2021 (11) TMI 114 - AT - Central Excise

Valuation - interface quantity of adopting assessable value of SKO (non Public Distribution System (PDS) at the prevalent rate - case of the department is that the appellant, instead of paying excise duty on the interface quantity of SKO as per rate prevalent for SKO, they should have paid excise duty higher of the two duties, after determining the duty payable on SKO and duty payable on MS/HSD - applicability of CBEC Circular No. 636/27/2002-CX dated 22.04.2002 - HELD THAT - The issue is no longer resintegra as in the appeals in the appellant s own case only for a different period, this Tribunal has already decided the matter in the M/S. INDIAN OIL CORPORATION LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VADODARA 2018 (9) TMI 24 - CESTAT AHMEDABAD where it was held that the duty on these products is payable as per price of the respective product prevailing at the time of removal of the goods. As regards MS and HSD, the duty was paid on the transaction value. As regards SKO, since the same was not sold, the duty was paid on the prevailing price of SKO on the basis of sale price prevailing for SKO naturally which is higher than the price of SKO sold under Public Distribution System, therefore, the correct price was adopted by the appellant while clearing the interface quantity of SKO. T he issue is no more res-integra - Appeal allowed - decided in favor of appellant.

Summary

Issues: Determination of excise duty on interface quantity of petroleum products; Interpretation of CBEC Circular No. 636/27/2002-CX; Whether intermixing of SKO with MS/HSD amounts to manufacture.

Analysis:
1. Determination of excise duty on interface quantity: The case involved the appellant, engaged in manufacturing petroleum products, paying duty on the interface quantity of SKO supplied through a pipeline with MS and HSD. The department contended that duty should be paid based on the higher of the two duties, as per CBEC Circular No. 636/27/2002-CX. The Adjudicating Authority confirmed the demand of differential duty with interest and penalties. The Tribunal noted that in a previous order, it was decided that duty should be paid based on the prevailing price of the respective product at the time of removal from the factory. The Tribunal found that the appellant correctly applied the price of goods cleared from the factory, and the Circular did not have statutory support, leading to the set-aside of the differential duty demand.

2. Interpretation of CBEC Circular No. 636/27/2002-CX: The Tribunal analyzed the Circular, which suggested applying the price of HSD/MS even on clearance of SKO. However, it found that the Circular did not align with statutory provisions and emphasized that a Circular cannot create law but only clarify existing law. Citing various judgments, the Tribunal held that the Circular, lacking support of any Act or Rule, was not binding on the assessee. The Tribunal highlighted that the Board can clarify existing law but cannot create new law independently.

3. Whether intermixing of SKO with MS/HSD amounts to manufacture: The Adjudicating Authority contended that the activity of supplying HSD/MS with interface SKO amounted to manufacture. However, the Tribunal observed that the show cause notice did not specify this activity as manufacture. The Tribunal analyzed the definition of "manufacture" under Section 2(f) and concluded that the activity specified in clause (iii) would only amount to manufacture for goods specified under the Third Schedule. Since the appellant's products were not listed under the Third Schedule, intermixing of SKO with HSD/MS did not constitute manufacture. Consequently, the differential duty demand on the interface quantity of SKO was deemed unsustainable, leading to the setting aside of the impugned orders and allowing the appeals.

In conclusion, the Tribunal's judgment centered on the correct determination of excise duty on interface quantity of petroleum products, the interpretation of CBEC Circular No. 636/27/2002-CX, and the assessment of whether intermixing of SKO with MS/HSD amounts to manufacture. The detailed analysis provided clarity on each issue, leading to the setting aside of the differential duty demand and the allowance of the appeals.