Custom, Excise & Service Tax Tribunal
M/S Kochi Refineries Ltd vs Commissioner Of Central Excise, Cochin on 6 October, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/972/2006 [Arising out of Order-in-Appeal No. 356/2006 dated 14.6.2016, passed by the Commissioner of Central Excise (Appeals), Cochin] M/s Kochi Refineries Ltd. Ambalamugal, Cochin-682 302. Appellant(s) Versus Commissioner of Central Excise, Cochin C.R. Building, I.S. Press Road, Cochin - 682 018. Respondent
Appearance:
Mr. Sandeep Gopalakrishnan, Advocate.
For the Appellant(s) Mr. N. Jagdish, A.R. For the Respondent(s) Date of Hearing: 28/09/2016 Date of Decision: CORAM :
HON'BLE SHRI S. S. GARG, JUDICIAL MEMBER HONBLE SHRI ASHOK K. ARYA, TECHNICAL MEMEBR Final Order No. /2016 PER ASHOK K. ARYA
1. The appellant, M/s Kochi Refineries Ltd., Cochin, is in appeal before this Tribunal against the Order-in-Appeal No. 356/2006 C.E. dated 14.6.2006 passed by the Commissioner of Customs and Central Excise (Appeals), Cochin.
2. The Commissioner in the impugned order holds that the sale price at which M/s BPCL sold the product to other Oil Marketing Companies (OMCs) should be considered as normal transaction value and interest at appropriate rate would also be payable under Section 11AB of Central Excise Act, 1944.
3. The matter mainly pertains to the issue - Whether duty of Central Excise is payable on the Refinery Gate Price (RGP) paid by the Oil Marketing Companies (OMC) to the appellant or it is payable on the subsidized price at which the Oil Marketing Companies so sell the goods (SKO Superior Kerosene Oil) under PDS and LPG - Liquid Petroleum Gas (Domestic) to their consumers? 4.1. The appellant also refers to another minor issue namely - Whether terminal charges being the amount collected by the appellant from the Oil Marketing Companies is to be included in the transaction value of SKO (PDS) and LPG (Domestic) for the purpose of assessment of Central Excise duty?
5. The appellant has been represented by the learned advocate, Shri Sandeep Gopalakrishnan and the Revenue has been represented by learned A.R., Shri N. Jagdish.
6. The learned advocate for the appellant based on the Appeal Memorandum and Argument Notes inter alia submits as follows :
(i) The Oil Marketing Companies (OMC) sell SKO (PDS) and LPG (Domestic) to ultimate consumer at the subsidized selling price irrespective of the fact that the transaction between the appellant and the Oil Marketing Companies takes place at transaction value.
(ii) The appellant does not determine the value of LPG (Domestic); therefore, subsidy given by the Government to compensate the loss due to Administered Price Mechanism (APM) is not includable in the assessable value.
(iii) C.B.E.C. Circular F. No. 354/81/2000-TRU dated 30.06.2006 is referred to in support that assessment should be done at a subsidized price.
(iv) In support, the appellant relies on the following decisions :
? Coramandel International Ltd. vs. CCE., Visakhapatnam - 2015 (319) ELT526 (Tri-Bang.) ? Madras Fertilizers Limited VS. Asst. Commissioner- Agricultural Income Tax and Sales Tax - 1994 (95) STC 134(Ker) ? Rashtriya Chemicals and Fertilisers Limited vs. State of UP - 1996 (101) STC 487 (All) ? TISCO General Office Recreation Club vs. State of Bihar - 2002 (126) STC 547 (SC) ? Neyveli Liginite Corporation Ltd. Vs. CTO - 2001 (124) ELT 586
7. The learned A.R. on behalf of the Respondent Revenue inter alia pleads as follows :
(i) The appellant, KRL paying duty at subsidized price whereas it is receiving the full price from Oil Marketing Companies (OMCs).
(ii) The duty is payable on the full price collected from Oil Marketing Companies (OMCs).
(iii) The subsidized value/price collected from the consumer by Oil Marketing Companies (OMCs) cannot be taken as assessable value for the purpose of payment of Central Excise duty.
(iv) Under the concept of transaction value, the actual value received for the goods from Oil Marketing Companies is the assessable value on which duty of Central Excise becomes payable by the appellant.
(v) The learned A.R. in support relies on the following decisions :
Oil & Natural Gas Corporation Ltd. Vs. Commissioner [2015-TIOL-1960-CESTAT-MUM-LB] Oil & Natural Gas Corporation Ltd. Vs. Commissioner [2010-TIOL-1419-CESTAT-MUM] Commissioner of Central Excise, Jaipur-II Vs. Super Synotex (India) Ltd. [2014 (301) E.L.T. 273 (S.C.)] Oil & Natural Gas Corporation Ltd. Vs. CCE, Surat [2015 (320) E.L.T. 614 (Tri.-Ahmd.)]
8. The facts of the case on record, the submissions of both the sides and the case laws cited have been carefully considered.
9. The main issue is whether excise duty is payable at the Refinery Gate Price (RGP) paid by the Oil Marketing Companies to the appellant, KRL or duty is payable at the subsidized price on which the subject goods are sold by Oil Marketing Companies to the consumers? 9.1. The appellant also mentions that there is other minor issue - Whether terminal charges being the amount collected from the Oil Marketing Companies are to be included in the transaction value of SKO (PDS) and LPG (Domestic) for the purpose of assessment of Central Excise duty? 9.1.1. We find that as per the impugned order passed by the Commissioner (Appeals), inclusion or exclusion of terminal charges in the transaction value for the purpose of assessment is no longer a issue when it is on record that the amount being paid by the Oil Marketing Companies (OMC) to the appellant KRL already includes terminal charges in their payments made for the subject goods. Therefore, when we decide the main issue given above in Paragraphs 4 and 9, there is no need to give separate findings and decision on this minor issue.
10. The duty of Central Excise is charged on the transaction value as mentioned in Section 4(1) of the Central Excise Act, 1944. Section 4(1) is reproduced below for reference :
4. Valuation of excisable goods for purposes of charging of duty of excise.-
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value.
.. .. .
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
[Explanation. For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.] 10.1. The appellant argues that they paid the duty as per price fixed by the Government at Administrated Price Mechanism (APM) and the duty of Central Excise should be charged on this price, which is the subsidized price.
10.1.1. The provisions of Section 4(1) of Central Excise Act, 1944, are very clear. These provisions state about the following elements of the assessable value/transaction value :
(i) The sale of the goods by the assessee for delivery at the time and place of removal;
(ii) The assessee and the buyer are not related; and
(iii) Price is the sole consideration for sale.
10.1.2. In the present case, the transaction value would be the price, where above three elements/conditions are present or fulfilled. We find that above three elements are present in the case of the amount / the price paid by OMCs (other than the BPCL). The price which is charged by the appellant KRL from the Oil Marketing Companies (other than the BPCL) is the price as per the provisions of Section 4(1) of the Central Excise Act, 1944. The price charged by the appellant KRL from BPCL cannot be called as transaction value, when BPCL is related to the appellant as KRL is said to be the subsidiary company of the BPCL (Bharat Petroleum Company Ltd.).
10.1.3. It is to be noted that the price being paid by the Oil Marketing Companies (other than BPCL) includes the terminal charges also. Therefore, for the purpose of Central Excise duty, the assessable value which is now called the transaction value [after the amendment made in Section 4 of the Central Excise Act, 1944 by the Finance Act (with effect from 1.7.2000)] is the price that is charged by the KRL from OMCs for the subject goods.
10.2. The appellants argument that the subsidized price should be taken as transaction value for charging Central Excise duty on the goods sold by the appellant to Oil Marketing Companies does not have sufficient force as the subsidized price, which has been charged by the Oil Marketing Companies from their customers does not fulfill all three conditions (mentioned earlier) given in the provisions of Section 4(1) of the Central Excise Act, 1944. In other words, sale has to be between non-related buyers; and sale has to be for delivery at the time and place of removal and it is to be ensured that in the transaction of sale, price is the sale consideration. Here full consideration, which is in the category of sole consideration, is paid by the buyer OMCs and received by the seller appellant and that only can be taken as assessable value (transaction value) for the purpose of payment of Central Excise duty. In the present case, subsidized price is not the sole consideration; therefore, it is not the transaction value for the purpose of charging Central Excise duty.
10.3. The appellant submits that the Central Board of Excise & Customs (C.B.E.C.) issued clarification Circulars saying that the subsidized price is to be taken as assessable value. However, when the provisions relating to valuation given in the Section 4(1) of the Central Excise Act, 1944 are very clear, this submission of the appellants and the said CBEC Circulars do not have sufficient legal force and cannot be given any legal effect.
10.4. For our conclusions made above, we take support from the Honble Supreme Courts decisions in the case of Commissioner of Central Excise, Jaipur-II Vs. Super Synotex (India) Ltd. [2014 (301) E.L.T. 273 (S.C.)] and in the case of Commissioner of C. Ex., Jaipur Vs. Shree Rajasthan Syntex Ltd. [2015 (318) E.L.T. 626 (S.C.)] and from the Tribunals Larger Bench decision in the case of Oil and Natural Gas Corporation Ltd. Vs. CCE [2015-TIOL-1960-CESTAT-MUM-L.B.]. In all these decisions, the ratio is that the price or cost paid/received to/by an assessee or manufacturer (from independent buyer) constitutes the assessable value / transaction value for the purpose of levy of Central Excise duty. The Honble Supreme Court in the case of C.C.E., Jaipur-II Vs. Super Synotex (India) Ltd. (supra) in paragraph 22 observes that the price or cost paid to the manufacturer constitutes the assessable value on which Central Excise duty is payable. Honble Supreme Court further says that the words that gain signification are actually paid.
10.4.1. The case laws cited by the appellant have different facts and do not support the submissions put forward by them.
11. Based on the discussions and the case laws quoted above, the appeal preferred by the appellant, M/s Kochi Refineries Ltd. stands rejected and the impugned order is sustained.
(Pronounced in open court on .. )
(ASHOK K. ARYA) (S. S. GARG)
TECHNICAL MEMBER JUDICIAL MEMBER
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