2016 (10) TMI 1159 - AT - Central Excise

Valuation - SKO (Superior Kerosene Oil) - includibility - reimbursements - impugned order has held that the amount reimbursed by the Oil Pool Account to the respondents and then in turn to Kochi Refineries Ltd. (KRL) the reimbursement component cannot be added to the assessable value - whether differential amount (difference between subsidized price and total price paid for the goods namely SKO) received separately from Oil Pool Account by the respondents M/s. IOC Ltd. and paid to the manufacturer of the subject goods M/s. KRL is part of the value of the goods under Section 4 of the Central Excise Act 1944 and whether duty of Central Excise accordingly is chargeable for said differential amount or not? Held that - the respondents M/s. IOCL have replaced the manufacturer and are the assessee for the purpose of Central Excise payment. When the respondents have taken the position of an assessee in place of the manufacturer it is not an acceptable argument on behalf of the assessee that transaction value in their case is only the subsidized price when it is on record and it is the fact that the assessee received additional consideration (differential price) from the Oil Pool Account for the same goods the goods in questions and they paid the same to the manufacturer who is M/s. Kochi Refineries Ltd. (KRL) - It is again made clear that the additional consideration/differential price being received from Oil Pool Account is to be treated as price-cum-duty paid on behalf of the buyer and it is being received by the assessee who is M/s. IOCL who in turn reimburse the manufacturer KRL by its payment to KRL - the duty of Central Excise is chargeable for the additional consideration (reimbursement) received and paid to the manufacturer KRL by the assessee IOCL. Extended period of limitation - Held that - From the facts on record it cannot be proved that the respondents wilfully suppressed the facts from the Department with intention to evade payment of duty of Central Excise though the Department in the show cause notice has invoked the extended period clause citing the proviso to Section 11A of the Central Excise Act 1944. When there is no sufficient evidence on record to prove wilful suppression misstatement etc. with intention to evade payment of duty on the part of the respondents the demand of the duty can be sustained only for the clearances made during the period of one year prior to the date of show cause notice - extended period cannot be invoked. For the period of one year quantification of liability of duty along with interest and imposition of penalty as per law is also required to be decided when the duty of Central Excise has not been paid on the differential price which includes the duty payable on the subject goods. For this limited purpose of re-quantification of duty and interest and for imposition of penalty in case of the duty not paid during the period of one year the matter is remanded to the original adjudicating authority - appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the differential amount received from the Oil Pool Account should be included in the assessable value for calculating Central Excise duty.
2. Whether the demand for the period prior to March 2004 is barred by limitation.

Detailed Analysis:

1. Inclusion of Differential Amount in Assessable Value:
The main issue revolves around the inclusion of the differential amount (difference between the subsidized price and the total price paid for SKO) received from the Oil Pool Account by the respondents (M/s. IOCL) and paid to the manufacturer (M/s. KRL) in the assessable value under Section 4 of the Central Excise Act, 1944.

Arguments by the Appellant (Revenue):
- The respondents are paying duty on a price much lower than the price paid to the manufacturer.
- Duty should be payable on the full price paid to KRL.
- The concept of 'transaction value' under the Central Excise Valuation Rules, 2000, mandates that the actual value paid to KRL should be the transaction value for duty purposes.

Arguments by the Respondent (IOCL):
- Duty was rightly paid on the price fixed by the Government under the Administered Price Mechanism (APM).
- The price fixed under APM for clearance to buyers should be the assessable value.
- The differential price paid to KRL is not part of the transaction value for duty purposes.
- Product Price Adjustment (PPA) is not an additional consideration from the buyer to the respondents.

Tribunal's Findings:
- Section 4(1) of the Central Excise Act, 1944: The duty of Central Excise is charged on the transaction value, which includes any additional consideration received directly or indirectly from the buyer.
- Explanation to Section 4(1): The differential price received from the Oil Pool Account is deemed as an additional consideration and should be included in the price-cum-duty.
- Rule 6 of the Central Excise Valuation Rules, 2000: The value of the goods should be the aggregate of the transaction value and any additional consideration received directly or indirectly from the buyer.
- The differential amount received from the Oil Pool Account is considered an additional consideration flowing indirectly from the buyers and must be included in the assessable value.
- The argument that the differential amount is not received directly from the buyers but from the Oil Pool Account is not tenable as it is deemed to be received on behalf of the buyers.

2. Limitation Period for Demand:
Arguments by the Respondent (IOCL):
- The demand for the period prior to March 2004 is barred by limitation.
- Being a Public Sector Undertaking, the issue was not free from doubt, and there was no intention to evade duty.

Tribunal's Findings:
- There is no sufficient evidence of willful suppression or misstatement with the intention to evade duty.
- The demand for the period beyond one year prior to the date of the show cause notice (21-3-2005) is barred by limitation.
- The duty demand is confirmed only for the period of one year prior to the date of the show cause notice.

Conclusion:
- The differential amount received from the Oil Pool Account should be included in the assessable value for calculating Central Excise duty.
- The demand for the period beyond one year prior to the date of the show cause notice is barred by limitation.
- The matter is remanded to the original adjudicating authority for re-quantification of duty, interest, and imposition of penalty for the period of one year prior to the date of the show cause notice.

Order:
The appeal is disposed of by remand to the original adjudicating authority for re-quantification of duty, interest, and penalty for the period of one year prior to the date of the show cause notice, within three months of receipt of this order. The liability of duty beyond one year is set aside.

(Pronounced in open Court on 5-10-2016)