2018 (12) TMI 151 - AT - Central Excise

Valuation - inclusion of amount of freight for transfer of the LBO from the Refinery to the appellant s storage tank in assessable value - period from October 1996 to March 2000 - time limitation - Held that - LBO is moved from warehouse to the storage tank of the appellant without payment of duty. Duty is to be paid at the time of its removal from the storage tank. Since transportation charges for bringing the goods to the storage tank is an element of value accrued prior to such removal it is required to be included. Time bar - Held that - The practice of transporting non-duty paid LBO from the refinery to the storage tank of the appellant has been used for several years and the same is very much within the knowledge of the Department. It cannot be said that non-inclusion of freight element for payment of duty is on account of any malafide intention on the part of the appellants - there is no justification to extend the demand of duty beyond the normal time limit. Appeal allowed in part.

Summary

Issues:
- Dispute over payment of Central Excise duty on Lubricating Base Oil (LBO) received by the appellant without duty payment.
- Valuation of LBO for duty payment including freight element.
- Applicability of time limit for demanding duty payment.

Analysis:

Issue 1: Dispute over Central Excise Duty Payment on LBO
The appellant received Lubricating Base Oil (LBO) from Indian Oil Refinery and HPCL Refinery without payment of duty, stored at the bonded warehouse for manufacturing lubricating oil. The Revenue contended that duty should be paid on LBO at the time of drawing it for manufacturing, including the freight element. The original authority upheld the demand within the time limit. The Commissioner (Appeals) also upheld the demand. The appellant challenged the impugned order.

Issue 2: Valuation of LBO for Duty Payment
The appellant argued that the transfer price for LBO from the Refinery, fixed by the Oil Coordinating Committee, included the freight element. They cited a Draft Comment approved by the Additional Secretary and a Supreme Court decision supporting their stance. They claimed that even if the freight element was included, the differential duty would be available as modvat credit when clearing the final product.

Issue 3: Applicability of Time Limit for Duty Demand
The original authority allowed the benefit of the time bar, which was reversed by the Commissioner (Appeals). The Tribunal noted that the practice of transporting non-duty paid LBO to the storage tank was known to the Revenue for years, indicating no malafide intention by the appellant. Thus, the demand of duty beyond the normal time limit was not justified.

The Tribunal found that the duty should be paid at the time of removal from the storage tank, including transportation charges accrued before removal. The impugned order was modified, restoring the original authority's decision. The appeal was partly allowed, maintaining the duty payment requirement at the storage tank.