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Commissioner of Central Excise, Shillong Versus M/s Numaligarh Refinery Ltd.

Denial of refund claim - subsequent revision in the price after removal of goods - sale of petrol and diesel, to Oil marketing Companies (OMCs) - whether the Appellants are entitled to the refund of excess duty paid during the period from April, 2003 to January, 2004 - reduction of freight charges from the transaction value - Held that:- Department itself has gone on a wrong premise from the very beginning, inasmuch as it was considered that the difference in the transaction values was on accoun .....

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rring of actual freight. It is evident that the Respondent had initially paid the duty on the basic price without deducting the notional freight element from the price, but after realization of the mistake, filed the refund claim. We do not find any reason to dis-agree with the conclusion arrived at by the ld. Commissioner (Appeals). Accordingly, the Respondent in principle are entitled to the refund claim. - Decided in favor of assessee.

The issue of correctness or otherwise of the t .....

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transaction value was higher and subsequent transaction value after deducting the notional freight, applying clause 5.4 of the agreement, became lower before allowing the said claim to the respondent. - For the limited purposes of verification of this fact, in our opinion, it is prudent to remand the case to the adjudicating authority, who shall ascertain the said facts after taking into consideration all the evidences on record and the evidences that would be produced by both sides. Needless t .....

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.1 Briefly stated the facts of the case are that the Respondent, a Government of India Undertaking, engaged in the manufacture of petroleum products, had filed a refund claim on 5th May, 2004, claiming refund of excess duty paid to the tune of ₹ 4,70,34,371/- for the period from April 2003 to January, 2004. It was filed on the ground that the transaction value on which duty at the time of clearance of the goods to customers, namely, M/s IOC, M/s IBP, M/s HPCL, the Oil marketing companies(h .....

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M); PINCODE- 782001. Phone # (03672) 235578.237449. FAX (03672) 235778. 237449 SHOW CAUSE NOTICE Whereas it appears thai M/s. Numaligarh Refinery Limited . Panka Urani, P.O. -Refinery Complex. District Golaghat (Assam), holder of Central Excise Number AAACN6984BXD001 (hereinafter referred to as the said assessee) have -vr refund to. the tune of ₹ 4.70.34.371 .00 (Rupees four crores seventy lakhs thirty-four three hundred seventy-one) only in view of the reduced transaction value of the goo .....

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yer. Central Excise Department can not be held responsible by acceding to their claim of refund. In view of the above, the said assessee is, therefore, called upon to Show Cause to the undersigned within 30( thirty) days from the date of receipt of this NOTICE as to why their above mentioned claim of refund shall not be rejected on the ground as mentioned in the aforesaid para as their instant refund claim is not admissible under Sec. 11B of the Central Excise Act. 1944. The said assessee. while .....

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when the case would be fixed for heating, the case would be decided ex-parte on the basis of the available record without, any further reference to them. The SHOW CAUSE NOTICE is issued without prejudice to any other or further action initialed against the assessee under the provisions of Central Excise Act' 1944 and of the Rules made there under or any other law for the time being in force. Sd/ on 23.07.2004 (C.D.BAIDVA.) ASSISTANT COMMISSIONER CENTRAL EXCISE NAGAON BY REGISTERED POST C.No .....

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ns, set aside the impugned order of the adjudicating authority and allowed the Appeal with consequential relief to the assessee-respondent. Aggrieved by the said Order, the Revenue is in Appeal. 4. The ld. A.R. for the Revenue reiterating the grounds of appeal, stated that the bone of contention of the Department, is not about the correctness of the transaction value, but the issue raised is, for non-payment of the agreed price by the buyers to the respondent, consequential refund of excise duty .....

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on suo-moto under section 4 of CEA, 1944, it is submitted that the said observation is contrary to the provisions of Central Excise Act and Rules made thereunder. It is also submitted that when transportation cost was not included in the assessable value, then the buyer is being relieved from the same; the Commissioner(Appeals) has erred by mentioning that transportation cost was borne by the buyer when it should have been by the Seller i.e. the Respondent as per the agreement. Further, it is pl .....

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rices paid or payable by their customers alone, can constitute the "transaction value" in the given case. Therefore, it is evident that the transaction value in the given case, is the statutory prices declared by the Respondent as per the Circular and they had correctly determined the transaction value and paid excise duty on such transaction value. The ld.A.R. for the Revenue also submitted that the deduction towards notional rail freight from the billed amount is nothing, but an afte .....

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Sale-Purchase Agreement dated 31st March, 2002 which was valid for a period of two years. He has contended that the product was sold by the Respondent to various OMC's at its factory/refinery gate on the Import Parity Price (IPP) or the Refinery Gate Price (RGP) determined in accordance with the Agreement and Excise duty was discharged on the said transaction value under Section 4(l)(a) of the Central Excise Act, 1944. It is his contention that pursuant to article 5.4 of the said Agreement, .....

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ges if the goods are sold at a place other than the place of removal ; (ii) For breach of Contract of their buyers, the Central Excise Department cannot be held responsible by allowing the refund claim. Hence, now the department cannot make out a new case in challenging the correctness of the transaction value or the transaction value is to be based on price circular etc. in view of the judgement of the Hon'ble Supreme Court in the case of CCEx., Vs. Champdany Industries Ltd. 2009 (241) ELT .....

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n of notional rail freight paid by the respondent from their refinery at NRL to New Jalpaiguri Station, was in pursuant to Clause 5.4 of the Agreement. It is his contention that since the sale was at the ex-factory/refinery, there was no question of incorporating freight element in the transaction value. But, in view of Clause 5.4 of the Agreement, the OMCs were entitled to a reduction from the basic price equivalent to notional rail freight payable from NRL to New Jalpaiguri Railways Station. F .....

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e entitled to the refund of excess duty paid during the period from April, 2003 to January, 2004. There is no dispute that the refund claim was filed in accordance with the provisions of Section 11B of the Central Excise Act, 1944 and the claim was filed within the stipulated period. It is also not in dispute that the appellant sold/cleared the manufactured goods ex-refinery/factory as per the Sale-Purchase Agreement dated 31st March, 2002. 8.2 We find that the refund claim was filed on the grou .....

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for the breach of contract between the respondent and their buyers (OMCs), the Central Excise Department could not be responsible. Secondly, it is alleged that that the assessable value of the goods is to be determined by incorporating the freight charges, when the goods were sold at a place other than the place of removal, and since the contract between the respondent and OMCs conform the said fact of sale of the goods was at a place other than the place of the removal, no refund was admissibl .....

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2002. Needless to emphasize, the Respondent had agreed to sell the product and the buyers have agreed to purchase the same under the terms and conditions mentioned in the said Agreement. It is relevant to refer to the pricing pattern mentioned under the said Agreement, which is crucial for determination of the present issue ; it is reproduced as below: ARTICLE 5 : PRICING FOR INTER-PARTY TRANSACTIONS "5.1 Basic price of product for road, rail and pipeline deliveries ex-coastal Refineries s .....

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the Import Parity Price of the destination port and also wharfage, if any actually incurred at refinery port and notional freight from refinery port to destination port as per formula stipulated in clause (t) of Annexure B. In such a case, the billable quantity shall be determined as the basis of quantity delivered as measured in shore storage tanks at the loading location for products. In case the product purchased from coastal refinery is billed to one Marketing Oil Company and subsequently s .....

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fer involving freight under/over-recoveries. The freight for the purpose of inclusion in the Import Parity Price of inland refineries for Sale/Purchase of products between the Oil Marketing Company shall be worked out as under: Koyali : 80% of Notional rail freight from Jamnagar to Koyali Barauni : 70% of Notional rail freight from Haldia to Barauni to be calculated based on pipeline distance from Haldia to Barauni. Mathura : 70% of sura total of Notional rail freight worked out on pipeline dist .....

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finery to New Jalpaiguri (NJP). Rail freight for the movement beyond NJP shall be borne by the Oil Marketing Company buying the product from the NE refineries. 5.5 Basic price for sale ex inland locations (other than refineries) including TOPs shall be the import parity price at the nearest port plus freight being recovered tn the selling price at such inland locations. 5.6 Basic price for sale ex non-refinery port locations shall be the import parity price as the nearest refinery port plus coas .....

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plying Oil Marketing Companies, the same shall be jointly taken up with the Government." 8.4 The agreed price between the parties varied in accordance with the circumstances and with reference to the Import Parity Price. For the present issue, the condition mentioned at Article 5.4 of the said agreement is relevant. It is agreed under the said Article that the basic price of products for sales ex-North Eastern Refineries shall be reduced by the notional rail freight from the supplying refin .....

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espondents in support of the refund claim, where against the respective column of the Table, the deduction from the price was shown as 'railways freight' not as notional freight. But, on a correct interpretation of the Article 5.4, it would be clear that the basic price of the products in relation to the sales from North Eastern region, be reduced to the extent of notional freight which is not conditional on the fact of incurring of actual freight. In other words, whether freight is incu .....

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