2023 (11) TMI 1165 - AT - Central Excise

Valuation of goods - CNG - Administered Price Mechanism - calculation of transaction value falling under the provisions of Sec 4(1)(a) of Central Excise Act - HELD THAT - The Court below has erred in drawing adverse inferences as the word commission has been used instead of the word profit-margin . Further, no adverse inferences can be drawn as the RSP is fixed by the Appellant, which is a PSU and CNG being a sensitive product touching the life of common man, in various aspects. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
The judgment involves the issue of valuation for the levy of Central Excise duty.

Comprehensive Details:
The Appellant, a PSU, manufactures Compressed Natural Gas (CNG) and was registered with the department, discharging Central Excise duty from August 2005 to December 2009. The CNG transactions are regulated and administered meticulously due to its sensitive nature. The Appellant dispatches CNG to HPCL via 'automobile trucks' from its factory. HPCL then moves the CNG to its retail stations and sells it to end-customers.

The dispute arises from the interpretation of the agreement between the Appellant and HPCL. The Authorities below contended that there was no real sale between the parties, treating the final sale price to end-customers as the 'transaction value' for levy purposes. They disregarded the sale invoices raised by the Appellant and alleged an agency relationship between the parties.

The Appellant argued that the agreement clearly establishes a principal-to-principal relationship, emphasizing clauses stating no agency relationship and the discharge of VAT liability as proof of a genuine sale. They highlighted that the mark-up retained by HPCL is its profit margin, not commission, and the agreement must be considered comprehensively.

The Appellate Authority upheld the decision against the Appellant, invoking an extended period of limitation and confirming a penalty for alleged mis-declaration to evade Central Excise duty payment. However, the Appellant cited precedents, including the Mahanagar Gas Ltd case, to support their position that the transaction value was correctly determined based on the mutually agreed price.

In the final ruling, the Tribunal found in favor of the Appellant, citing precedents and emphasizing the fixed sale price determined by the Appellant, the sensitive nature of CNG, and the use of 'commission' in the agreement. The Impugned Order was set aside, granting the Appellant consequential benefits.

Separate Judgement:
No separate judgment was delivered by the judges in this case.