2013 (1) TMI 526 - AT - Central Excise

Evasion of duty Transactional value Under-valuation of goods - Whether or not by converting the actual volume of oil at room temperature to notional volume at 15 C for the purpose of fixing the price amounts to undervaluing the product to evade excise duty - Appellant is engaged in the manufacture of petroleum products - Volume of the petroleum product undergo change with change in temperature - Appellant has supplied goods to other oil manufacturing companies by charging the price per litre based on notional volume by converting the volume at room temperature to the volume at 15 C - Pay excise duty on transaction value of goods supplied at 15 C. Held that - For the purpose of calculating the excise duty chargeable, the price charged if it is sole consideration for the sale, would be the transaction value. The goods have been cleared on payment of excise duty as per the price declared in the invoices. It is not the case of the revenue that other manufacturing companies to whom the oil was supplied at the rate based on the volume at 15 C are the related parties and invoice price was not the sole consideration for sale or the appellant/assessee has received any other additional consideration apart from the declared sale price. Thus, the appellant has rightly paid the excise duty as per transaction value in terms of Section 4 of the Central Excise Act and there is no justification for allegation of under-valuation of the goods with a view to evade excise duty - In favour of assessee

Summary

Issues:
- Undervaluation of products for excise duty calculation based on temperature conversion.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi involved appeals concerning the undervaluation of petroleum products for excise duty calculation due to temperature conversion. The appellant, engaged in manufacturing petroleum products, faced allegations from the department regarding the calculation of product volume at different temperatures. The department contended that the appellant undervalued products supplied to other oil manufacturing companies by converting the volume at room temperature to the volume at 15^0C, resulting in a lower price and reduced excise duty. The jurisdictional Commissioner confirmed duty demands against the appellant based on these allegations.

The appellant's advocate argued that the impugned order was unsustainable as the goods were supplied to unrelated parties, and excise duty was paid as per Section 4 of the Central Excise Act, 1944. On the other hand, the respondent's representative emphasized that there was no provision in the Act for working out notional quantities at room temperature for price fixation, advocating for using the volume at room temperature for price calculation.

Upon considering the contentions and records, the Tribunal focused on whether converting the actual volume at room temperature to notional volume at 15^0C for pricing constituted undervaluation to evade excise duty. Referring to Section 4(1) of the Central Excise Act, the Tribunal highlighted that if the price was the sole consideration for sale to unrelated parties, the transaction value should be the basis for excise duty calculation. Since the goods were cleared on payment of excise duty as per the declared price in the invoices, and there was no evidence of additional considerations or related party transactions, the Tribunal concluded that the appellant correctly paid excise duty as per transaction value, as mandated by the Act.

Consequently, the Tribunal found no justification for the allegation of undervaluation to evade excise duty. The impugned orders confirming duty demands with interest against the appellant were set aside, and the appeals were accepted.