2018 (11) TMI 722 - AT - Central Excise

Valuation - SKO and LPG when cleared by the appellant to other OMCs for distribution in PDS - Department was of the view that the duty is required to be paid on the consideration received by the appellant from other OMCs at ZTVL - Penalty - Held that - The concept of transaction value was introduced with the amendment to Section 4 of the Act w.e.f.01.07.2000, the new Central Excise Valuation Rules, 2000, were also notified at the relevant time. The explanation to the relevant changes were circulated vide Circular F.No.354/81/2000-TRU dated 30.06.2000. Penalty - Held that - The issue of valuation of petroleum product was in a state of flux immediately after the introduction of changes in Section 4 of Central Excise Act, 1944 - the imposition of penalty on the appellant in this case is not justified and is set aside. Appeal allowed in part.

Summary

Issues: Valuation of goods for Central Excise duty payment.

Analysis:
1. Background: The appeal, pending since 2007, involves the valuation of Superior Kerosene Oil (SKO) and Liquefied Petroleum Gas (LPG) cleared by the Appellant to other Oil Marketing Companies (OMCs) from 16.11.2004 to 28.02.2005 for Central Excise duty payment.

2. Contention: The Appellant paid duty at ZAVL, a price dictated by the Government, while OMCs sold at ZAVL and were compensated by the Government, leading to a dispute on the duty value.

3. Appellant's Argument: The Appellant did not pay duty at an artificially depressed price, as the prices were set by the Government, not by the Appellant or OMCs.

4. Revenue's Argument: The Revenue justified the demand based on a Larger Bench decision requiring duty payment based on transaction value collected from OMCs post-amendment of Section 4 of the Central Excise Act, 1944.

5. Distinguishing Factors: The Appellant distinguished the case from the Larger Bench decision by highlighting differences in the nature of transactions and the involvement of ONGC, not an OMC.

6. Decision: After hearing both sides, the Tribunal upheld the duty payment based on the transaction value received by the Appellant from OMCs, in line with the Larger Bench decision post-amendment of Section 4.

7. Clarification: The Tribunal noted the introduction of new Central Excise Valuation Rules in 2000 and the confusion surrounding valuation of petroleum products post-amendment, justifying the setting aside of the penalty imposed on the Appellant.

8. Conclusion: The demand for duty was upheld with interest, but the penalty was set aside, considering the transitional confusion in valuation rules post-amendment, leading to a partial allowance of the appeal.