2008 (8) TMI 890 - AT - Central Excise

Valuation - Superior Kerosene Oil (SKO) - Liquefied Petroleum Gas (LPG) - ONGC is paying Excise duty on a value which is declared as assessable value but this price is different from what they are collecting from their customers namely HPCL BPCL IBP and IOCL - Held that - 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 - appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of Superior Kerosene Oil (SKO) and Liquefied Petroleum Gas (LPG) under Administered Price Mechanism (APM) and applicability of amendment of Section 4 in assessment practice.

Valuation of SKO and LPG under APM:
The case involved a dispute regarding the valuation of SKO and LPG manufactured and sold by ONGC under the Administered Price Mechanism (APM) formulated by the Government of India. ONGC sold these products to oil marketing companies, who further sold them through the Public Distribution System (PDS) or their own distributors. The Government fixed the selling prices of these products under APM, and ONGC paid Excise duty based on these fixed prices. However, the actual prices collected by ONGC from the oil marketing companies were different from the prices fixed by the Government. The oil marketing companies paid the additional amount from the subsidy provided by the Government, which was over and above the assessable value fixed by the Government. The Tribunal noted that the issue had already been decided in favor of the parties in previous cases like Reliance Industries Ltd. and Mangalore Refinery and Petrochemicals Ltd., where it was held that the additional consideration paid by the oil marketing companies out of the subsidy was not received from the ultimate consumers.

Applicability of Amendment of Section 4:
The appellant argued that the decision of the Commissioner was incorrect and cited precedents where the Tribunal had followed the decision of the Larger Bench in cases like GAIL. The appellant also referred to a Circular issued by the Board, stating that the assessment practice for goods under APM should continue as it existed before the amendment of Section 4. On the other hand, the Revenue contended that after the amendment of Section 4, the relevant factor for valuation was the transaction value, and there was no need to differentiate between assessable value and other value. The Revenue cited a judgment of the Hon'ble Supreme Court to support their argument that any additional consideration received by the buyer, even if under the policy of the Government, should be included in the assessable value.

Decision:
After considering the arguments from both sides, the Tribunal held that the issue had already been settled in previous cases like Reliance Industries and MRPL, where it was decided in favor of the parties. The Tribunal noted that the additional consideration paid by the oil marketing companies was from the subsidy provided by the Government and not from the ultimate consumers. Therefore, the Tribunal followed the precedent set by the Larger Bench and allowed the appeals filed by ONGC. The judgment was pronounced on 6-8-2008 by the Members of the Tribunal, Ms. Archana Wadhwa and Shri B.S.V. Murthy.