2018 (7) TMI 680 - AT - Central Excise

CESTAT Chennai rules in favor of petroleum manufacturer in excise duty classification dispute

The Appellate Tribunal CESTAT Chennai ruled in favor of the appellant, a petroleum products manufacturer, in a case concerning the classification of Light ... Recovery u/s 11D - Demand of Differential duty - seven transactions in which the RTP of FO was more than the LDO - The department is of the view that the negative differential duty total amounting to ₹ 12.25 lakhs, which has arisen on account of the above price scenario, is required to be paid by the appellant in terms of section 11D - Held that:- When the LDO has been cleared at the price of FO, then higher amount shall be the transaction value and ED computed of transaction value is the actual ED payable. Thus, there is no excess payment of ED to be deposited under section 11D - The excise duty payable on LDO including the BED and the specific duty is higher than that on FO in the impugned seven transactions. Therefore, there is no justification for demanding payment of the amount under section 11D - demand set aside. Penalty - Held that:- The appellant himself has worked out and paid the differential duty and only after receiving such intimation of payment of duty, the department has issued show-cause notice followed by the impugned order - no allegation of suppression can be sustained against the appellant - penalty set aside. Appeal allowed in part. Issues:1. Classification of petroleum products for excise duty.2. Adjustment of excise duty paid on LDO against FO.3. Dispute over differential duty on certain transactions.4. Imposition of penalty by the adjudicating authority.Issue 1: Classification of petroleum products for excise duty:The appellant, a manufacturer of petroleum products, faced a challenge regarding the classification of Light Diesel Oil (LDO) and Furnace Oil (FO) for excise duty purposes. Both products were stored in common tanks during the impugned period. LDO was subjected to specific duty in addition to the ad valorem rate, while FO had a different duty rate. The dispute arose from the mixing of LDO and FO in storage tanks, leading to the clearance of LDO as FO, resulting in the need to pay excise duty applicable to FO. Previous orders and appeals clarified the differential duty liability for LDO cleared during specific periods, which the appellant paid under protest.Issue 2: Adjustment of excise duty paid on LDO against FO:The Department contended that excise duty paid on LDO could not be adjusted against the higher excise duty collected on FO in certain transactions during the period of February 2007 to December 2009. The Adjudicating authority ordered the payment of differential duty for these transactions, leading to a dispute over the applicability of Section 11D of the Central Excise Act. The appellant argued that the excise duty payable on LDO was higher than that on FO in the disputed transactions, hence no excess payment was due under Section 11D.Issue 3: Dispute over differential duty on certain transactions:The appellant disputed the demand for differential duty on seven transactions where the Refinery Transfer Price of FO exceeded that of LDO. The appellant contended that the excise duty payable on LDO for these transactions was higher than the excise duty paid on FO, thus no additional payment was warranted. The Tribunal agreed with the appellant's argument, finding no justification for demanding payment under Section 11D for these transactions.Issue 4: Imposition of penalty by the adjudicating authority:The Adjudicating authority imposed a penalty equal to the duty amount held payable by the appellant. However, the Tribunal noted that the appellant had already paid the differential duty as per the CESTAT order and disputed transactions, with no suppression allegations against them. Consequently, the Tribunal set aside the penalty imposed and reduced the demand amount, ultimately allowing the appeal in favor of the appellant.This detailed analysis of the judgment from the Appellate Tribunal CESTAT Chennai highlights the key issues surrounding the classification of petroleum products for excise duty, adjustment of excise duty payments, disputes over differential duty on specific transactions, and the imposition of penalties by the adjudicating authority. The Tribunal's decision provided clarity on these issues, ultimately favoring the appellant in certain aspects and setting aside penalties where justified.