2010 (9) TMI 907 - AT - Central Excise

Transaction value - Valuation (Central Excise) - Liquefied petroleum gas (LPG) - Sold from June, 2002 to December, 2004 in bulk by manufacturer/refinery (ONGC) to oil marketing company (OMC) at import parity price (IPP), who after bottling it sold to dealers under Administered Price Mechanism (APM) of Government of India - Statutory invoice for clearances from refinery showing payment of duty on APM - OMC received the difference in IPP and APM from Oil Pool Account maintained by Ministry of Petroleum, however, ONGC did not receive any subsidy - On IPP recovered from OMCs found to be more than APM, Department making demand for duty based on IPP - Held that - Parliament introduced the concept of transaction value replacing the concept of normal price by amending Section 4 of the Central Excise Act w.e.f. 1-7-2000, which was a fundamental departure as acknowledged in CBEC s Circular dated 30-6-2000 cited by counsel. The amended Section 4(l)(a) lays down that the assessable value for payment of duty of excise shall be the transaction value in a case where the goods are sold by the assessee for delivery at the time and place of removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale. This provision of law makes it clear that, for the transaction value (as defined supra) to be reckoned as the assessable value, there are three conditions to be satisfied viz. (i) sale of the goods by the assessee for delivery at the time and place of removal, (ii) the assessee and the buyer not to be related, (iii) the price to be the sole consideration for the sale. In the present case, admittedly, the appellant satisfied all these conditions and, therefore, the assessable value of LPG which was sold in bulk, ex-refinery, to the OMCs should be its transaction value as defined under the new Section 4(3)(d). There was a feeble suggestion at the bar that the difference between ex-refinery price recovered by ONGC from their buyers (OMCs) and the ex-storage price (APM price) on which duty was paid by ONGC be reckoned as a subsidy paid by the Government to ONGC through the OMCs. This plea is not supported by documentary evidence. Even if it be assumed that ONGC received subsidy from Government indirectly, the amount could only be included in the assessable value of the goods sold by ONGC to the OMCs as per the ratio of the Hon ble Supreme Court s decision in Commissioner v. Mazagon Dock Ltd. 2005 (7) TMI 105 - SUPREME COURT . Thus follow judicial discipline by causing the matter to be placed before the Hon ble President for constitution of Larger Bench to consider and decide on the substantive issue, on which the view taken happens to be contrary to the view taken by a co-ordinate Bench in MRPL s case 2008 (10) TMI 564 - SC ORDER as although the facts of the present case are similar to it the apex court s having been passed sub silentio in respect of the substantive valuation issue cannot, be followed as a binding precedent under Article 141 of the Constitution for the present case. The issue to be considered by Larger Bench is framed as follows - Whether a manufacturer of LPG selling the product in bulk, post-1-7-2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price (APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f. 1-7-2000.

Issues Involved:
1. Valuation for assessment of duty on LPG (domestic) cleared in bulk.
2. Applicability of the "transaction value" concept under Section 4 of the Central Excise Act.
3. Binding effect of CBEC circulars and Supreme Court decisions.
4. Comparison of facts with previous Tribunal and Supreme Court decisions.
5. Interpretation of the amended Section 4 of the Central Excise Act.

Detailed Analysis:

1. Valuation for Assessment of Duty on LPG (Domestic) Cleared in Bulk:
The appellant, engaged in the manufacture of petroleum products including LPG, sold LPG in bulk to Oil Marketing Companies (OMCs) at an "Import Parity Price" (IPP) while paying excise duty based on a lower "Administered Price Mechanism" (APM) price. The department argued that the correct assessable value should be the higher IPP, as it was the actual price collected from the OMCs, and issued show-cause notices demanding differential duty and imposing penalties.

2. Applicability of the "Transaction Value" Concept under Section 4 of the Central Excise Act:
The amended Section 4(3)(d) of the Central Excise Act defines "transaction value" as the price actually paid or payable for the goods when sold. The Tribunal noted that the concept of "transaction value" replaced the "normal price" concept from 1-7-2000, marking a fundamental departure in valuation for excise purposes. The Tribunal emphasized that the transaction value should include any additional consideration paid by the buyer, making the higher IPP the correct assessable value.

3. Binding Effect of CBEC Circulars and Supreme Court Decisions:
The appellant argued that show-cause notices were contrary to CBEC circulars and cited Supreme Court decisions on the binding effect of such circulars. The Tribunal acknowledged the Supreme Court's dismissal of the department's appeal in the MRPL case, which involved similar facts, based on a CBEC circular. However, the Tribunal noted that the Supreme Court's decision in MRPL was passed sub silentio regarding the substantive valuation issue under the amended Section 4, and thus was not a binding precedent for the present case.

4. Comparison of Facts with Previous Tribunal and Supreme Court Decisions:
The appellant cited several Tribunal decisions, including cases involving GAIL, HPCL, BPCL, and IOCL, where similar valuation issues were considered. The Tribunal distinguished these cases based on factual differences, such as the receipt of subsidies and the period of dispute being prior to 1-7-2000. The Tribunal emphasized that the present case involved post-1-7-2000 transactions, where the amended Section 4's "transaction value" concept applied.

5. Interpretation of the Amended Section 4 of the Central Excise Act:
The Tribunal analyzed the amended Section 4, highlighting that the assessable value should be the transaction value, which includes the actual price paid or payable by the buyer. The Tribunal concluded that the higher IPP charged by the appellant to the OMCs should be the assessable value for excise duty purposes, as it constituted the transaction value under the amended Section 4.

Conclusion:
The Tribunal decided to refer the matter to a Larger Bench for a final decision on the substantive issue, framing the question as whether a manufacturer of LPG selling the product in bulk, post-1-7-2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price (APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f. 1-7-2000. The Tribunal directed the Registry to place the records before the Hon'ble President for the constitution of a Larger Bench.

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