2015 (10) TMI 1993 - AT - Central Excise

Denial of refund claim - subsequent revision in the price after removal of goods - sale of petrol and diesel, to Oil marketing Companies (OMCs) - whether the Appellants are entitled to the refund of excess duty paid during the period from April, 2003 to January, 2004 - reduction of freight charges from the transaction value - Held that - Department itself has gone on a wrong premise from the very beginning, inasmuch as it was considered that the difference in the transaction values was on account of the freight charges between the factory gate and the place of delivery of the goods by the respondents. Both Revenue as well as the respondent have not disputed the fact of sale of the petroleum products were under the Multilateral Product Sale-Purchase Agreement dated 31st March, 2002. It has been mutually agreed that in case of sale from North Eastern Region, the basic price be reduced by an amount equivalent to the notional freight, which in our opinion, does not refer to incurring of actual freight. It is evident that the Respondent had initially paid the duty on the basic price without deducting the notional freight element from the price, but after realization of the mistake, filed the refund claim. We do not find any reason to dis-agree with the conclusion arrived at by the ld. Commissioner (Appeals). Accordingly, the Respondent in principle are entitled to the refund claim. - Decided in favor of assessee. The issue of correctness or otherwise of the transaction value determined on the basis of the said Agreements, which is neither raised in the demand notice nor in the grounds of appeal, cannot be re-opened at this stage, which would otherwise result into traveling beyond the scope of the show-cause notice as held by the Hon ble Supreme Court in the case of Champdany Industries Ltd. 2009 (9) TMI 7 - SUPREME COURT OF INDIA . - Decided in favor of assessee. Both sides agree that it is necessary to ascertain the fact whether initial transaction value was higher and subsequent transaction value after deducting the notional freight, applying clause 5.4 of the agreement, became lower before allowing the said claim to the respondent. - For the limited purposes of verification of this fact, in our opinion, it is prudent to remand the case to the adjudicating authority, who shall ascertain the said facts after taking into consideration all the evidences on record and the evidences that would be produced by both sides. Needless to mention, a reasonable opportunity of hearing be granted to the Respondent-assessee - Matter remanded back - Decided partly Revenue.

Issues Involved:
1. Entitlement to refund of excess duty paid.
2. Determination of transaction value.
3. Inclusion of freight charges in assessable value.
4. Breach of contract implications on refund claim.
5. Verification of initial and subsequent transaction values.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Excess Duty Paid:
The Respondent, a Government of India Undertaking, engaged in the manufacture of petroleum products, filed a refund claim for excess duty paid amounting to Rs. 4,70,34,371/- for the period from April 2003 to January 2004. The claim was based on the ground that the transaction value on which duty was initially paid was higher than the transaction value realized from the Oil Marketing Companies (OMCs). The Assistant Commissioner of Central Excise rejected the refund claim, but the Commissioner (Appeals) set aside this order and allowed the appeal with consequential relief. The Revenue appealed against this decision, arguing that the non-payment of the agreed price by the buyers could not justify a refund of the excise duty paid on the excess price.

2. Determination of Transaction Value:
The Revenue contended that the statutory prices as per different pricing Circulars constituted the "transaction value" and that the Respondent had correctly determined and paid excise duty on this value. The Respondent argued that the transaction value should be adjusted as per Article 5.4 of the Multilateral Product Sale-Purchase Agreement, which allowed for a reduction in the basic price by the notional rail freight from the supplying refinery to New Jalpaiguri (NJP). The Tribunal found that the refund claim was based on the difference in transaction values due to the notional rail freight deduction, which was a factor agreed upon in the said Agreement.

3. Inclusion of Freight Charges in Assessable Value:
The show-cause notice issued proposed rejection of the refund claim on the grounds that the assessable value should incorporate freight charges if the goods are sold at a place other than the place of removal. However, it was clarified that the sale was ex-refinery/factory gate, and the deduction of notional rail freight was pursuant to the Agreement. The Tribunal noted that the Department had misinterpreted the Agreement, and the deduction of notional freight was not conditional on the actual incurrence of freight charges.

4. Breach of Contract Implications on Refund Claim:
The Revenue argued that the Central Excise Department could not be held responsible for the breach of contract by the buyers (OMCs). However, the Tribunal found that there was no breach of contract, as the deduction of notional rail freight was in accordance with the Agreement. The Tribunal emphasized that the reduction in transaction value was due to factors prevalent at the time of clearance and not due to any subsequent event.

5. Verification of Initial and Subsequent Transaction Values:
The Tribunal agreed that it was necessary to verify whether the initial transaction value was higher and the subsequent transaction value, after deducting the notional freight, was lower. The case was remanded to the adjudicating authority for verification of these facts, with a direction to complete the verification and decide the claim within three months.

Conclusion:
The Tribunal concluded that the Respondent was entitled to the refund claim in principle, but remanded the case to the adjudicating authority for verification of the transaction values. The adjudicating authority was directed to complete the verification and decide the claim within three months from the date of communication of the order. The appeal by the Revenue was allowed by way of remand to the extent mentioned.

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