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2016 (10) TMI 1159

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.....2 The impugned order has held that the amount reimbursed by the Oil Pool Account to the respondents and then in turn to Kochi Refineries Ltd. - KRL (the reimbursement component) cannot be added to the assessable value and therefore, dropped the demand of duty of Central Excise. 2. The appellant (Revenue) has been represented by Shri N. Jagdish, the learned AR and the respondents, M/s. IOC Ltd. have been represented by Shri G. Shivadass, the learned advocate. 3. The learned AR on behalf of the appellant-Revenue, based on the written submissions, inter alia, pleads as follows : (i) The respondents (IOCL) are paying duty at a price which is much less than the price paid to the manufacturer, KRL. (ii) The duty is payable on the full price paid by the respondent to KRL. (iii) The subsidized value on which duty has been paid by the respondents cannot be taken as assessable value for the purpose of payment of Central Excise duty. (iv) The period involved is after 1-7-2000, which is the date when the new Central Excise Valuation Rules, 2000 came into force. It brought the new concept of 'transaction value'. (v) Under the concept of 'transacti....

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....il dealers. (e) The respondents further submit that in terms of Section 4(3)(d) of the Act, the consideration received by the assessee for sale of goods from the buyer is treated as 'transaction value' for the purpose of payment of duty. In the present case, the price reimbursed to the refinery towards cost of manufacture has nothing to do with the transaction value adopted by the respondents for sale of goods to the retail dealers and it is not the case of the department in the present case that the respondents have received any additional consideration from the buyers towards sale of goods. (f) As long as the provisions of Section 4(1)(a) ibid are satisfied, the transaction value adopted should not be rejected unless there is any flow back of additional consideration from the buyer to the assessee. (ii) Product Price Adjustment (PPA) is not additional consideration either directly or indirectly from buyer to respondents : (a) In terms of Rule 6 of the Central Excise (Valuation) Rules, 2000 any additional consideration received directly or indirectly from the buyer to the seller is required to be added to the assessable value. (b) In the case of SKO s....

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.... is chargeable for said differential amount or not?" 6.1 Duty of Central Excise is charged on the transaction value mentioned in Section 4(1) of the Central Excise Act, 1944. Section 4(1) is reproduced below for reference : "4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Whereunder this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value.    ......        ......        ...... (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and ....

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.....2 The submission of the respondents that "the 'differential price' which is over and above the subsidized price (administrative price) is not being received directly from the buyer, who are receiving the goods under Public Distribution System (PDS), but is being received from Oil Pool Account" again cannot have much force as the differential price is deemed as indirectly being received on behalf of buyers only though it is being paid from the Oil Pool Account. This differential money is factually the compensation payable on account of the subject goods and is the additional consideration deemed to be paid on behalf of buyers. 6.2.3 In this case, the respondents, M/s. IOCL have replaced the manufacturer, and are the assessee for the purpose of Central Excise payment. When the respondents have taken the position of an assessee in place of the manufacturer, it is not an acceptable argument on behalf of the assessee that transaction value in their case is only the subsidized price, when it is on record and it is the fact that the assessee received additional consideration (differential price) from the Oil Pool Account for the 'same goods', the goods in questions and they pa....

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.... has been sold to and received by the buyers. Therefore, this reimbursement money from oil pool account has to be deemed to be received from buyers only, though indirectly. Here, the receipts by the assessee from Oil Pool Account of the Ministry of Petroleum which is the reimbursement money has been deemed as receipts from buyers only when this is on account of the subject goods only. This transaction between Oil Pool Account and the assessee cannot be called a transaction without any basis or an empty transaction, where the money is exchanged without any kind of consideration or without any basic exchange of the goods. 6.3 The show cause notice issued to the respondents, M/s. IOCL invokes Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 along with Section 4 of the Central Excise Act, 1944 for issuing the demand on the differential money/price paid by them to M/s. Kochi Refineries Ltd. (KRL). The said Rule 6 of the Valuation Rules, 2000 (supra) is reproduced below : "Rule 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4 of the Act except the circumstance where....

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....ead with the provisions of Section 4(1) of the Central Excise Act, 1944, this reimbursement amount received from Oil Pool Account by the respondents have to be added to such "transaction value" for charging duty of Central Excise on the subject goods sold to the buyers by the respondents. It is made again clear that in terms of the Explanation to Section 4(1) of the Central Excise Act, 1944, this reimbursement amount or the additional consideration is deemed to include the duty payable on such goods and this amount is required to be treated as price-cum-duty accordingly. 6.4 The respondents submit that the Central Board of Excise & Customs (C.B.E. & C.) issued clarification circulars saying that the contribution from the Oil Pool Account is not to be added to the assessable value. However, when the provisions relating to valuation given in the Explanation to Section 4(1) of the Central Excise Act, 1944 and Rule 6 of the Central Excise Valuation Rules (supra) are very clear this submission of the respondents does not have sufficient force and cannot be accepted. 6.5 The respondents submit that the Tribunal's Larger Bench decision in the case of Oil and Natural Gas Corpor....

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....hough the Department in the show cause notice has invoked the extended period clause citing the proviso to Section 11A of the Central Excise Act, 1944. When there is no sufficient evidence on record to prove wilful suppression, misstatement, etc., with intention to evade payment of duty on the part of the respondents, we hold that the demand of the duty can be sustained only for the clearances made during the period of one year prior to the date of show cause notice. The date of show cause notice is 21-3-2005, therefore, the demand for the period of one year prior to 21-3-2005 is only confirmed as recoverable against the respondents, M/s. IOCL. 6.7 We make note again that the additional reimbursement (consideration) is not an empty transaction. This is the transaction which is with reference to the subsidized sale of the subject goods by the assessee to the buyer under Public Distribution System (PDS) and for this sale the additional consideration received from Oil Pool Account has been further reimbursed to the manufacturer who is M/s. Kochi Refineries Ltd. (KRL) in this case. The Tribunal cannot accede to the logic of the respondents that transaction is complete just by del....

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....ity of payment of Central Excise duty, when they paid the duty on part price (subsidized value) only. Their liability of payment of Central Excise duty would be complete only when the respondents pay duty to the National Exchequer on full price of the goods. In other words, the remaining duty for the other part of the payment, which the respondents paid to the manufacturer, KRL as reimbursement money (received over and above subsidized price from Oil Pool Account) is also payable to the Revenue. Consequently, their argument that there was no liability on them to pay further duty of Central Excise for the quantum of payments made later as reimbursement money to the manufacturer is wrong as per the law of Central Excise. 6.9 We take support for our conclusions made above from the Hon'ble Supreme Court's decisions in the case of Commissioner of Central Excise, Jaipur-II v. Super Synotex (India) Ltd. [2014 (301) E.L.T. 273 (S.C.)] and in the case of Commissioner of C. Ex., Jaipur v. Shree Rajasthan Syntex Ltd. [2015 (318) E.L.T. 626 (S.C.)] and from the Tribunal's Larger Bench decision in the case of Oil and Natural Gas Corporation Ltd. v. CCE [2015-TIOL-1960-CESTAT-MUM-L.B.]. In....