TaxTMI 
TaxTMI 
2009 (6) TMI 166
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....ty. From Panewadi, these were cleared to 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....
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.... (Naresh Narad) Shri S.K. Kapoor Director (Marketing) M/s. 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 ....
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....ds to be set aside in toto. 14.1 The first point raised by the Ld. counsel is that the issue involved in the present case had also been raised earlier on a number of occasions and in all 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 ....
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....ef Commissioners, All Commissioners of Central Excise and Customs, DG'(Audit), DGCEI Sir, Sub. : Valuation of MS and HSD sold amongst OMCs-MOW regarding 1. I am directed to say that with effect from 1-4-2002, the APM was dismantled and Oil Coordination 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. ....
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....ment to take the selling price of the receiving OMC as the transaction value. All the oil companies are public limited companies and in the following cases, the Supreme Court has held that two public limited companies cannot be considered as related persons :- (i) Alembic Glass Industries - 2002 (143) 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 i....
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....artel members, should be accepted as a transaction value of the goods. 15.5 If there are two prices for the same product, a lower price to a buyer with whom they have a reciprocal arrangement and a higher price to another buyer, with whom there is no such reciprocal arrangement, it will be presumed that the agreement has 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....
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.... this case. This aspect was also not known at the time of the decision in the case of HPCL (supra). 15.9 Revenue cannot be bound by a CESTAT Order, which is based on wrong and incorrect facts, as held in the case of GMR Energy Ltd. v. CC, Bangalore reported in 2007 (218) E.L.T. 676 (Tri.-Bang.). 15.10 The CESTAT decision in the case of HPCL (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 ....
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....is obvious from the definitions appearing in Sections 4(3)(b)(i) and 4(3)(b)(iv) of the Central Excise Act, 1944, read with Sections 2(g)(iii)(c), 2(g)(vi), 2(g)(vii)(v) and 2(g)(vii)(vii) of the MRTP Act, 1969. The relevant extracts are reproduced below :- Central Excise Act, 1944. Section 4. …………… "(3) For the purpose of this section,- …………… (b) persons shall 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 …….. (v....
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....rat Earth Movers Ltd., the extended time limit was upheld [2001 (136) E.L.T. 225 (Tri.-Bang.)]. Hence the extended time limit has been correctly invoked in the present case. 15.22 As regards penalty, there was no ground to contend that mercy because it is a Public Sector Undertaking (PSU), they cannot be penalized. There are innumerable instances of penalty being imposed on PSUs. In fact, in a separate proceeding against the same appellants, M/s. BPCL, a penalty of Rs. 10 lakhs was upheld by CESTAT, Mumbai [2002 (139) E.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 ....
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....ne oil company would supply petroleum products to another oil company at a particular location and this would be reciprocated by the receiving oil company to the supplying oil company at some other location. In a case of barter deal, price becomes irrelevant as only commodities are exchanged. This is the situation in the present case also. The import parity price is clearly a notional value adopted by the signatories to the MOU for their accounting purposes and it had no relationship with the actual selling price of the product to independent buyers. The price 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 receivin....
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....d of petroleum products necessitated selling the products at cost price. In fact, it is common knowledge that the market for petroleum products is supply - driven. It is also not the case of the appellants that the transaction value of sale to the independent dealers had always been at a loss. Thus, supplying a product in a market, which is supply-driven, without taking into consideration any profit element, clearly indicates that the said transaction is not a commercial transaction and is not at an arm's length. 23. The Ld. Counsel for the appellants has tried to argue 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....
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.... This results in an optimal utilization of the marketing facilities of the various companies in the country and reducing the cost of transportation. It is better for a refinery to market its products at a nearby marketing facility owned by another company than to send the same goods to its own marketing facility at a far off place. Alternatively, when the company having a refinery has a marketing outlet at some other place, nearer to a refinery of a different company, then it would be better for that marketing outlet to purchase the product from the that refinery rather than 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....
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.... to the appellants for amounts, which were not reflected in the value on which the duty was paid. As already indicated above, this amount was around Rs. 3000 per KL in respect of MS and around Rs. 2000 per KL in respect of HSD, on which the duty was not paid. 28. The other assumption on the basis of which the HPCL decision was delivered was that the MOU had been entered on the directive of the Govt. of India. In the course of the present investigations, the Revenue has been able to establish that what the Govt. of India (Ministry of Petroleum) had directed was to merely enter into an MOU to 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 Ra....
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....om there is no such reciprocal arrangement, it will be presumed that the agreement has influenced the price. The Hon'ble Supreme Court decision 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, can be cited in support. It was held in that case 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". 33. Thus, since the Revenue has been 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 ....
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....ealed a position, which is quite different from what was known, or presented, at the time of the HPCL decision (supra) and hence the Board's instructions cannot bind the Department against contesting this appeal Even otherwise, the Ld. Joint CDR has rightly pointed out that the Hon'ble Supreme Court in the case of Ratan Melting (supra) has modified/clarified their decision in the case of Dhiren Chemicals and has held that the Board's instructions, contrary to law, cannot prevent the Department from arguing against it. 39. This is a clear case of profiteering where, through one channel of transaction i.e. the M.O.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....
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....t acts. This is definitely a positive act, for which the extended time limit has been rightly invoked. We have examined the Judgments cited by the Ld. Counsel. A perusal of these Judgments reveals that there can be no uniform guidelines for invoking the extended time limit. Each case will have to be determined on the facts present therein. In the case of Grauer and Weil (India) Ltd. v. CCE, Baroda [1994 (74) E.L.T. 481(S.C.)], a manufacturer had not informed the Central Excise Department about a second unit belonging to the same company situated on the same plot of land. Even though the party had filed a declaration regarding the 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, ....