2015 (11) TMI 609 - AT - Central Excise

Demand u/s 11D - the respondent issued debit note to adjust the difference in the price of invoice and money paid, by cheque (for crude oil) - Revenue felt that the amount reflected in the debit note as Excise duty, amounts to such collection by the respondent-assessee, which is required to be deposited with the Central Government in terms of the provisions of Section 11D of the Act - Held that - It is admitted fact on record that the respondent-assessee received crude oil on which no Excise duty was chargeable. It is further admitted fact that the purchase invoices are for refined oil under the exigency of business, the assessee used to issue debit note as stated hereinabove, for adjusting the amount not payable. In view of the findings in the impugned order the learned Counsel prays for dismissing the appeal of Revenue. - Finding of the Commissioner (Appeals) are correct and there is no illegality or impropriety in the impugned order. Further I hold that the basic ingredients as required under Section 11D, for attracting liability are absent in the facts of this case, like recovery of any amount in the name of duty from the buyers of such goods, that is excisable goods, and such person should be the person liable to pay duty under the scheme of the Excise Act. These elements being absent I conclude that the respondent-assessee was not required to pay any duty under the provisions of Section 11D of the Act. - Decided against Revenue.

Issues Involved:
1. Liability of the respondent-assessee to pay Excise duty under Section 11D of the Central Excise Act.
2. Validity of the book adjustments made by the respondent-assessee.
3. Interpretation of transactions involving crude oil and refined oil.
4. Whether the suppliers of crude oil can be considered buyers of refined oil under Section 11D.

Detailed Analysis:

1. Liability of the respondent-assessee to pay Excise duty under Section 11D of the Central Excise Act:

The core issue is whether the respondent-assessee is liable to pay Excise duty under Section 11D of the Central Excise Act. The Revenue argued that the amount shown as Excise duty in the debit notes must be deposited with the Central Government. The Commissioner (Appeals) found that the respondent-assessee had not actually recovered any amount representing Excise duty from the suppliers of crude oil. The debit notes were issued to adjust the bill amount of refined oil to the cost of crude oil, and no undue benefit was derived from this adjustment. The Tribunal upheld this finding, stating that the basic ingredients required under Section 11D, such as the recovery of an amount in the name of duty from the buyers of excisable goods, were absent in this case.

2. Validity of the book adjustments made by the respondent-assessee:

The Revenue contended that the book adjustments made by the respondent-assessee were improper and not based on correct facts. However, the Commissioner (Appeals) and the Tribunal found that the adjustments were necessary to nullify the bills of refined oil to the extent of job charges and bring them to the level of the cost of crude oil. The Tribunal reviewed the books of accounts and other documents and concluded that the adjustments were legitimate and did not result in any undue benefit to the respondent-assessee.

3. Interpretation of transactions involving crude oil and refined oil:

The Commissioner (Appeals) and the Tribunal examined the nature of transactions where crude oil was supplied but invoices were issued for refined oil. This was done to gain sales tax benefits under the Sales Tax Act. The Tribunal noted that the debit notes were issued to adjust the difference between the price of crude oil and refined oil, and no actual recovery of job charges or Excise duty occurred. The Tribunal agreed with the Commissioner (Appeals) that the transactions were correctly interpreted and did not involve any recovery of Excise duty from the suppliers of crude oil.

4. Whether the suppliers of crude oil can be considered buyers of refined oil under Section 11D:

The Tribunal held that the suppliers of crude oil could not be considered buyers of refined oil under Section 11D. The law requires that any amount collected in excess of the duty assessed must be from the buyer of the goods. In this case, the suppliers of crude oil were not buyers of refined oil, and there was no evidence that the respondent-assessee collected any extra amount from the actual buyers of refined oil. Therefore, Section 11D was not applicable.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals) order that the respondent-assessee was not liable to pay any duty under Section 11D of the Central Excise Act. The Tribunal found that the book adjustments were legitimate, the transactions were correctly interpreted, and the suppliers of crude oil could not be considered buyers of refined oil under Section 11D. The respondent-assessee was entitled to consequential benefits in accordance with the law.

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