2026 (3) TMI 10 - AT - Central Excise

Transaction value at place and time of removal governs assessable value, displacing provisional refinery price for those removals.

Whether assessable value for raw naphtha removed from intermediate storage is governed by the provisional refinery price or by the actual transaction ... Determination of the assessable value - provisional assessment for clearance of Naphtha without payment of duty - raw naphtha converted into duty-paid stock and lost in transit - meaning of ‘place of removal’ - Place of refinery Or Intermediate storage location - assessable value which the Department claimed to be the provisional price at which it was cleared from the refinery i.e. Rs.53,360/- PMT; whereas the appellant claims the transaction value of Raw Naphtha sold to NTPC on the date of its removal i.e. 31.10.2008 from the intermediate storage location and transaction value of the quantity of 1.822 MT lost in transit is Rs.45,470/- PMT being the transaction value at which 2251.860 MT sold to the fertiliser unit. Assessable value - transaction value - provisional assessment - HELD THAT: - Since the value of the Raw Naphtha could not be determined, the appellant resorted to provisional assessment by execution of bond for the quantity of 2400 MT of Raw Naphtha meant to be transferred to their intermediate storage location at Irimpanam. The consignment was meant to be cleared / sold to one M/s. Indo gulf Fertilisers. But out of the total stock cleared on provisional basis, a quantity of 145.705 MT sold to NTPC at a transaction value of Rs.34,134.03 PMT on 31.10.2008 from the intermediate storage location and balance quantity was cleared to the fertiliser unit of which 1.822 MT was lost during the course of transit. The appellant discharged duty on 145.705 MT of Raw Naphtha adopting the transaction value at which it was sold and for the lost quantity of 1.822 MT, they adopted the price of Rs.45,470/- PMT at which it was cleared to fertiliser unit. Both the authorities below have committed the error of insisting to adopt the provisional price of Rs.53,360/- PMT at which initially the goods were cleared from their refinery resorting to provisional assessment. The appellant has requested for the provisional assessment making a specific submission that the actual price could be ascertained only when it would be cleared / sold from their intermediate storage location at Irimpanam to their customers. Therefore, the price at which the goods are sold at Rs.34,134/- PMT & Rs.45,470/- to be considered as the transaction value in determining the assessable value of the goods cleared to M/s. NTPC and M/s. Indo Gulf Fertilisers respectively from their intermediate storage location at Irimpanam, the provisional price of Rs.53,360/- PMT cannot be adopted. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law. Final Conclusion: The impugned demand based on the provisional refinery price is set aside; the transaction values at the time of removal from the intermediate storage location are to be adopted for the sold and lost quantities, and the appeal is allowed with consequential relief as per law. Issues: Whether the assessable value for quantities of raw naphtha converted into duty-paid stock and lost in transit must be determined by the provisional price at which the goods were cleared from the refinery under provisional assessment or by the actual transaction value prevailing at the time and place of removal from the intermediate storage location (Irimpanam).Analysis: The appellant had sought provisional assessment at the refinery because the final sale price of raw naphtha could not be determined at that time. Part of the provisionally cleared consignment was subsequently sold from the intermediate storage location to NTPC at a specific transaction value on 31.10.2008, and a separate quantity was cleared to a fertiliser unit at a different transaction value, with a small quantity lost in transit. The appellant discharged duty on the quantities sold and on the lost quantity based on the actual transaction values prevailing at the dates and place of removal from the intermediate storage location. The authorities below insisted on adopting the provisional refinery price used at initial clearance. The question turns on whether the provisional assessment price fixed at the refinery must govern the assessable value for goods ultimately removed/sold from the intermediate storage location, or whether the actual transaction value at the time and place of removal from the intermediate storage location is the correct assessable value under the statutory scheme (including Section 4 of the Central Excise Act, 1944).Conclusion: The actual transaction values prevailing at the time and place of removal from the intermediate storage location (Rs.34,134.03 per MT for the quantity sold to NTPC and Rs.45,470 per MT for the quantity relating to the fertiliser unit and the lost quantity) shall be adopted as the assessable values. The provisional refinery price of Rs.53,360 per MT cannot be imposed for those removals.