Custom, Excise & Service Tax Tribunal
M/S. Hindustan Petroleum Corpn. Ltd vs Commissioner Of Central Excise on 7 February, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
LARGER BENCH
APPEAL NO. E/392, 393/2003 BAN & 3464/2005 DEL
Arising out of Orders-in-Original No. 107/CE/JAL/2005 dated 31.07.2005 passed by the Commissioner of Central Excise, Chandigarh and CE-3/2003 (Commr) & CE-2/2003 (Commr.) both dated 10.2.2003 passed by Commissioner of Central Excise, & Customs, Guntur.
For approval and signature:
Honble Shri S.S. Kang, Vice President
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri Sahab Singh, 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 :
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?
M/s. Hindustan Petroleum Corpn. Ltd.
M/s. Hindustan Petroleum Corpn. Ltd.
M/s. Indian Oil Corporation
:
Appellants
Versus
Commissioner of Central Excise,
Chandigarh
Commissioner of Central Excise,
Guntur
Respondents
Appearance Shri M.H. Patil, Advocate with Shri T.C. Nair, Advocate for appellants Shri V.K. Singh, Addl. Commissioner (A.R.) For Respondents CORAM:
Shri S.S. Kang, Vice President Honble Shri Ashok Jindal, Member (Judicial) Shri Sahab Singh, Member (Technical) Date of Hearing : 07.02.2012 Date Pronounced :.
ORDER NO.
Per : Ashok Jindal The following reference has been made before us:-
Whether imported custom duty paid goods falling in any of the Schedules to the Central Excise Tariff Act, 1985 would come within the ambit of the expression excisable goods used in the text of sub-section (1) of Section 11D of the Central Excise Act.
2. Before going into the arguments we have to see in what context this reference has been made before us. Therefore, it is important to discuss the facts of the case.
3. Facts of the case are that the appellants are public sector undertakings holding Central Excise Registration and are the manufacturer of petroleum products. They are having storage tanks and are receiving imported and indigenous petroleum products under D-3 intimation filed by them and indigenous non-duty paid product on AR-3A and also duty paid petroleum products from other manufacturers of their companies and/or other petroleum companies what are called by them as bridging arrangements. The imported petroleum products and the indigenous petroleum products are stored in same tanks and are being accounted for under FIFO system of material management accounting i.e. first in first out basis. The goods received under the bridging arrangements are entered in the Companys own record while the imported goods received under D-3 intimation and the indigenous goods received under AR-3A are entered in the RG-I register maintained under the Central Excise Rules. The appellants are transferring the duty paid goods received under the bridging arrangements without entering the goods physically into the tanks. These goods are normally received in the road tank lorries and are being transferred to their customers under invoice being issued by the appellants. The imported goods and the indigenous non-duty paid goods are also cleared likewise under the same series of invoices by the appellants. While clearing the indigenous non duty paid goods, the appellants are discharging the duty due thereon based on the quantity therein, called as out turn statement. No duty of excise is being discharged on the customs duty paid goods which are stored in these mix bonded tanks. All these clearances were invariably made at APM prices as it was mandatory for all the oil marketing companies. In respect of the goods cleared by the appellants as customs duty paid stock, it appeared that the amount mentioned as excise duty in the relevant invoice had been collected by the appellant from their dealers but not credited to the Central Government. This aspect came to the notice of the department at the time of scrutiny of the RT-12 returns and allied documents for the period starting from 1.1.93. It was found that the appellants have collected an amount representing duty of excise from their dealers under cover of every invoice issued in respect of custom duty paid (CDP) stock of petroleum products cleared from the warehouse, the department issued a show-cause notice under Section 11D(1) of the Central Excise Act to the appellants for recovery of the amount which was collected from the buyer but not paid to the exchequer. Periodical show-cause notices were issued for the period from 1.1.93 to 31.12.97 and similar show-cause notice was issued for the period from 1.7.1998 to 31.10.1998. The show-cause notices were adjudicated and finally demands were confirmed against the appellants under Section 11D of the Central Excise Act read with Section 28B of the Customs Act. Therefore, the appellants are in appeal before this Tribunal.
4. The dispute is that whether the duty charged by the appellant in their invoices on customs duty paid stock is recoverable as per the provisions of Section 11D(1) of the Central Excise Act or not?
5. Heard both sides.
6. During the course of arguments the learned Counsel for the appellants relied on the following case laws:-
1. HPCL Ltd. vs. Commissioner of Central Excise, Hyderabad 2002 (149) ELT 1294 (Tri-Chennai).
2. Order No. C.II/2807-12/WZB/2002 dated 12.9.2002 in Appeal Nos. C/220 to 224/2000-Mum (HPCL and others vs. Commissioner of Customs, Pune).
3. BPCL vs. Commissioner of Central Excise, Meerut 2002 (146) ELT 646 (Tri. D).
4. Manager (Terminal), IOCL vs. Commissioner of Central Excise, Visakhapatnam 2007 (211) ELT 590 (Tri. Chennai)
5. CCE Managalore vs. IOCL 2005 (191) ELT 356 (Tri. Bang.).
6.1 The learned Counsel further submitted that although the issue has attained finality in view of the cited decisions, therefore, the impugned orders are to be set aside but it was also pointed out during the course of arguments that the Tribunals decision in the case of HPCL Ltd. (supra) and BPCL (supra) have been appealed before the Honble Apex Court and the appeals have been admitted.
7. The matter was contested by the learned Jt. CDR, (A.R.). As referral Bench took contrary view to the decisions cited by the learned Counsel for the appellants therefore, the referral Bench was of the view that the matter has to be referred to the Larger Bench, accordingly the matter was referred before us.
8. Shri M.H. Patil, learned Counsel for the appellants appeared before us and submitted that as the case law relied upon by the appellants during the course of arguments in the case of HPCL and BPCL (supra) the matter was pending before the honble apex court therefore, the reference was not warranted. He further submitted that the reference made by the Referral Bench is not correct in the facts of this case. The Bench objected to the arguments advanced by the learned Counsel and was of the view that we have to answer the reference made before us and we have to restrict to answer the reference only.
8.1 Thereafter, the learned Counsel submitted that the demands have been made against the appellants as per the provisions of Section 11D(1) from the manufacturer of the goods i.e. the person who is liable to pay duty under the Central Excise Act or Rules made there-under. In this case, it is an admitted fact that the appellants are not liable to pay duty under this Act or Rules as they are not the manufacturer. Therefore, what duty they have collected is not payable under Section 11D(1) of the Central Excise Act.
8.2 He further submitted that during the relevant period of time under Section 11D(1) the duty was payable by every person who has collected an amount from the buyers of any goods of any manner amounts representing duty of excise. Therefore, the dispute arise for interpretation of words every person. The same was dealt with by the Honble Andhra Pradesh High Court in the case of Laxmi Starch Ltd. vs. Union of India 1993 (67) ELT 769 (A.P.) wherein the Honble High court held that the every person in sub-section (1) of Section 11D of the Central Excise Act is to be read down as the manufacturer/producer; so also the expression every person occurring in Section 28B of the Customs Act has to be read down as the importer. He drew our attention to the Boards Circular dated 7.11.2000 wherein the issue was examined and it was clarified that the amended provisions are to be construed as the original enactment proceedings if any, for the recovery of the sums of the nature specified in sub-section (1) of Section 11D of the Central Excise Act, 1944 need therefore, only be initiated against a manufacturer who is liable to pay excise duty in terms of the amended provisions. It is presumed that the Commissioners have already initiated appropriate action in this direction. He also drew our attention to the Boards Circular dated 27.02.2009 wherein the Board has concurred that the decision of this Tribunal in the BPCL case as reported in 2002 (146) ELT 646 (T) wherein it was held that no demand could be raised against the appellant under Section 11D(1) as they were not the manufacturer of the concerned goods. This issue was discussed in Board meeting held on 23.07.2008. In view of Honble Supreme Courts decision dated 26.07.2004 in the case of M/s. BPCL, the Board decided that for past cases action as per AGs advice and the Honble Supreme Court order is required to be taken. The Board, however, concurred with the view of the Central Excise Policy wing that by virtue of amendment in Section 11D vide Finance Act, 2008, the differential duty, if any collected by a person would be recoverable under Section 11D(1) subject to the condition that such extra amount has been collected as duty of excise.
8.3 The learned Advocate further submitted that the honble apex court in Civil Appeal No. 4107/2003 against the Tribunals decision in the case of BPCL (supra) has decided the issue on 27.09.2011 in favour of the appellants, holding that in view of the period involved in the case is July, 1997 to August, 2000, there is no infirmity in the impugned order passed by the Tribunal on merits. Therefore, the issue has been settled by the honble apex court. Accordingly, reference is answered by the apex court in favour of the appellants.
9. Shri V.K. Singh, learned A.R. appeared on behalf of the Revenue and submitted that the reference before this Bench is restricted to only whether imported custom duty paid goods falling in any of the Schedules to the Central Excise Tariff Act, 1985 would come within the ambit of the expression excisable goods used in the text of sub-section (1) of Section 11D of the Central Excise Act. It is not the dispute that the impugned goods are excisable goods as held by Honble Apex Court in case of Wallace Flour Mills Company Ltd. v. Collector of C.EX. 1989 (44) ELT 598 (S.C.). When goods are excisable goods then any duty collected on those goods as excise duty is recoverable as per provision sub-section (1) of Section 11D of the Act. He further drew our attention to the decision of the honble apex court in the case of Shree Shankar Industries v. Collector 1997 (95) ELT A233 (S.C.) wherein the Honble Apex Court dismissed the appeal confirming the decision of this Tribunal wherein this Tribunal held that once the goods are mentioned in the First Schedule to the Central Excise Act, 1944, and are subject to a duty of excise, the goods do not cease to be excisable goods even if they become exempt by virtue of an exemption notification.
10. We have given careful consideration to the submissions of both sides. We find that the reference before us is that whether the imported custom duty paid goods falling in any of the Schedules to the Central Excise Tariff Act, 1985, would come within the ambit of the expression excisable goods used in the text of sub-section (1) of Section 11D of the Central Excise Act or not. 10.1 To deal with the issue, we have to see the provisions of Section 11D during the relevant time which is reproduced here as under:-
Section 11D. Duties of excise collected from the buyer to be deposited with the Central Government. (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who has collected any amount from the buyer of any goods in any manner as representing duty of excise shall forthwith pay the amount so collected to the credit of the Central Government.
10.2 On examination of the provisions of Section 11D(1) during the relevant time i.e. during the period 1.1.1993 to 31.10.1998, every person who has collected an amount from the buyers of any goods in any manner amounts (representing duty of excise) shall forthwith pay an amount to the credit of Central Government. Therefore, from the above provisions, every person who is collected duty of central excise is liable to pay to the credit to Central Govt. Therefore, the issue who is every person was dealt with by the Honble High Court of Andhra Pradesh in the case of Laxmi Starch Ltd. (supra) wherein the Honble High Court of Andhra Pradesh observed that-
the purport of sub-section (1) of Section 11D of the Central Excise Act, 1944 and sub-section (1) of Section 28B of the Customs Act is not only to collect the amount received by manufacturers, producers, importers etc. in the form of amount excise duty/customs duty but also from persons other than the manufacturers or producers, importers etc. from whom excise duty/customs duty cannot otherwise be collected. Yet on examination of provisions of sub-section (2) of Section 11D of the Central Excise Act and sub-section (2) of Section 28B of Customs Act, it is clear that they deal with adjustment of the amount payable by the person on finalization of the assessment and crediting of the surplus to the fund or refunding of the surplus to the person who has borne the incidence of such amount in accordance with the provisions of Section 11B of the Central Excise Act or Section 27 of the Customs Act, as the case may be. Therefore, if the expression every person in sub-section (1) of the above-said sections is read down as every person liable under the respective charging sections, namely, manufacturer/producer/importer the vice pointed out above, would not invalidate the impugned provisions and they would be with the parliaments legislative power. This question is accordingly answered. 10.3 Thereafter the honble High Court has held that the expression every person in sub-section (1) of Section 11D of Central Excise Act has to be read as the manufacturer/producer/importer. The decision was followed by the CBEC vide F.No.6/40/2000-CX-1 dated 7.11.2000 and an amendment was done retrospectively wherein it was clarified that the duty under sub-section 1 of Section 11D of Central Excise Act is to be recovered from the manufacturer only.
10.4 In the case of BPCL (supra), the Tribunal has observed that there is no dispute that the demand sustained by the Commissioner in respect of the goods which were not manufactured by the appellant. Before the Honble High Court of Andhra Pradesh, the constitutional validity of Section 11-D, before its amendment, was under challenge along with other provisions. In order to uphold the constitutionality of the provisions the High Court read down the expression every person in sub-section (1) of Section 11-D as the manufacturer/producer as also the expression every person appearing in Section 28-B of the Customs Act as the importer. It was the above view that has been expressed by the statutory amendment under Section 103 of the Finance Act 2002 with retrospective effect from 20.9.91. 10.5 Under this circumstances the appellants contentions are to be accepted under Section 11D and it is not the manufacturer of the concerned goods and the observation of the Tribunal were confirmed by the honble apex court.
10.6 In the case of Manager (Terminal) Indian Oil Corporation Ltd. vs. CCE Visakhapatnam 2007 (211) ELT 590 (Tri. Chennai) this Tribunal has observed that -
5. We have examined the records and considered the submissions made by both sides. The appellants had been permitted to store customs duty paid imported goods along with such goods produced indigenously on which duty was not paid in their storage tanks as per Boards Circular F. No. 261/6/5/84-CX, dated 17.07.1984. While clearing goods of both streams the appellants used clearance documents with the same format which showed an amount paid towards CUS.DUTY/CX. DUTY. The appellants explained that this was owing to the common software they had used. In respect of the impugned goods they had passed on a lower amount than the actual incidence of tax on the goods they had borne.
6. We find that Section 11D (1) of the Central Excise Act reads as follows:-
(1) Notwithstanding anything to contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, [every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods] in any manner representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government. In terms of the above provisions amount collected in excess of the duty assessed or determined and paid on any excisable goods alone is required to be paid to the Central Government. We find that the finding of the Commissioner that the impugned goods are excisable goods is totally misconceived and incorrect. From the unambiguous wording of the above sub-section the impugned demand of amounts collected as duty on clearances of imported petroleum products is not sustainable. This is the settled position in law evidenced by the following judicial authorities cited.
10.7 We have also examined the impugned order and in the impugned order the adjudicating authority has given the findings that it is an admitted fact that though it was mentioned in the invoices M/s. HPCL to the buyers that the amount collected is Executive/Customs duty, the amount collected is equal to the excise duty in force. The same were the facts in the case of Indian Oil Corporation discussed in the proceedings paragraphs.
10.8 The arguments advanced by the learned A.R. that the goods are excisable goods as held by the Honble apex court in the case of Wallace Flour Mills Company Ltd. (supra), we hold that there is no dispute that the impugned goods are excisable goods but issue is that whether the duty collected by the appellants on imported custom duty paid goods, excise duty is payable as per the provisions of sub-section 1 of the Section 11D of the Central Excise Act.
10.9 We have seen that although the goods are excisable but duty can be recovered from the assessee in the provisions of Section 11D(1) of the Central Excise Act from the manufacturer/producer or importer under Section 28B of the Customs Act.
11. In view of the above observations, the reference is answered as under:-
On imported customs duty paid goods falling under the Schedule of Central Excise Tariff Act, 1985, are excisable goods but duty is payable under sub-section 1 of Section 11D of the Customs Act by the manufacturer or producer or importer.
11.1 As in the facts of the reference in hand as the appellants are not a manufacturer or producer therefore, as per the provisions of sub-section 1 of Section 11D of Central Excise Act, duty is not payable.
12. The reference is answered accordingly.
13. Registry is directed to place the files before the Referral Bench to deal with the issue in terms of the reference answered. (Pronounced in open Court on ) (S.S. Kang) Vice President (Ashok Jindal) Member (Judicial) (Sahab Singh) Member (Technical) nsk 18
1. In view of the majority decision, the reference is answered as under:-
On imported customs duty paid goods falling under the Schedule of Central Excise Tariff Act, 1985, are excisable goods but duty is payable under sub-section 1 of Section 11D of the Central Excise Act, by the manufacturer or producer or importer.
As in the facts of the reference in hand as the appellants are not a manufacturer or producer therefore, as per the provisions of sub-section 1 of Section 11D of Central Excise Act, duty is not payable.
(S.S. Kang) Vice President (Ashok Jindal) Member (Judicial) (Sahab Singh) Member (Technical)