TaxTMI 
TaxTMI 
2022 (2) TMI 90
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.... Memorandum of Understanding (MoU) dated 31.03.2002, called Multilateral Product Sale Purchase Agreement (MPSPA) to ensure smooth supply and distribution of petroleum products across the country. The said MoU/ agreement also provided for Pricing of petroleum products for inter-se sale/ purchase by the Oil Marketing Companies (OMCs). Such price was Import Parity Price (IPP) which was based on landed cost of petroleum product at a particular port and other expenses such as transportation, terminal charges, etc. Such price was also referred to as refinery gate price (RGP). Further, the MoU also prescribed the system of settlement, wherein the seller was required to claim payments on a weekly basis, through the mechanism of Joint Certificates and claim sheets. The payments were released to the Appellant within 15 days of signing of the joint certificate. 4. The Appellant sold its products to various OMCs like IOCL, IBP, HPCL and the Appellant's holding company, i.e., BPCL. Such customers of the Appellant affected subsequent retail sales. The Appellant discharged excise duty in terms of Rule 9 of the Excise Valuation Rules for supplies made to BPCL, i.e., Appellant's holding company, b....
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....icable in respect of supplies made by the appellant to the other OMCs as well. 8. Aggrieved by the aforesaid order, the appellant is in appeal before us. 9. At the time of hearing, the Ld. Counsel for the Appellant, Mr.B. L. Narasimhan filed written notes of arguments wherein the following points are taken: a. The Appellant and OMCs are independent public sector undertakings and have no cross-holding of shares or interest in each other. The MoU has been entered into with the objective to ensuring steady supply of the petroleum products throughout the territory of India at all times, depending on the demand. There is neither any allegation nor observation of flow back of any consideration between the Appellant and the OMCs. There is no relationship whatsoever between the Appellant and OMCs which influences the price of the products. The MoU entered and the fixation of the IPP is a perfectly commercial transaction between two unrelated parties, viz. the Appellant and the OMCs. b. The issue is no longer res integra since the same has been decided in the following cases, (which includes the case of Kochi Refineries, which is another subsidiary of BPCL): * Hindustan Petrol....
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....e other OMCs are to be valued at Import Parity Price, which should be taken as transaction value or the same should be valued at the price at which such goods cleared to BPCL have been valued. 14. In our view, the Appellant and the other OMCs are independent parties and are not related to each other. Though the SCN alleged the mutuality of interest on the ground that the MoU entered into between the parties benefitted each of them mutually, however, the said ground was relinquished by the adjudicating authority itself, while passing the impugned order. Further, even in our view, merely entering into a mutually beneficial arrangement like MoU in the instant case, cannot make the parties related for the purposes of Section 4(3)(b)(iv) of the Central Excise Act, 1944. For this we rely on the decision of the Tribunal, Bangalore Bench in the case of Hindustan Petroleum Corporation Ltd. V. Commissioner of C. Ex., Visakhapatnam-I [2005 (187) E.L.T. 479 (Tri. - Bang.)], maintained in Commissioner v. Hindustan Petroleum Corporation Ltd. [2006 (196) E.L.T. A72 (S.C.)]. 15. Further, we were taken through the contents of the MoU in detail by the Ld. Counsel Mr. Narasimhan particularly the Ar....
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.... made out in the SCNs issued to the Appellant. The SCNs only alleged the mutuality of interest to treat the Appellant and other OMCs as related and value to be arrived at on the basis of Rule 9 of the Excise Valuation Rules. However, the adjudicating authority has not given any finding on such aspect and categorically observed that the question of mutuality of interest bears no consequence for determination of prices. The relevant portion of the impugned order is reproduced hereunder: "3.8.2 NRL has also cited the CESTAT Bangalore Order No. 30, 307/2005 dated 28.02.2005, wherein the Hon'ble CESTAT has dropped the case in absence for lack of evidence to establish that there is mutual interest in the business of each other among the four OMCs. But under the facts and circumstances in the instant case as discussed in the foregoing paras this case law also gets distinguished, since the question of mutual interest bears no consequence for determination of price. The price vis-à-vis assessable value is available otherwise." 20. Therefore, once the adjudicating authority found that the mutuality of interest is not relevant to the instant case, the only conclusion ought to be dro....