Customs, Excise and Gold Tribunal - Ahmedabad
Reliance Industries Ltd. vs Commissioner Of Central Excise And ... on 29 December, 2006
ORDER M.V. Ravindran, Member (J)
1. These two appeals are directed against the orders-in-original dated 17/07/2006 and 27/07/2006 which confirmed the demand and imposed penalties on the appellant. Since the issue involved in both the appeals is identical except a small portion, both the appeals are disposed off by a common order.
2. Common issue that arises in both the appeals is whether the amount of subsidy on the sale of Superior Kerosene Oil (SKO) and LPG received by the appellant from the oil marketing company is includible in the assessable value for confirmation of the differential demand of duty. In Appeal No. E/77/06 an additional issue is regarding the confirmation of demand of duty on the appellant for non-production of proof of payment of duty by the Indian Oil Corporation in respect of the petroleum products transferred under bond through pipe lines.
3. The learned advocate appearing for the appellant submits that the prices of SKO and LPG are controlled under the Essential Commodities Act. It is his submission that Central Government decides the price at which these two products will be sold by the appellant and that also through the oil marketing companies only. It is his submission that ex-refinery price and ex-storage price of both the commodities having been regulated by the government price control mechanisms, they are compensated by the Central Government for the difference between the ex-refinery price and ex-storage price. It is also submitted that the ex-refinery price of these products is also decided by the Central Government and the appellant is not at liberty to charge different price. It was also submitted that the compensation given by the oil marketing companies to the appellant is not additional consideration but a subsidy given out from the Consolidated Fund of India and hence cannot be considered as additional consideration for sale of the these products. For this proposition he relies upon the decisions of the larger bench of the tribunal in the case of Gas Authority of India Ltd., v. C CEX, Vadodara as reported at and final order No 1893/2006 dated 10.11.2006 of the tribunal in the case of Mangalore Refinery and Petrochemicals Ltd., v. C CEX., Mangalore. As regards the issue of demand of duty on the non-submission of the proof of payment of duty on the goods cleared under Bond it is his submission that IOCL had diverted the petroleum products cleared in pipelines to their another refinery, but now the duty liability has been discharged by IOCL. He produces the certificates given by IOCL countersigned by jurisdictional Range officer.
4. The learned SDK on the other hand submits that the appellant discharges the duty liability on these products as per the ex-storage price and gets compensated for the difference from the oil marketing companies. This fact is not disputed and hence such amount received by them would get covered under the provisions of Section 4 of the Central Excise Act, 1944. It is submitted that the oil marketing companies are the purchasers of these goods and hence any amount received in connection with the sale is liable to be included in the value of the goods. As regards the differential duty on the goods cleared under Bond in pipelines it was submitted the said issue may be remanded back to the authority for verification.
5. We have considered the submissions made at length by both sides and perused the records. It is undisputed that the ex-refinery and ex-storage price of the SKO and LPG are fixed by the Central Government and the appellants have to sell these products as per the prices fixed. The differential duty demanded in this case is post July 2000 when the provisions of new Section 4 of the Central Excise Act, 1944 were in force. It is the revenue's contention that as per the new Section 4 the additional consideration received by the appellant would get included in the assessable value and differential duty is payable. When the price of the products is fixed by the Central Government and the said price fixation being final, any amount received as subsidy from government, to our mind would not amount to additional consideration to the appellant. An identical issue in respect of another assessee for the period post 1.7.2000 was before the tribunal. In that case tribunal held as under:
4. We have carefully considerd the submissions and find that this issue was referred to the Larger Bench of this Tribunal in the case of Gas Authority of India Ltd. (cited supra). The Gas Authority of India Ltd. also took up the same contention as taken in the present case that the Administrative Price Mechanism covers the assessable value of the products for the purpose of levy of excise duty. The Larger Bench accepted their contention and set aside the demands raised as short levy. The findings recorded in paras 7 to 13 are reproduced herein below.
'7. In deciding the issue, we are conscious of our limitation that we are not governed by the Policy of Govt. where the law is specific and calls for no different interpretation. If law on the point is not clear, then Policy of Govt. has vital impact. Tariff Act does not contemplate LPG in different forms - Packed or Bulk. Appellants have no discretion in fixing the price to their product. The OCC fixed the price depending on the end user as seen hereinabove. That price can alone be the basis for assessing duty. It is the admitted case of parties that the appellants paid duty on LPG as per price fixed for domestic consumption. Whenever it was sold for non-domestic or industrial user, duty on the higher price was paid. Assessable value of goods manufactured will depend on the purchaser to whom it is meant to be sold and the price that is fetched at such sale. This is the law laid down by the Supreme Court in IDL Chemicals Ltd. v. Collector of Central Excise .
8. Learned Counsel Mr. Chandersekharan representing the Revenue advanced an argument that OCC fixed price for LPG depending on the nature or form in which it is removed and that price should decide the value for the purpose of imposing duty. LPG could be removed either in packed form or in bulk. In packed form it may be for domestic use or for non-domestic use. For both, different prices have been fixed. In the case of bulk movement another price is fixed and that should be the basis for assessment to duty. This argument is quite attractive; but on a closer scrutiny we find it difficult to accept the same. In packed form different prices are fixed by OCC depending on user. Therefore, it is evident that the packing is not the sole basis for the fixation of the price. The use to which it is put decides the price. Likewise, the removal in bulk can also be for different purposes. If it is earmarked for domestic consumption, the price that will be fetched on such sale should be fixed as assessable value. If a different interpretation is adopted, it will upset the entire price structure and the policy of the Central Govt. as discernable from the speech made by Finance Minister in Lok Sabha.
9. Mr. M. Chandrasekharan further submitted that the principles laid down by the Supreme Court in various decisions on Section 4(1)(a) of the Central Excise Act cannot be of any assistance to the appellants before us because these decisions were in relation to goods manufactured which were sold to different buyers at different prices. LPG is not capable of being sold to different classes of buyers at different prices. Price of LPG is fixed by OCC. It cannot be varied by the manufacturer. It must, therefore, according to learned Counsel, depend on the form in which it is removed. Even conceding for arguments' sake that such an approach is possible, then, LPG in packed form should have one price and bulk another price. This is not so. Accordingly, we are clear in our mind that LPG earmarked for domestic consumption must have the lower price for assessment even when it is removed to the buyers or on stock transfer in bulk for bottling. Thus, it is evident that the assessable value of LPG cleared in bulk by the appellants for bottling for domestic consumption should be assessed at the lower value fixed by OCC for that category. In this view, the decisions relied on by learned Counsel, namely, Dharamsi Morarji Chemical Co. Ltd. v. Collector of Central Excise, Bombay 1996 (86) ELT 448 (Bom) and Varelli Weavers Pvt. Ltd. v. Union of India 1996 (83) E.L.T 255 (S.C.) are not of any assistance to him. They deal with entirely different set of circumstances. So, we are not discussing them in detail.
10. Their Lordships of the Supreme Court in Oil and Natural Gas Commission v. Collector of Central Excise as clarified in directed the Central Govt. to set up a High Power Committee to resolve controversies between a Ministry and another Ministry of the Govt. of India, a Ministry and a Public Sector Undertaking of the Govt. of India and between Public Sector Undertakings themselves. Such High Power Committee should, as per the decision, endeavour to resolve the matters in dispute. If that Committee is unable to resolve the matter for reasons to be recorded by it shall grant clearance for the litigation. Scant respect to this mandate of the Supreme Court has been shown by the High Power Committee. Committee did not take any measure to resolve the dispute or controversy between the Public Sector Undertaking and the Revenue Ministry. Minutes of the meeting of the High Power Committee which met on 110-6-1999 to consider the fate of appeals of ONGC were made available to us. Forty persons were present at the meeting of this High Power Committee which took up many cases. The decision arrived at by this crowded body as seen from the minutes is:
The Committee, having regard to the fact that. the disputes in the above cases at serial Nos. 17 and 18 involved mixed questions of law and fact, permitted Oil and Natural Gas Corporation Ltd. to pursue the appeals in CEGAT.
Questions of law and facts will arise in disputes before Tribunals and Courts. Such disputes are to be resolved by the High Power Committee. No attempt in this direction was seen to have been made in the instant case.
11. To crown all these, we were informed of the view expressed by the Ministry of Petroleum and Natural Gas on the issue now permitted to be agitated before CEGAT. By letter No. P. 20029/18/98-PP dated 6-4-1999, Ministry of Petroleum and Natural Gas issued clarification on the points raised in these appeals to the appellants before us and other similar manufacturers of LPG. It reads:
When LPG is removed by the gas extraction plants i.e., ONGC, OIL & GAIL as well as by the Petroleum refineries i.e., IOC, BPC, HPC, CRL, MRL and BRPL in bulk from either to their own bottling plants or to the bottling plants owned by any of the oil marketing companies, for the purpose of declaring the assessable value for Excise duty payment, the selling prices as applicable for the intended sale from such bottling shall only be applied and the excise duty liability shall be discharged by the gas extraction plants/petroleum refineries accordingly
12. This clarification is in consonance with the view reached by us. When the Petroleum Ministry was having this view, the High Power Committee should have at least considered the same in a purported attempt to resolve the dispute and given reasons for deviating from that view. The High Power Committee in the case on hand dealt with the issue in a casual manner only to give an impression that the direction of the Supreme Court is complied with. Committee should not have approached the issue to say the least, in the casual manner adopted at its meeting held on 10-6-1996.
13. In view of what has been stated above, we allow all the appeals and hold that the appellants correctly paid excise duty on LPG removed in bulk for domestic consumption as per the price fixed by the OCC for the said quantities for the said user. No further amount by way of excise duty is payable by these appellants on those quantities. Contrary view taken by the adjudicating officers in the orders impugned in these appeals is illegal and unsustainable. Those orders are set aside with consequential relief, if any. Appeals are accordingly allowed.
4.1 This Bench also in the case of HPCL, cited supra, upheld the assessee's contention as noted in Para 4, which is reproduced below:
4. On a careful consideration we are agreeing with the Board Circular. The Commissioner has also not applied the judgments which are clearly applicable to the facts of the case. He has also held that there is suppression of the facts. On a careful consideration, we find that the order passed by the Commissioner is totally unacceptable and it is a clear case of judicial indiscipline. The Board Circular had been specifically issued for this case and it has been clarified that the PPA is not includible in the assessable value. Further more, the issue is also covered by the Larger Bench judgment rendered in the case of CCE v. Coolade Beverages Ltd. and Brindavan Beverages (supra) and catena of other judgments which have clearly held that subsidy given to a manufacturer is not to be added to the sale price. All the facts were known to the department and clearance were made under invoices. In these circumstances to hold that there is suppression and also to impose fine and penalty is totally unjustified. The Order of the Commissioner to say the least is perverse and is not acceptable, particularly when he holds that there exists mens rea on the parts of PSU unit. The issue is they were to collect duty only on the value of price fixed by the Govt. and that, additional consideration received as product price is not part of the price at all. In terms of the Board Circular and the citations, the impugned order is set aside and appeal allowed with consequential relief if any.
4.2 Respectfully following the ratio of the above noted judgments, we are of the considered opinion that the stay application and appeal are required to be allowed with consequential relief, if any. Ordered accordingly.
6. It is seen that the issue in these cases are squarely covered by the decision of the tribunal and we do not see any reason to take a different view. Accordingly the appeals directed on the issue of inclusion of the subsidy (for SKO and LPG) in the assessable value are allowed the impugned orders are set aside.
7. As regards the confirmation of demand of the duty on the non-submission of proof of payment of the duty on the goods cleared under Bond, we accept the contentions of the learned SDK that this has to be verified from the records of the appellant and IOCL, which to our mind would be better if left to the authorities below. The appeal against this part of the demand is allowed by way of remand to the original authority. The adjudicating authority will consider the evidences that may be produced by the appellant and arrive at a conclusion after granting the appellant an opportunity of personal hearing and to marshal evidence in support of their claim.
8. The impugned orders are set aside and the appeals allowed as indicated in the above paragraphs.
(Pronounced in the Court on 29/12/2006)