TaxTMI 
TaxTMI 
2016 (9) TMI 782
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....l to motor vehicles. Prior to 1.3.2001, compression of natural gas did not amount to manufacture. However, w.e.f. 1.3.2001, through a Note to Chapter 27, compression of natural gas amounts to manufacture. MGL are classifying the CNG under Tariff Item 2711 21 00 and are paying duty thereon, after having obtained centralized registration for each of the outlets where compression of natural gas and supply thereof takes place. MGL installed their own equipments for compression and dispensation of CNG at each of the outlet and electricity charges to operate those equipments is borne by them. MGL purchase natural gas from GAIL and the sale/purchase of natural gas takes place at a location known as City Gate Station situated at Sion. There are two streams of supply of natural gas by MGL, one supply of piped natural gas (PNG) which is used for cooking purpose by domestic, commercial and small industrial consumers and the other being CNG, as a fuel to motor vehicles. There are three types of outlets/filling stations for supplying CNG, which are known as Mother Stations (MS), Online Stations (OS) and Daughter Booster Stations (DBS). The MS are the locations where natural gas is receive....
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....uld be the assessable value for payment of duty for the CNG supplied to OMCs, as against the Appellants' payment of duty on the net sales price charged to OMCs. The basis of the SCNs is that all parameters like ownership of equipment, manner of production, product, RSP, etc. remaining the same, assessable value for the purpose of payment of duty should also be same for discharge of duty for sale of CNG to OMCs. The demands have been arrived at by backward calculation from RSP, excluding the element of VAT and central excise duty/cesses only, leading to demand of duty on commission/ trade margin. The Adjudicating Authority passed separate Orders-in-Original upholding the charges in SCNs, confirmed the demands and imposed penalties, against which the Appellants have filed eleven separate appeals. 4. The Counsel appearing on behalf of the Appellants made various submissions inasmuch as that CNG is purchased by OMCs from MGL and the transaction is of sale-purchase and not of providing any service by OMCs to MGL; that various clauses of the agreements evidence that those are not agency agreements, but are for sale and purchase of CNG on principal to principal basis, which gets ....
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....discounts to OMCs would also prove that what was offered/paid to OMCs is trade discount/profit margin and not commission; that the nomenclature like discount, trade profit, commission, etc. were/are loosely used in agreements, which were entered into much prior to introduction of central excise duty on CNG and, hence, the same has to be decided from the context in which such terms are used; that it is not the letter, but the spirit behind it has to be considered while interpreting the agreements; that discount offered by whatever name is admissible, based on judgments in the case of Perfect Circle Victor Ltd. v/s. UOI - 1992 (50) ELT 676 (SC), CCE v/s DCM Textiles - 2006 (195) ELT 129 (SC), Apar Industries Ltd. v/s CCE - 2009 (92) RLT 968 (T) and Bhopal Sugar Industries Ltd. v/s. Sales Tax Officer - (1977) 3 SCC 147; that even if trade discount is offered under the name and style "commission", still the same would not cease to be a trade discount, based on Hon'ble Supreme Court judgment in CCE v/s DCM Textiles - 2006 (195) ELT 129 (SC), that discounted/contract sales price by MGL to OMCs has to be considered transaction value under Section 4, based on various judgments like HBL Air....
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....ommission", the Department demanded and confirmed service tax from OMCs, claiming that OMCs are providing the service of promoting the business of MGL and such activity would fall under Business Auxiliary Service; the Hon'ble Tribunal, vide Final Order No.A/828-830/14/CSTB/C-I dated 4.6.2014, reported in 2014-TIOL-1114-CESTAT-MUM, in the cases of BPCL & HPCL, has held that since BPCL/HPCL themselves are buying the goods from MGL and MGL is charging VAT/sales tax while selling the CNG to BPCL/HPCL and BPCL/HPCL are also paying VAT/sales tax on the entire value, including the so called commission and the transaction between them is sale/purchase transaction and, hence, service tax was not payable; that ratio of the said judgment is squarely applicable to the present cases also, as the very same consideration has been held to be "trade discount" offered by MGL to BPCL/HPCL; that demand for the period June 2003 to May 2007 (out of total period of June 2003 to March 2008) covered under Appeal No.E/328/09 is barred by limitation, in the absence of any conscious or deliberate suppression, etc.; that for the said reasons, penal provisions are not invocable. The Counsel submitted certain co....
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.... have considered the rival submissions and perused the records. 5.1 We find that the common issue involved in the above appeals is whether price charged for sale of CNG to OMCs can be considered as transaction value for the purpose of payment of duty under Section 4(1)(a) of CEA. 5.2 We find that entire period covered in all the appeals is post July, 2000, governed by amended Section 4. The new Section 4 essentially seeks to accept different transaction value, which may be charged by the assessee to different customers, for assessment purposes, so long as those are based purely on commercial consideration, where buyer and the seller are not related and price is the sole consideration for sale at the time and place of delivery. Thus, it enables valuation of goods for excise purpose on the value charged as per normal commercial practices, rather than looking for a notionally determined value which existed prior to amendment of Section 4 in 2000. The Adjudicating Authority has confirmed the demand on the differential value between MGL's sales price from their own outlets and/or the outlets of PPs and the sales price of MGL to OMCs, treating the difference as th....
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....e absence of any allegation/ substantiation of mutuality of interest between Appellants and OMCs, as both are independent entities. We also find that there is a distinct difference in the transactions of the Appellants with PPs, wherein MGL supply CNG through the outlets owned and operated by PPs and CNG is directly supplied by PPs to the ultimate consumers/vehicles users from their outlets for and on behalf of MGL, under the invoices/bills/cash memos of MGL and the price charged in those bills/invoices/cash memos are the retail sales price or maximum recommended price determined by MGL, from time to time. In a true sense, the customers/ vehicle users at the outlets of PPs are buying CNG from MGL, through the PPs. The privity of contract is between MGL and those buyers and those sales are directly recorded in the Books of Account of MGL and not in the Books of PPs, as there is no sale and purchase of CNG by PPs and PPs act only as an agent of MGL on commission basis. The entire sales proceeds are remitted by PPs to MGL on daily basis. The contracts between MGL and PPs are that of "principal" and "agent" as the PPs are merely service providers and not buyers of CNG from MGL. Their o....
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....actions; that commission paid to PPs was Rs. 1.20/kg, Rs. 1.74/kg, Rs. 1.90/kg and Rs. 2.45/kg during different periods, whereas discount given to OMCs was Rs. 1.20/kg, Rs. 1.40/kg, Rs. 2.42/kg, Rs. 2.62/kg and Rs. 2.74/kg during different periods. From the above discussions, we are of the view that the Appellants' case is squarely covered under new Section 4(1)(a) of CEA which essentially permit different transaction values, unlike normal sales price existed prior to 1.7.2000, which has also been explained by CBEC, vide its Circular No.354/81/2000-TRU dated 30.06.2000 in Para 5. 5.4 We also find that the agreements between the Appellants and OMCs were entered into in 1998 or 1999, when there was no levy on CNG, which came into effect only from 1.3.2001 and, hence, the Appellants could not have thought that using certain expressions like commission/trade margin, etc. would create hassle at a future date from central excise point of view and also there would not have been any inducement to use any expression in the agreement with an intent to evade payment duty. The nomenclature like commission/profit margin used in the agreements when read with invoices raised by the Appel....