of value and Section 4 has changed from 1.7.2000 was totally missed in the order of MRPL. The fact that before 1.7.2000, Section 4(i)(a) proviso (ii) read as under:-
Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof. and that there is no corresponding provision in the new Section 4 which is effective from 1.7.2000 and the new Section 4 speaks of the transaction value and transaction value alone was totally lost sight of. The said judgment similarly reproduced one para relating to HPCL case which again did not discuss anything relating to either the old Section 4 or the new Section 4. After quoting the above paragraphs, this Tribunal held in favour of MRPL. Revenue filed Civil Appeal No. 432 of 2008 against the said judgment of MRPL in the Honble Supreme Court. The said appeal came to be dismissed by the Honble Supreme Court by its order dtd. 01/10/2008 holding that the issue involved in this case is squarely covered by the Circular issued by Central Board of Excise & Customs, New Delhi, bearing no. 563/59/2000-CX, dtd. 21st December, 2000 which circular is binding on the Department. However, the referral Bench in para 8.5 and 8.6 has rightly discussed in detail how the said judgment cannot be taken as precedent.
8.6 In view of the above analysis, in my considered view, none of the judgments so far issued by this Tribunal or any other court have analysed the issue with reference to the legal position i.e. old Section 4, new Section 4 and the fact that the appellant is selling the goods to the oil marketing company on import price parity basis and not APM basis.
8.7 My learned brother has also mentioned the Boards circular dated 6.9.2004. This circular was quoted by the counsel for the appellant in that case of ONGC (present appellant) and the Tribunal did not discuss anything about the said circular. Be that as it may, one has to understand the circular with reference to the context in which it is issued. Till 6.9.2004 the petroleum products were covered under the warehousing provisions which implied that all petroleum products after manufacture were moving from one warehouse to the other warehouse without payment of duty and it is only near the final consumption destination that the duty was being paid. On 6.9.2004, the Government withdrew the facility of warehousing in respect of the petroleum products and when the facility was removed with immediate effect, in order to ensure that there is no obstruction in the movement or clearance of petroleum products thereby causing shortage of such items in different parts of the country, the Board had issued a general circular. This circular was not meant to examine the valuation aspect of the petroleum products. In any case, this circular does not analyse about the sale of LPG by a manufacturer to an oil marketing company wherein the manufacturer is recovering the price corresponding to the import price parity. In my considered view, any reliance on the circular dated 6.9.2004 in the context of the present issue will be totally misplaced. In any case, in the said order of the Tribunal the Boards circular dated 6.9.2004 was not the basis to arrive at the conclusion.
8.8 My learned brother in para 5.5 has referred to a letter written by the Chairman, CBEC, to the Secretary, Ministry of Petroleum and Natural Gas and the reply of the Secretary, Ministry of Petroleum and Natural Gas, which are reproduced in para 5.5. It would be interesting to note what the Chairman, CBEC, has to say on the legal issue. Para 2 of the said letter is reproduced below:-
2. It may be noted that Section 4 of the Central Excise Act, 1944 governing the valuation of the excisable goods, was amended with effect from 1.7.2000 whereby the concept of Transaction Value was introduced. The earlier practice was to charge duty on the deemed value arrived and Section 4 of the Central Excise Act, 1944 had a provision that in case the value has been fixed for sale by a Government Department, the same shall be adopted as the value. However, this provision was not included in the new provision w.e.f. 1.7.2000 and charging duty on Transaction Value meant that any additional consideration in or in relation to the sale of excisable goods have to be included in the assessable value. The dispute arose in the case of the above mentioned two products because these goods were being sold at a price lower than their cost price and there was additional consideration flowing back to the refineries/fractionators through the OMCs in order to recover their losses. While the Department has been of the firm view that the duty has to be paid on the Transaction Value, the OMCs are of the opinion that the earlier practice of charging duty on the deemed value should continue, as this was the intention of the Government. However, their arguments are not tenable as these emanate from their reading of earlier instructions issued by the Department which would not be applicable after the change in the law. The above para very clearly indicates the views of CBEC on the legal position. It is for this reason that appeals are being filed by Revenue in the Honble Supreme Court against the decision of this Tribunal in the appellants own cases as well. The reply of the Secretary, Ministry of Petroleum, does not discuss anything about the legal aspect but only speaks about the administrative aspect and speaks that the oil marketing companies will have to be compensated by the Government in case the view taken by the CBEC is accepted.
8.9 A perusal of circular dated 21.12.2000 as also the letter of the Chairman, CBEC, clearly indicates the Revenues stand all along, more particularly after 1.7.2000.
8.10 Ld. Sr. Counsel for the appellant invited attention of the Bench to para 26 of the Boards Circular dtd. 30/06/2000 and submitted that the Board has clarified that even after new Section 4 of the Central Excise Act, 1944 was brought into force, the present practice of assessment of price administered petroleum products should be continued. For the sake of convenience, para 26 of the circular is reproduced below:
26. The Application of new Section 4 and the valuation rules made thereunder to petroleum products may now be mentioned. Under the provisions of the existing Section 4 and rules made thereunder, the practice being followed is to assess the price administered petroleum products like motor spirit, HSD, SKO (domestic) and LPG to duty on the ex-storage sale prices that are fixed by the Oil Coordination Committee (OCC) from time to time. The assessable value is the same irrespective of whether the administered petroleum products are sold at the refineries or through the marketing companies. It would be seen that but for the normal value being replaced by transaction value or normal transaction value (in case goods are sold at a point other than the place of removal), there is no essential difference in the scheme of valuation of petroleum products under the old Section 4 and the new Section 4. As such, the new Section 4 and the valuation rules when applied to the marketing of price administered petroleum products as it exists should not make any material difference in assessable value of these products. However, this aspect may be examined by the Commissioners and it may be ensured that for the present the assessment of price administered petroleum products may be continued to be made as per the hitherto practice of assessment. It may be ensured by the Commissioners that no disruption is caused in the movement of these petroleum products. In case, as a result of examination of provisions of new Section 4 and rules made thereunder, it is felt that the assessable value would get increased for the price administered petroleum products, provisional assessment may be resorted to at the current level of assessable value and a detailed reference may be made to the Board for further examination. The reference may be made as early as possible bringing out clearly the issue involved and the views of the Commissioners thereon. On a careful examination of para 26, it does not appear that the Board has anywhere stated that even when the manufacturer was selling the goods at a price higher than the APM price, then also the APM price is to be taken as the transaction value for purposes of assessment. Similarly, this circular no where states that even wherein manufacturer (like appellant) is selling the gas in bulk at import price parity to OMCs, duty is required to be collected at APM prices.
9. During the discussion, my learned brother Member (Judicial) has indicated that since there is a decision of a coordinate Bench, it was the duty of the referral Bench to follow the same order and not to refer the matter to the Larger Bench. While this would be true normally, but when a coordinate Bench strongly feels that the decision of the coordinate Bench is not correct or the coordinate Bench has not taken into consideration certain aspects, there cannot be a bar not to follow the earlier order. In this connection, I may usefully rely upon the judgment of the Honble Supreme court in the case of Union of India vs. Paras Laminates (P) Ltd. reported in 1990 (49) ELT 322. In para 9 of this judgment, the Honble Supreme Court has held as follows:
9. It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters. Classification of particular goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions, lest such judicial inconsistency should shake public confidence in the administration of justice. It is, however, equally true that it is vital to the administration of justice that those exercising judicial power must have the necessary freedom to doubt the correctness of an earlier decision if and when subsequent proceedings bring to light what is perceived by them as an erroneous decision in the earlier case. In such circumstances, it is but natural and reasonable and indeed efficacious that the case is referred to a larger Bench. This is what was done by the Bench of two members who in their reasoned order pointed out what they perceived to be an error of law in the earlier decision and stated the points for the President to make a reference to a larger Bench. [emphasis supplied] From the above judgment of the Honble Apex Court, it can be safely said that the referral Bench was not bound to blindly follow the Tribunals decision in the appellants own case or the case of MRPL and hence by a reasoned order, it has rightly referred the matter to the Larger Bench for a considered decision on merits.
10. It is to be noted that after passing of the said order, at least in two cases of the present appellant, the Honble Supreme Court has admitted the appeals filed by the Revenue which imply that prima facie the Honble Supreme Court is of the view that the question of law is involved and the matter is pending before the Honble Supreme Court. In fact, in another case as reported in 2015 (320) ELT A255 (SC), it appears that the Honble Supreme Court in one appeal of the present appellant has refused to condone the delay but has observed that the question of law will remain open for future. The authenticity of the said finding is disputed by the learned senior counsel vide his letter dated 15.7.2015 which was submitted after the hearing was over on 6.5.2015 . However, whatever the truth may be, the fact remains that at least Civil Appeal No. 8063-8069 of 2010 as also 4197-4199 of 2010 have been admitted by the Honble Supreme Court to decide the said question of law.
11. During the discussion as also in para 5.5 of the order, learned Member (Judicial) also was of the view that since the matter is pending before the Honble Supreme Court in the appellants own cases as detailed below,-
i) Civil Appeal No. D28289/2009 which has been converted into Civil Appeal No.8063-8069 of 2010 (Order of CESTAT No. A/1535-1541/WZB/AHD/08 dated 6.8.2008 [2015] 320 ELT 614);
ii) Civil Appeal No. D24746 of 2009 which has been converted into Civil Appeal No.4197-4199 of 2010 (Order of CESTAT bearing No. A/2587-2589/WZB/AHD/2008 dated 26.11.2008), there is no reason for the Bench to take any view in the matter. I am unable to agree with the said view. In fact, recently in the case of Standard Chartered Bank & others vs. CST, Mumbai-I reported in 2015-TIOL-1713-CESTAT-DEL-LB, similar issue has come up wherein the Revenue had taken similar objection and wanted that Larger Bench should not decide the issue. In that context, the Larger Bench in the said case has observed as under:-
46. Preliminary Objections by Revenue to hearing of the Reference :
The Principal Commissioner, Service Tax (Mumbai-I and IV) has filed miscellaneous application No. ST/MA(ORS)/93629/15-Mum seeking adjournment hearing of this reference until final disposal of "this matter" by the Hon'ble Supreme Court of India.
It is pleaded that against the Tribunal decision in ABN Amro Bank Limited, the successor to this Bank i.e. Royal Bank of Scotland N.V. filed Central Excise Appeal No. 693 of 2012 before the Allahabad High Court. The High Court dismissed the appeal on 28.04.2014, on the ground that an alternative remedy of an appeal (to the Supreme Court) was available against the order in ABN Amro Bank Limited. Against this decision Royal Bank of Scotland N.V. filed SLP (C) 12901 of 2014. By the order dated 08.05.2014, Supreme Court directed issue of notice on the SLP and that this SLP be tagged with SLP (C) No. CC.709/2012. The applicant further pleads that the decision in ABN Amro Bank Limited was independently challenged before the Supreme Court and is pending consideration.
Revenue pleads that the reference ought not to be heard and be adjourned to await the decision of the Supreme Court in appeals preferred against the decision of the Allahabad High Court and of this Tribunal in ABN Amro Bank Limited.
On 18.05.2015 we orally rejected Revenue's plea for adjournment and now record our reasons for doing so. The ABN Amro Bank Limited decision by a Division Bench was doubted in the order of reference which referred specified issues for resolution of the Larger Bench. Mere filing or pendency of an appeal against the decision in ABN Amro Bank Limited , neither eclipses this decision nor operates as a fetter on another Division Bench, which would be free to either follow the ABN Amro Bank Limited decision or could doubt its correctness and seek interpretation, by a Larger Bench. There is also no purpose served in adjourning the reference to await the decision of the Hon'ble Supreme Court. In case theABN Amro Bank Limited decision is confirmed by the Supreme Court, that would be the governing law and the reference would not survive. The same would be the position if ABN Amro Bank Limited decision is reversed in appeal. Till a final pronouncement by the Supreme Court emerges, there exist diametrically contrary views in the Tribunal; one the final order in ABN Amro Bank Limited and the other which is expressed in the order of reference and in respect of the same subject matter, namely identification of the scope of "credit card services" in BOFS, during the period prior to 01.05.2006.
Resolution of such a conflict at the level of the Tribunal is therefore a salutary course of action, in interests of interpretative stability which would operate until an authoritative decision is received from the judgment of Supreme Court.
There is also precedential guidance on this aspect. A two Member Bench of this Tribunal disagreed with an earlier decision of a special Bench of this Tribunal and referred the matter to the President for constitution of a Larger Bench of five Members, for reconsideration of the earlier decision of the three Member Bench, while an appeal against the three Member Bench decision was pending before the Supreme Court. The President constituted a five Member Bench and this was challenged before the Delhi High Court. In Paras Laminates (Pvt.) Ltd., vs. CEGAT 1990 (45) ELT 521 (Dli); the Delhi High Court quashed the order of the President referring the case to a five Member Bench and inter-alia observed:
Judicial propriety demanded that before the constitution of the Larger Bench, the President should have waited for the decision of the Supreme Court which would have been binding on all the Courts.
The order of the special Bench and the order of the President referring the case to the Larger Bench were quashed for a plurality of reasons including jurisdictional. Against this order, an appeal was preferred which was allowed by the Supreme Court in Union of India vs. Paras Laminates (Pvt.) Limited 1990 (49) ELT 322 (SC) = 2002-TIOL-48-SC-CUS. The Supreme Court ruled that President had the jurisdiction to order the reference. The observation of the High Court regarding the propriety of awaiting the decision of the Supreme Court before constituting a Larger Bench was neither argued nor decided by the Apex Court. The consequence of allowing the appeal is however that this observation of the High Court also stood impliedly reversed.
A special (five Member) Bench in Tetragon Chemi (Pvt.) Limited vs. Collector of Central Excise, Bangalore 2001 (138) ELT 414 (Tri. LB) specifically rejected a similar objection, also presented by Revenue i.e. to the hearing of a reference by special Bench when a decision of the earlier Division Bench was the subject matter of an appeal to the Supreme Court and was pending consideration by that Court.
The decisions cited by Revenue in support of its contentions in the miscellaneous application including the decision in Union of India vs. Jaiswal Coal Company Limited (1992) 5 SCC 733are irrelevant and do not provide any guidance on this aspect of the matter.
For the foregoing reasons, Miscellaneous application No. ST/MA(ORS)/ 93629/15-Mum. is rejected. In view of the foregoing precedent decision, in my considered view, Larger Bench should decide the issue referred by the referral bench.
12. I also note that the referral Bench has referred the matter to the President and the President in turn found that the reference is in order and thereafter constituted this Larger Bench. It will not be appropriate on the part of this Bench not to examine the issue on the merits particularly the issue raised by the referral Bench and just send back the reference with a direction to follow the order of this Tribunal in appellants own case. It will also be disrespect to the Presidents direction. Larger Bench should examine the issue keeping in view various legal and judicial aspect and decide which may be as per the earlier order or as per the views of the referral bench. If the earlier views are not in accordance with law, the same are required to be amended for future. I also note that due to pressure of work, many a times this Tribunal misses certain facts as also the changes in law or holistic view of a scheme covered by certain Sections/Rules and passes the order, but in my considered view, it is the bounden duty of the Tribunal to rectify any such mistake whenever pointed out by any party to the litigation and not brush aside any such argument. Case laws are not above law. Law should be respected more than case law. The coordinate referral bench has just done that. We will be failing in our duty if instead of examining the matter, particularly the points raised by the referral bench, we brush aside the reference or arguments.
13. With above in view, I proceed to record my views on the merits of the reference.
14. There is no dispute that appellant ONGC sold and cleared LPG (bulk) from its refinery to OMCs during the period, June, 2002 to December, 2004. The OMCs sold, a part of it (which is subject matter of dispute) after bottling in cylinders to domestic consumers through dealers. ONGC sold to the OMCs at a price as indicated in commercial invoices. This price was based upon Import Price Parity. Amount indicated in commercial invoices was collected from OMC. However, excise duty was not paid as per these invoices. OMC in turn sold the same after bottling in cylinders at APM price which was ex-storage price fixed by OCC, Ministry of Petroleum, ONGC paid central excise duty on APM price under cover of central excise invoices issued under Rule 11 of the Central Excise Rules, 2002. The OMCs received compensation/subsidy (i.e. difference between ex-refinery price paid to ONGC and the ex-storage price i.e. APM price collected from the dealers) from the Oil Pool Account/Subsidy maintained by the Ministry of Petroleum. ONGC did not receive any subsidy or compensation from the Govt.
14.1 Prior to 01/07/2000, Section 4 of the Central Excise Act, 1944 provided for the concept of the normal wholesale price which was replaced w.e.f. 1.7.2000 by the concept of transaction value by amending Section 4 of the Act. This is a fundamental departure as clarified by the Board vide its Circular M.F. (D.R.) F. No. 354/81/2000-TRU dated 30/06/2000. Paras 4 & 5 of the said Circular which are relevant for the present purpose are reproduced below:
4. The definition of "transaction value" needs to be carefully taken note of as there is fundamental departure from the erstwhile system of valuation that was essentially based on the concept of Normal Wholesale Price, even though sales were effected at varying prices to different buyers or class of buyers from factory gate or Depots etc. had to be determined.
5. The new Section 4 essentially seeks to accept different transaction values which may be charged by the assessee to different customers, for assessment purposes so long as these are based upon purely commercial consideration where buyer and the seller have no relationship and price is the sole consideration for sale. Thus, it enables valuation of goods for excise purposes on value charged as per commercial practices rather than looking for a notionally determined value. 14.2 Transaction value has been defined in amended Section 4(3)(d) of the Central Excise Act as follows:
(d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. As per the amended Section 4(1)(a) of the Act, assessable value for payment of duty of excise shall be the transaction value in a case where the goods are sold by the assessee for delivery at the time and place of removal, the assessee and the buyer are not related and the price is the sole consideration for the sale. As per this provision, for the transaction value to be reckoned as the assessable value, three conditions are required to be satisfied, namely, (i) sale of goods by the assessee for delivery at the time and place of removal, (ii) the assessee and the buyer are not related and (iii) the price is the sole consideration for the sale. In the present case, admittedly, the appellant satisfied all these conditions. Therefore, the assessable value of LPG which was sold in bulk, ex-refinery, to the OMCs should be its transaction value as defined in new Section 4(3)(d) of the Act.
14.3 From the definition of transaction value, it is quite clear that the transaction value of excisable goods is the price actually paid or payable for the goods when sold and includes, in addition to such price, any additional consideration which the buyer is liable to pay to, or on behalf of the assessee by reason of, or in connection with the sale. In the present case, the sale amount actually paid by the buyer (OMCs) to the appellant (ONGC) as price of LPG (bulk), ex-refinery, is the one mentioned in the commercial invoice and that only is the transaction value of the goods.
14.4 Under the contract of sale between ONGC and the OMCs in this case, the latter was liable to pay the ex-refinery price (i.e. import parity price). Therefore, it cannot be denied that the price actually paid by the OMCs to the appellant is the transaction value as defined in Section 4(3)(d), which is the price mentioned in ONGCs commercial invoices. The fact that appellants customer i.e. OMCs in turn were selling part of such goods (after bottling) to final consumer at APM price and the differential between their purchase price and APM price was being received by them as subsidy or from Oil Pool Account is of no consequence as far as Section 4 of the Central Excise Act is concerned.
15. In the context of Sales Tax Incentive Scheme in the case of C.C.E., Jaipur V/s. Shree Rajasthan Syntex Ltd. - 2015 (318) ELT 626 (S.C.) there was a controversy between the parties as to whether full incidence of sales tax collected by the respondents should be deducted from the total amount to arrive at the assessable value of the excisable goods for payment of duty of excise after 1/7/2000 when new Section 4 of the Central Excise Act, 1944 came into force. In that case, the respondents were collecting full incidence of sales tax from its buyer, retained 75% of the same and only 25% of the said sales tax was paid to the State Government under the Incentive Scheme. Proceedings were initiated by the Central Excise Department by issue of a Show Cause Notice dated 26/11/2001 demanding duty of Rs.37,03,161/- on the ground that excise duty was payable on the amount after including the aforesaid 75% sales tax as well. In adjudication, the Commissioner confirmed the duty demand. In appeal, the Tribunal set aside the Commissioners order. The Department went in appeal before the Honble Apex Court against the Tribunals Order. In para 4 of its order and judgment, the Honble Apex Court held as follows :
4. . The valuation of the excisable goods has to be in terms of Section 4 of the Central Excise Act, 1944. The said Section was amended in the year 2000 which amendment came into effect on 1-7-2000. The legal position relating to identical sales tax incentives Scheme which would prevail in view of the unamended provision as well as amended provision, came up for consideration before this Court in Commissioner of Central Excise, Jaipur-II v. Super Syncotex (India Ltd.) - 2014 (301) E.L.T. 273 (S.C.). This Court took the view, after analysing the provision of Section 4 which provided prior to the amendment, that the assessee would be entitled to claim deductions towards sales tax from the assessable value and sales tax incentive which is retained by the assessee namely 75% sales tax amount in this case. The Court also held that this position changed after the amendment in Section 4 with effect form 1-7-2000 and in arriving the transaction value the amount of 75% which was retained by the assessee, will be included. As per the aforesaid decision, the assessee/respondent herein will not be liable to pay any excise duty on the sales tax amount which was retained under the Incentive Scheme up to 30th June, 2000. However, this component of sales tax which was retained by the assessee after 1-7-2000 shall be includible in arriving at the transaction value and sales tax shall be paid thereon..
The ratio of the above judgment is squarely applicable to the present case. After 1/7/2000, the appellant has to pay duty of excise on the transaction value in terms of new Section 4 of the Central Excise Act, 1944. It is needless to say that the appellant had collected import parity price (i.e. the transaction value) from its buyers (OMCs) by issuing commercial invoice and not the APM price which was lower than the value declared in the commercial invoice.
16. Honble Supreme Court in the case of Maruti Suzuki India Ltd. reported in 2014-TIOL-74-SC-CX has observed as under:-
25. Finally, our attention was drawn to a Circular dated 30th? June, 2000 issued by the Central Board of Excise and Customs. This circular was issued in view of the coming into force of Section 4 of the Excise Act (as amended) from 1st July, 2000.
26. The circular brought to the notice of all concerned? that in view of the amended Section 4 of the Excise Act, any amount actually paid or actually payable by way of excise, sales tax and other taxes shall be excluded from the transaction value. It was made clear that if tax is paid at a concessional rate, that amount may be deducted from the transaction value. But, where the tax is not paid at the time of the transaction, but is paid subsequently, as for example, sales tax payable under a deferment scheme, then too the benefit of exclusion would be allowed since the amount would be actually payable. The relevant paragraphs of the circular, namely, paragraphs 10 and 11 read as follows :-
10. As regards exclusion of taxes while working out assessable value, the definition of transaction value itself mentions that whatever amount is actually paid or actually payable to the Government or the relevant statutory authority by way of excise, sale tax and other taxes, such amount shall be excluded from the transaction value. In other words, if any excise duty or other tax is paid at a concessional rate for a particular transaction, the amount of excise duty or tax actually paid at the concessional rate shall only be allowed to be deducted from price. The assessee cannot claim that the excise duty or tax payable at the normal rate should be allowed to be deducted. The words actually paid have, therefore, been used to the definition of transaction value to reflect the legislative intention as explained above.
The words actually payable in the context of the amount of?11. duty of excise, sales tax and other taxes would normally come into play only in those situations where the amount of excise, sales tax or other taxes is not paid at the time of transaction but paid subsequently, for example, sales tax payable under a deferment scheme.
27. Insofar as the present case is concerned, there is? no doubt that 50% of the sales tax collected was retained by the assessee and was not actually paid to the exchequer nor was it actually payable since the HPC permitted the assessee to retain that amount.
28. Therefore, whichever way the issue is looked at, the fact? remains that the assessee retained with it 50% of the sales tax collected from its customers and it was neither actually paid to the exchequer nor was it actually payable to the exchequer. That being the position, the transaction value was required to be calculated by including the amount of about Rs. 22.44 crores retained by the assessee.
29. In our opinion, the Tribunal misdirected itself in law on? several counts and erroneously decided the appeal in favour of the assessee and, therefore, the order of the Tribunal is set aside. From the above, it is clear that only the actual taxes paid from the overall transaction value are required to be deducted. In essence, whatever amount is recovered except the taxes actually paid will be the assessable value. In the present case, there is no dispute that the value recovered by the appellant is as per the commercial invoice and thereore the commercial invoices represent the transaction value, the duty will required to be paid by the appellant on the said transaction value. The APM price recovered by the appellants customer from the general public or their customer is not relevant for determining the assessable value of the goods sold by appellant to OMCs under Section 4 of the Central Excise Act.
17. Coming to the case laws quoted by senior counsel, I note that these have already been discussed in paras 8 to 8.8 and are therefore not being discussed again.
18. In view of the foregoing findings, it has to be held that the appellant was required to discharge its duty liability on the basis of transaction value which it collected from the OMCs by issuing commercial invoices during the disputed period in terms of provisions of Section 4 of the Central Excise Act as amended w.e.f. 01/07/2000. In other words, post 01/07/2000, the provisions of new Section 4 cannot be ignored for determination of assessable value of LPG sold in bulk to OMCs for further sale in packed form to dealers/domestic consumers. Therefore, the views expressed by the referral Bench are correct and the same are endorsed.
(P.K. Jain) Member (Technical) tvu
19. I have gone through the judgment recorded by my learned brother Shri M.V. Ravindran, Member (Judicial) as also that recorded by learned brother Shri P.K. Jain, Member (Technical). I agree with the views expressed by Shri P.K. Jain, Member (Technical).
(P.S. Pruthi) Member (Technical) ??
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