9911796707
TMI Blog2009 (6) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... their own depots as well as to other Oil Marketing Companies (OMCs) on payment of duty. Enquiries conducted by the Central Excise Department revealed that M/s. BPCL were paying less duty on clearances of MS and HSD made to other OMCs as compared to sales made to their own independent dealers/buyers. In other words, M/s. BPCL were paying duties on the same products but at two different assessable values. 3. Enquiries further revealed that 4 oil companies viz. M/s. BPCL, Indian Oil Corporation Ltd. (IOCL), Hindustan Petroleum Corporation Ltd. (HPCL) and Indo Burma Petroleum (IBP) had entered into the MOU w.e.f. 1-4-2002, so as to ensure smooth supply and distribution of petroleum products by sharing their infrastructure so as to avoid any kind of disruption of supply anywhere in India. The agreement basically was that if, say, IOCL did not have their own refinery or import facilities near Mumbai, they could get the petroleum products from another oil company having a refinery or import facilities in Mumbai, viz. BPCL, which M/s. IOCL could then sell to IOCL's own independent dealers. The MOU also provided for a reciprocal arrangement in the sense that IOCL would provide the same fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharatpetroleum Corporation Ltd. New Delhi" 5. When die officers of BPCL were asked by the Central Excise officers to peruse the above letter and to comment as to whether the said letter contained any directions for adopting 2 prices, one for sale to independent dealers and another for supply to other OMCs, they replied in the negative. 6. Based on the enquiries, the two values adopted by BPCL for paying duty were found to be as under : AS ON 16-3-2003 ASSESSABLE VALUE FOR TRANSFER TO OTHER OMCs (PER KL) Rs. ASSESSABLE VALUE FOR SALE TO OWN INDEPENDENT DEALERS (PER KL) Rs. MS HSD MS HSD Import Parity Price 11860.12 13125.49 Dealer billing price 27166.01 19223.71 Freight 277.47 912.92 44.00 30.42 Delivery charges Terminating Charges (if through pipeline) 0.81 12.55 Less excise duty 4528.17 2172.86 Less addl. ex.duty 7500.00 1500.00 Total 12148.40 13450.95 15043.85 15520.43 7. From the above, it appeared that in respect of MS, the price difference was nearly Rs. 3000 per KL and in respect of HSD, it was nearly Rs. 2000 per KL. On being asked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll cases the matter has been decided in favour of the oil companies. The following judgment; were cited by him. (i) HPCL v. CCE, Visakhapatnam-I [2005 (187) E.L.T. 479]. (ii) Above order upheld by the Supreme Court. [2006 (196) E.L.T. A72(S.C.)]. (iii) IOCL v. CCE&C, Goa [Order No A/360-361/08/C-I/EB, dated 1-4-2008 - 2009 (235) E.L.T. 702 (Tribunal). (iv) HPCL v. CCE, Pune-II [Order No A/478/07/C-I/EB, dated 26-6-2007]. 14.2 The Ld. Advocate carried us through the whole judgment in the case of HPCL v. CCE, Visakhapatnam-I (supra) pointing out that all the issues raised by the Revenue in the present proceedings had been deliberated upon, and, thereafter, it was held by the Tribunal that the dealings between the oil companies were at an arm's length and, therefore, the transaction value could not be rejected. Shri Patil submitted that this decision had been upheld by the Supreme Court by dismissal of the Civil Appeal No. D-22493 of 2005 filed by the Department as reported in 2006 (196) E.L.T. A72 (S.C.). He further submitted that on dismissal of the Civil Appeal, the Tribunal's order merged with the Supreme Court decision and it should now be considered as the law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdination Committee (OCC) was dissolved. In view of the infrastructural, operational and logistic constraints and to ensure the regular supply of the petroleum products, the Oil PSUs entered into MOUs at the behest of Ministry of Petroleum and Natural Gas, whereby any Oil Company having a warehouse/refinery at any location was obliged to exchange the products with other Oil companies as per logistic plan at mutually agreed price. 2. CERA had raised objection and SCNs were issued to the Oil PSUs on the ground that the transactions of inter PSU sale were not at arms length and that the sale price as per the MOU did not represent the transaction value under Section 4 of the Central Excise Act, 1944. 3. CESTAT, Bangalore, in the case of CCE, Visakhapatnam v. HPCL, has held vide Order No. 306,307, dated 28-2-2005 [2005 (187) E.L.T. 479 (Tri-Bang.)] that the sale price as per the MOU correctly represented the transaction value. SC has dismissed the Civil Appeal filed by the Department against the CESTAT order. 4. It has been decided that said pending cases and future assessment of said products should be decided based on above order. Cases pending in call book may also be decided acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43) E.L.T. 244 (S.C.) (ii) Besta Cosmetics Ltd. - 2005 (183) E.L.T. 132 (S.C.) (iii) Ranbaxy Laboratories - 2004 (173) E.L.T. 474 (Tri.) (iv) Utkal Alloys (P) Ltd. - 2005 (188) E.L.T. 56 (Tri.) (v) Saci Allied Products Ltd. - 2005 (183) E.L.T. 225 (S.C.) (vi) Manan Agrawal - 2009 (235) E.L.T. 89 (Tri.) 15. Shri A.K. Prasad, the Ld. Jt.CDR, arguing on behalf of Revenue submitted at the first stage that though the present dispute relates to a PSU, this fact should not influence or prejudice the Tribunal. The law as laid down by Parliament has to be applied uniformly to all entities, whether these are in the public sector or in the private sector. In the present case, the issue involved is interpretation of Section 4 of the Central Excise Act, 1944. This Section makes no exception regarding its application to a PSU. In other words, this Tribunal should decide the legal issues, without being influenced by the fact that the appellants in this case are a PSU. 15.1 The Ld. Joint CDR submitted that as per Section 4(1)(a) of the Central Excise Act, 1944, the transaction value is to be accepted provided it is the sole consideration for sale. In the instant case, price is not the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s influenced the price. For this, the Jt CDR relied on the decision of the Supreme Court in the case of CCE, Mumbai-III v. ISPL Industries Ltd. [2003 (154) E.L.T. 3 (S.C.)], given in the context of interest free advances affecting the price. It was held that "where there are two prices, one for those who have made the advance and the other who have not, it would require no further proof of the lower price having been influenced by the interest free advance made by the buyer". 15.6 The Ld. Joint CDR submitted that the supply of petroleum products by M/s. BPCL to other OMCs, at the artificially depressed price, was not sale as no sales tax was being paid on these transactions. Sales tax was only being discharged at the point of sale by the buying OMCs to their independent dealers. [This has been brought out in Para 16 of the O-I-O]. There were only adjustments in quantities of dealings between all the OMCs on an all-India basis, monthly, through debit notes and monetary transactions were made only for any excess/short drawals of a company. 15.7 Ld. Joint CDR further submitted that the reliance of the appellants on the decision of HPCL v. CCE, Visakhapatnam-I [2005 (187) E.L.T. 479 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CL (supra) was based more on the fact that the company was a PSU and less on analysis of law points involved. It was submitted that law has to be uniformly applied to all, and it should make no difference whether the unit is a PSU or a private sector unit. 15.11 Section 4 of the Central Excise Act, 1944, as it existed prior to 1-7-2000, had a specific provision for accepting a value fixed under any law, as the assessable value. There is no such provision in Section 4 after 1-7-2000, which is the provision relevant for the instant proceedings. Hence shelter cannot be taken of any purported directions of the Govt. to deviate from the valuation principles. 15.12 Thus the decision of the Tribunal in the case of HPCL v. CCE Visakhapatnam-I, is distinguishable and, therefore, not binding. 15.13 All the other decisions relied upon by the appellants are based on the above decision in the case of HPCL and are, therefore, also distinguishable. 15.14 Alternatively, even if the said decision of HPCL is applicable, it is not binding on the present Division Bench of the CESTAT, as the said decision is based on factually incorrect presumptions and without noticing the specific provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be deemed to be "related" if …………… (i) they are inter-connected undertakings, …………… (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. " Explanation :- In this clause - (i) 'Interconnected undertakings' shall have the meaning assigned to it in clause (g) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) MRTP Act, 1969. Section 2. "(g) inter-connected undertakings means two or more undertakings which are inter-connected with each other in any of the following manner, namely:- …………… (iii) where the undertakings are owned by bodies corporate, - …….. (c) if the bodies corporate are under the same management, or …….. (vi) if the undertakings are owned or controlled by the same person or by the same group. (vii) if one is connected with the other either directly or through a number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub-clauses. …………… Explanation I - For the purpose of this Act two bodies corporate shall be deemed to be under the same management, - …………… (v) if the same individual or individuals belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L.T. 382 (Tri.-Mumbai)]. 15.23 In view of the above, the Ld. Joint CDR submitted that the present appeal deserved to be dismissed. 16. We have carefully considered the rival contentions and perused the records. We agree with the Ld. JCDR at the outset that so far as interpretation of law is concerned, it has to be applied uniformly to both the public sector and the private sector, unless the law itself provides for an exception. It is nobody's case that in the present proceedings, where we have been called upon to interpret the provisions of Section 4 of the Central Excise Act, 1944, any exception has been carved out for PSUs. 17. The first and foremost issue to be decided is whether the lower price shown in respect of supplies made by the appellants to the other OMCs can be considered as a 'transaction value' as per Section 4 of the Central Excise Act, 1944, in the sense that it is a deal between two legal entities at an arm's length, where price is the sole consideration for the transaction. For this, it will be necessary to study the terms of the MOU signed by the oil companies. Some relevant clauses of the MOU are reproduced below : Clause 2.11 — 'Import Parity Price' means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to independent buyers, in other words, 'the transaction value' was known to BPCL as they were selling the same products to their independent dealers. There was, therefore, no reason for not adopting the same value in their MOU instead of adopting the cost plus method based on the assumed landed cost of the product. 19. We, therefore, agree with the Ld. Joint CDR that the IPP based price could not be considered as the transaction value, as it was an artificially fixed notional value. In such an arrangement, price was definitely not the sole consideration for sale, as one of the important considerations was that the receiving OMCs would supply similar quantities at reduced notional prices to the supplying oil companies at another location. The price agreed as per the MOU could have been accepted as a transaction value at an arm's length, had there not been any conditions attached on the receiving OMCs. Such a conditional transaction cannot be said to have been done at an arm's length and in which case, the price cannot be considered to be the sole consideration for sale. Would the appellants have agreed to the MOU, if the buying OMC did not agree to reciprocate the gesture? The answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue relying on a number of Court decisions, that the price, which is lower than the cost price can also be considered as a transaction value. In the cases cited by him, there was no instance of supply of goods in a supply-driven market or a case, where the same manufacturer had two prices, one at a profit and the other, only at cost. It is also not the case of the appellants that the transactions with the other OMCs were distress sales, where profit could not be considered. As such, the decisions cited by the Ld. Counsel on this issue are clearly distinguishable and not applicable to the present facts of the case. In the case of Gurunanak Refrigeration (supra), the issue relates to the provisions of Section 4 as it existed prior to 1-7-2000 and further there was no evidence to suggest that the price was not the sole consideration. In the case of North East gases, the appellants was selling their goods at a loss, as they wanted to establish themselves in the market and further, price was the sole consideration for the sale. In the case of Godavari Manar SSK Ltd., molasses were sold against tenders and again the sale price was the sole consideration for the sale. In the present procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receive from their own refinery. This arrangement definitely, reduces the transportation cost and is only in pubic interest. The Central Excise authority cannot question this. Excise men better do not enter into territories alien to them. Even if the agreement between the companies results in mutual benefit, we don't understand why the Excise Department should feel unhappy as long as duty is paid on the transaction value. On going through the agreement we do not find any ground to hold that the transactions art not at arm's length. It should also be borne in mind that the days of the concept of normal price are over when the concept of transaction value was introduced in the year 2000. In fact it would be worthwhile to quote from Board's Circular dated 30-6-2000. "4. The definition of "transaction value " needs to be carefully taken note of as there is fundamental departure from the erstwhile system of valuation that was essentially based on the concept of 'Normal Wholesale Price', even though sales were effected at varying prices to different buyers or class of buyers from factory gate or Depots etc., had to be determined. 5. The new Section 4 essentially seeks to accept differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o save on the transportation cost and to make optimum use of the common infrastructure facilities of the oil companies. The Govt. of India had at no stage directed the oil companies to adopt two different prices for payment of duty. Thus, the adoption of two prices, one as per the MOU and the other for sale to independent dealers, was not as per the directive of the Govt. of India. 29. In the written submissions filed subsequently by the appellants, it has been mentioned at one point that the Govt. of India (Ministry of Petroleum) vide letter dated 13-6-2006 had informed all OMCs that the Rangarajan Committee's recommendation to adopt the import parity price for petroleum product has been accepted by the Government. This letter has no relevance as the present proceedings cover the period upto September, 2004 and further, it is not clear as to what was the scope and implication of the Rangarajan Committee's recommendations. In fact, this only goes to prove beyond doubt that at the time of signing of the MOU in March, 2002, the import parity price based agreement did not have the sanction of the Govt. of India and it was a notional price agreed between the OMCs for their mutual conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een able to establish all the three points, which they could not establish in the case of HPCL (supra), the case of HPCL becomes clearly distinguishable and cannot be considered as a binding precedent in view of the new facts brought out and established by Revenue in the present proceedings. 34. In fact, we find that the decision in the HPCL case was based more on the consideration that appellants were a PSU, who had acted strictly as per the directive of the Govt. of India and the Central Excise Department could not question the same. 35. The Ld. Counsel for the appellants has raised another point that in similar situations, a number of other Orders-in-Original/Order-in-Appeal have been passed by the other Commissioners of Central Excise, which have not been challenged, and hence the Department is barred from agitating the said issue in the present proceedings. For this proposition, he relied upon the case laws referred to in para 14.4. We find that in all the cases cited by the learned Counsel for the appellants, the facts were identical in the subsequent appeals and, therefore, the Supreme Court held that the Department is barred from agitating the same issue based on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U., the OMCs were enhancing their profits through artificial reduction in the assessable value of the petroleum products. The appellants have admitted during the course of investigations that through this dual mode of pricing, the profit of buying OMC was increased. It is not the case of any of the OMCs that they had passed on this profit or relief to their independent dealers/buyers. 40. Though the appellants have not submitted any arguments on the method of valuation adopted by the Commissioner, who has adopted Rule 11 of the Central Excise Valuation Rules read with Rule 7 ibid yet their argument is merely that their transactions were on the basis of transaction value and there was no need to resort to the Valuation Rules. We have, however, given our considered thought to the valuation provision adopted by the Commissioner. We are of the view that the correct Rule to apply is Rule 4 of the Central Excise Valuation Rules, 2000, which is reproduced below :- Rule 4 : The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment, subject, if necessary, to such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second unit, the Court held that the said declaration was found to be in a different context under a separate notification and it was, therefore, held that it was not a case of simple inaction or failure but one of wilful and deliberate mis-statement and suppression. In the present case, the appellants had not informed the Department about the contents of the MOU wherein, a transaction price with buying OMCs was agreed to, which was much less than their sale price to independent buyers. It cannot be said that they were unaware of the revenue implications, specially when the MOU resulted in increase in the profit of all the signatories to the MOU including the appellants and less payment of duty. 45. In this context, we would like to note that the appellants are not a small Undertaking, who would be unfamiliar with the Central Excise laws. They ought to be aware that Section 4 of the Central Excise Act, 1944 does not provide for accepting any price as the transaction value, even if it is presumed (for argument's sake) to have been adopted on the directions of the Government,. Earlier, in Section 4, as it existed prior to 1-7-2000, there was a provision for accepting a value fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
