Custom, Excise & Service Tax Tribunal
M/S. Hindustan Petroleum Corpn.Ltd vs Commissioner Of Central Excise, Guntur on 20 May, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
Appeal No. E/392/03
Appeal No. E/393/03
(Arising out of Order-in- Original No. CE-3/2003 (Commr) & C E-2/2003(Commr.) both dtd. 10.2.2003 passed by the Commissioner of Central Excise & Customs, Guntur )
For approval and signature:
Honble Mr P.G.Chacko, Member(Judicial)
And
Honble Mr. S.K.Gaule, Member(Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
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?
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M/s. Hindustan Petroleum Corpn.Ltd.
M/s. Hindustan Petroleum Corpn.Ltd.
:
Appellant
VS
Commissioner of Central Excise, Guntur
Respondent
Appearance
Shri M.H.Patil, advocate with Shri T.C.Nair, Consultant, Ms.P.M.Patil, advocate for Appellant Shri B.K.Singh,Jt.CDR for respondent CORAM:
Mr.P.G.Chacko, Member(Judicial) And Mr.S.K.Gaule, Member(Technical) Date of hearing: 20/05/10 Date of decision: 20/05/10 ORDER NO.
Per : P.G.Chacko The appellant in these appeals is a Central PSU which has obtained the requisite clearance from the Committee on Disputes to pursue these appeals. They have a unit at Tadepalli in Guntur District of Andhra Pradesh holding warehouse registration under Rule 140 of the erstwhile Central Excise Rules, 1944. During the period 1.1.93 to 31.12.97, the appellant had cleared various petroleum products viz. Motor Spirit (MS), Superior Kerosene Oil (SKO), High Speed Diesel Oil (HSD) to their dealers at prices determined by the Ministry of Petroleum and Natural Gas ( hereinafter referred to as Administered Prices or APM prices). Such clearances of every petroleum product were made out of a common stock in the warehouse. This common stock consisted of indigenously manufactured, non-duty-paid goods procured under bond and imported, customs duty-paid goods. (The latter category will hereinafter be referred to as CDP stock ) . The appellant adopted what is called first-in-first-out (FIFO) method in clearing the goods from the warehoused stock of each petroleum product. Accordingly, where CDP stock of Motor Spirit in a given storage tank was the first to have been received in that tank, the first clearance out of that tank totalling in quantity to the CDP stock so received in the tank would be treated as clearances of CDP Motor Spirit. The subsequent clearances from the same tank would be non-duty-paid Motor Spirit. All these clearances would be invariably made at APM prices as it was mandatory for all the oil marketing companies. In respect of the goods cleared by the appellant as CDP stock, the department found that the appellant was mentioning excise duty in the relevant invoices and, on this basis, it appeared that the amount mentioned as excise duty in the invoices 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 from 1.1.93. Having found that the appellant had collected an amount representing duty of excise from their dealers under cover of every invoice issued in respect of CDP stock of petroleum products cleared from the warehouse, the department issued show-cause notices under Sec.11D(1) of the Central Excise Act to the appellant for recovery of the amount which was collected from the buyer but not paid to the exchequer. The aforesaid period from 1.1.93 to 31.12.97 was covered by 8 such show-cause notices, together demanding over Rs. 13 crores. A similar show-cause notice was issued covering the period from 1.7.1998 to 31.10.1998 , whereby an amount of over Rs. 2.5 crores was demanded from the appellant under Sec.11D(1) of the Act. The demand was contested by the party on numerous grounds. In adjudication of the set of 8 show-cause notices, the Commissioner confirmed the demand , but his order was set aside by this Tribunal for the purpose of de novo adjudication. In de novo adjudication also, the demand of over Rs. 13 crores came to be confirmed under Sec.11D of the Central Excise Act read with Sec.28B of the Customs Act. Appeal No.E/393/03 is against the Commissioners order. For the period from 1.7.98 to 31.10.98 also, the Commissioner had confirmed the demand against the appellant, but his order was set aside for the purpose of de novo adjudication, wherein the Commissioner passed fresh order directing the party to pay the amount of over Rs. 2.5 crores to the Central Government under Sec.11D of the Central Excise Act read with Sec.28B of the Customs Act, aggrieved by which they have filed Appeal No.E/392/03.
2. Upon hearing both sides, we find that the Sec.11D(1) of the Central Excise Act is the central point of the dispute. This provision of law is being interpreted in diverse ways. The ld.counsel for the appellant has argued as follows:-
a) The show-cause notices invoked only Sec.11D of the Central Excise Act but the ld.Commissioner, in de novo adjudication of the cases, invoked Sec.28B of the Customs Act as well. Any demand under Sec.28B of the Customs Act is beyond the scope of the show-cause notices.
b) The entire demand is on CDP stock of petroleum products, which were cleared by the appellant to the dealers without any manufacturing operations and therefore, the goods were not excisable. Sec.11D(1) is not applicable to non-excisable goods.
c) Not being a manufacturer, the appellant was not liable to pay duty on the goods in question and, therefore, the above provision of law is not applicable to the appellant.
d) No amount representing duty of excise was collected by the appellant from their dealers even though such duty amounts were mentioned in the relevant invoices. Hence the appellant had no liability to make any payment to the Central Government under Sec.11D(1).
e) Under the APM scheme, whatever duty was collected by the appellant was deposited to Oil Pool Account and therefore, neither Sec.11(D) of the Central Excise Act nor Sec.28B of the Customs Act is applicable.
f) The goods in question had suffered basic customs duty, countervailing duty and special excise duty, the grand total of which would exceed any amount of duty collected by the appellant from their dealers.
g) For the purpose of applying Sec.11D(1) of the Central Excise Act , the comparison should be between the total amount of customs duties paid on the CDP stock and any amount of duty collected from the buyer. The comparison cannot be between CVD on the one hand and any amount of duty collected from the dealers on the other.
The ld.counsel has relied on a plethora of decisions in support of each of the above points :-
1. HPCL Ltd. vs. CCE, Hyderabad [2002(149) ELT 1294 (Tri-Chennai)] 2. Order No.C.II/2807-12/WZB/2002 dated 12.9.02 in Appeal Nos. C/220 to 224/2000-Mum ( HPCL and others vs. Commissioner of Customs, Pune
3. BPCL vs. CCE, Meerut [2002(146)ELT 646(Tri-D)]
4. Manager (Terminal), IOCL vs CCE, Visakhapatnam [2007(211) ELT 590 (Tri-Chennai)]
5. CCE, Mangalore vs IOCL [2005(191)ELT 356(T-Bang.)]
3. The ld.counsel has also claimed support from 2 Orders-In-Original passed by the Commissioner of Central Excise, Rajkot, one in the case of BPCL and the other in the case of IOCL, wherein the ld.Commissioner followed some of the above judgments. The view taken in all the aforesaid cases is that Sec.11D(1) is not applicable to imported petroleum products. In this connection, the ld.JT.CDR submits that the department has filed Civil appeals against the Tribunals decisions in HPCLs case [2002)149(ELT 1294(T)] and BPCLs case [2002(146) ELT 646(T)] and that both the appeals have been admitted by the apex court.
4. The ld.Jt.CDR has also sought to distinguish the cited cases by submitting that the provisions of Sec.11D(1) were not correctly interpreted or correctly applied in those cases.
5. Sub-section (1) of Section 11D of the Central Excise Act as it has stood w.e.f. 20.9.1991 reads thus:-
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 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 as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.
6. According to ld.JCDR, there are 3 distinct ingredients in sub-section (1) of Sec.11D. He submits that the clause every person who is liable to pay duty under this Act or the Rules made thereunder does not mean that the noticee should necessarily be liable to pay duty on the goods in respect of which demand is raised under Sec.11D(1). If a person is liable to pay duty under the Central Excise Act or the Central Excise Rules on any goods whatsoever, that would be sufficient for the purpose of invoking Sec.11D(1). The second ingredient of the provision, referred to by the ld.Jt.CDR, pertains to collection of any amount in the nature of duty of excise by such person from his buyer on any excisable goods. It is submitted that, where the relevant invoice mentions an amount of duty of excise, it is duty determined for purposes of Sec.11D(1). If the person who issued the invoice collected such amount from the buyer but did not pay any part thereof to the Central Government , the second requirement of Sec.11D(1) stands fulfilled. The third element of Sec.11D(1) ,referred to by the Jt.CDR, pertains to the expression any excisable goods. He argues that, if the goods in respect of which demand is raised under Sec.11D(1) is goods figuring in the Schedules to the Central Excise Tariff Act as being subject to a duty of excise, that would satisfy the third requirement. The goods could be customs duty-paid as in the present case, but nevertheless it would still be excisable goods if it figures in any of the Schedules to the CETA. This argument of the ld.Jt.CDR is based on the definition of excisable goods given under Sec.2(d) of the Central Excise Act as well as on case law viz. the Honble Supreme Courts judgment in Wallace Flour Mills Company Ltd. vs Collector of Central Excise[1989 (44) ELT 598(S.C)] (paragraph 4) and the Honble High Courts judgment in Hind Rubber Factory vs. Union of India [1990 (48)ELT 363 (P&H) (paragraph 23) as affirmed by the Supreme Court in 2000 (119) ELT A 178 (S.C.). The definition under Section 2(d) reads :
excisable goods means goods specified in the [ the First Schedule and the Second Schedule ] to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt.
7. His argument is that being subject to a duty will not necessarily mean actual levy of duty. The definition of excisable goods given under Sec.2(d) does not mean that duty must be levied in order to make the goods excisable goods. In this view, the ld.Jt.CDR argues that the CDP stock of petroleum products cleared by the appellant during the material period was definitely in the category of excisable goods inasmuch as the appellant has never had a case that those goods did not figure in the CETA Schedule. It is submitted that the Tribunals decisions cited by the ld.counsel proceed on the premise that the imported, customs duty-paid goods are not excisable goods.
8. In the case of Wallace Flour Mills Company Ltd. (supra) and Hind Rubber Factory (supra) , the scope of the expression excisable goods under Sec.2(d) of the Central Excise Act was examined in detail. The Honble High Court has laid down the clear distinction between the expression subject to and the expression subjected to and has held that excisable goods are goods which are open to, or prone to, or liable to duty of excise and need not already be under a burden of duty. The definition of excisable goods under Sec.2(d), considered by the Honble High Court, clearly indicates that these are goods falling under the Schedules to the Central Excise Tariff Act as subject to a duty of excise. Undisputedly, the petroleum products in question belong to this category and hence, it appears, they should rightly be considered as excisable goods. The fact that those goods were imported on payment of duties of customs will not detract from the status of excisable goods. Therefore, if the definition of excisable goods given under Sec.2(d) of the Central Excise Act as interpreted by the Honble High Court in the case of Hind Rubber Factory (supra) is read into the text of sub-section(1) of Section 11D, one may not prudently say that the provisions of Sec.11D(1) are not applicable to imported, customs duty-paid goods falling under the Schedules to the CETA.
9. The view which we have taken in the foregoing paragraph is contrary to the view taken by the co-ordinate benches in the cases of HPCL( 2002(149) ELT 1294), BPCL (2002(146) ELT 646), IOCL (2005(191) ELT 356) etc.
10. The ld.Counsel for the appellant has made an attempt to distinguish the case of Hind Rubber Factory (supra) with reference to the facts of that case. We have not compared the facts of the instant case with the facts of the Hind Rubber Factory case (supra). We have only considered the interpretation given by the Honble High Court to the expression excisable goods defined under Sec.2(d) of the Central Excise Act. This interpretation is contained in paragraph 23 of the Honble High Courts judgment, which is reproduced below:-
In view of the above authorities, except the High Court of Madhya Pradesh and Allahabad, a large majority of the other High Courts have taken the view that excisable do not cease to be excisable on exemption being granted under Rule 8 of the Rules. In support of the same conclusion, we may add some more reasons. The definition of the expression excisable goods consists of two parts. The first part lays down that such goods are those which are specified in the First Schedule. The second part is that such goods are subject to a duty of excise. It is significant to note that the two parts of the definition are not disjunctive and, therefore, it cannot be held that being subject to a duty in the context means actual levy of the excise duty. The expression being subject to according to Shorter English Oxford Dictionary, means exposed or open to, prone to or liable to .. having a tendency prone or disposed of. It follows that the goods mentioned in the Schedule to the Act are liable to attract excise duty. The definition does not mean that the duty must be imposed in order to make the goods excisable goods. To understand the significance of the expression subject to, it would be profitable to compare it with the expression subjected to. If the latter expression had been used, it could be said that exemption from excise duty under Rule 8 would make the excisable goods non-excisable or outside the definition. The expression occurring in the definition is subject to . It cannot be disputed that even after exemption the exempted goods continues to be included in the schedule and remains liable to reimposition of excise duty e.g. by withdrawal of the exemption notification. Rule 8 of the Rules under which the Central Government is empowered to grant exemption itself shows that exemption may be granted from time to time which necessarily implies that the exemption granted may be withdrawn. Granting of exemption under Rule 8 does not have the effect of either deleting the goods covered by the exemption notification from the schedule or adding any goods in that Schedule. In other words, the exemption notification under Rule 8 does not affect the First Schedule to the Act except in so far as the excise duty is concerned. There is no provision under the Act empowering the Central Govt. to add to or delete the goods mentioned in the First Schedule. The First Schedule is a part of the enactment and only Parliament is empowered to amend the same. This has actually been done on several occasions by the Finance Acts.
11. As the meaning of the term excisable goods used in Section 11D(1) is central to the dispute in this case and as the view which we have taken is contradictory to the decision of the co-ordinate benches in the cases of HPCL, BPCL and IOCL etc. ( vide supra), we are of the opinion that the conflict has got to be resolved by a Larger Bench. Accordingly, we direct the Registry to place the records before the Honble President to constitute a Larger Bench to consider and decide on the following issue:-
Whether imported, customs duty-paid goods falling in any of the Schedules to the CETA 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. (Pronounced in court) S.K.Gaule Member(Technical) P.G.Chacko Member(Judicial) pv 10