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Commissioner of Central Excise, Nashik Versus M/s Bhagwati Refineries Pvt. Ltd.

2015 (11) TMI 609 - CESTAT MUMBAI

Demand u/s 11D - the respondent issued debit note to adjust the difference in the price of invoice and money paid, by cheque (for crude oil) - Revenue felt that the amount reflected in the debit note as Excise duty, amounts to such collection by the respondent-assessee, which is required to be deposited with the Central Government in terms of the provisions of Section 11D of the Act - Held that:- It is admitted fact on record that the respondent-assessee received crude oil on which no Excise dut .....

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ired under Section 11D, for attracting liability are absent in the facts of this case, like recovery of any amount in the name of duty from the buyers of such goods, that is excisable goods, and such person should be the person liable to pay duty under the scheme of the Excise Act. These elements being absent I conclude that the respondent-assessee was not required to pay any duty under the provisions of Section 11D of the Act. - Decided against Revenue. - APPEAL NO. E/07/10 - Dated:- 14-5-2015 .....

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iers, which were mainly the oil industries milling oil from the oil seed. Due to some problem of getting set-off under the Sales Tax Act, the supplier of crude oil raised the bill for refined oil. As the supplier of crude oil was entitled to only the price of crude oil, whereas the bill was raised for the refined crude oil, the respondent issued debit note to adjust the difference in the price of invoice and money paid, by cheque (for crude oil). From perusal of the debit note it is evident that .....

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e as Excise duty, amounts to such collection by the respondent-assessee, which is required to be deposited with the Central Government in terms of the provisions of Section 11D of the Act. Accordingly show-cause notice in February, 2008 was issued requiring the respondent to show-cause as to why the same should not be adjudicated and collected, being an amount of ₹ 23,06,387/ along with interest. 3. The show-cause notice was adjudicated vide order in the Order-in-Original dated 20/10/2008, .....

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f duty. The suppliers, though supplied crude oil, used to issue bills for refined oil at a price consisting of value of crude oil plus process charges for converting crude oil to refined oil. The appellant honours these bills to the extent of value of crude oil, but in order to adjust the amount towards process charge, the appellant used to issue job work bill/debit note for ₹ 2/- per Kg. However, ₹ 2/- has been divided as ₹ 1/- towards job charges and ₹ 1/- as Excise dut .....

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t. The appellant refines the oil out of their own crude oil and also out of crude oil supplied by the suppliers. The crude oil supplied by various suppliers is refined and get mixed with the refined oil manufactured by appellant with purchased crude oil. The suppliers used to issue bills for refined oil, though they supply crude oil. The appellant is required to pay price of crude oil only out of the total price charged for refined oil by the suppliers of crude oil. The price of refined oil char .....

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of price of crude oil. Thus effectively the appellant is recovering only price of crude oil and not recovering any job charges from crude oil suppliers which also includes an element of ₹ 1 per kg of Central Excise duty. Ordinary prudent suppliers will not honour any bill towards excise duty if he has supplied the crude only, as everyone knows that the taxes like excise duty, sales tax is charged only to the customer and not to the supplier. Further the appellant was required to pay value .....

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tively nothing has been recovered, the debit notes also including the component of excise duty cannot be construed to have recovered the amount representing excise duty. This job work bill/debit note can be issued showing any head viz. job charges or excise duty, but the fact remains that they were required to pay cost of crude oil only which has been paid by the appellant. In effect nothing has been recovered from the suppliers of the crude oil under head job work which also includes excise dut .....

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by issue of debit note/job charges bill showing excise duty. Such job charge bills/debit notes are not reducing the value of crude oil but effectively reducing the cost of refined oil to the cost of crude oil. This ultimately results in no undue benefit of ₹ 1/- per kg which is shown as excise duty. In other words, there has been no recovery of any amount, regardless whether it is for job charges or for excise duty, by issue of job charges bill/debit notes. The very purpose of issue of jo .....

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nly for crude oil, then what was necessity to show it in first transactions and deduct in second one. I find the assessee s reply is not explaining the rationale behind such transaction. Such book adjustment is not allowed in accounting standard and even otherwise ethically not correct. 11. The adjudicating authority erred in stating that, it is not clear what benefit those suppliers were gaining out of this paper transactions. Shri Bharat Bachharaj Patwari, Partner of M/s Bharat Oil Industries .....

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posed Sales Tax on the cotton seed wash oil as well as on the refined cotton seed oil; that if cotton seed wash oil was sold to the refineries then they did not get set off the sales tax paid on the crude oil; however if they got the refined oil manufactured on job work basis then they wee entitled to get the set off. From what has been deposed by Mr. B. B. Patwari in the statement it is clear that by such method, if at all, they are deriving sales tax benefit which has nothing to do with Centra .....

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icating authority, the appellant produced letter dated 13.05.2008 of M/s Mukund Oil Industries wherein they have stated that they manufacture crude oil only as they do not have refinery; that as per set off provisions of sales tax, set off is not available to input if the crude oil is sold. Hence, they were selling crude oil to appellant by raising the invoice of refined oil; that as the invoice of refined oil was getting accounted against which they were only entitled to receive the payment of .....

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cating authority is totally wrong in stating that no explanation is forthcoming as to why crude oil was being sold in the name of refined oil. M/s Mukund Oil have categorically stated that if the crude oil is sold, they are not entitled for set off and therefore, bill for refined oil is raised though crude oil is sold. Obliviously the debit note raised by the appellant is only for accounting entry as they are required to pay only for crude oil and the appellant is bound to raise debit note for d .....

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the appellant have procured only crude oil and not the refined oil. Even if the departments stand that debit notes were issued showing ₹ 1/- per kg as Central Excise duty, as one of the components, is accepted; no proof what so ever has been furnished that the amounts mentioned in debit notes were actually realized from the suppliers. What is important is recovery of an amount in the name of Central Excise Duty and not mere raising of bill/debit note to that effect. Under the circumstanc .....

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Government. Therefore, the requirement of the law is that the amount which is collected from buyer of such goods, in addition to the excise duty paid by the buyer should be paid back to the Central Government under Section 11D. As explained above, the suppliers of crude oil can by no stretch of imagination can be termed as buyers of refined oil. In fact, they are the suppliers of crude oil and buyers of refined oil are various customers to whom the refined oil has been sold by the appellant. As .....

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amount charged and recovered showing as Excise duty. The explanation regarding book adjustment in the facts and accepted by the Commissioner (appeals) is not proper because it does not revealed correct fact. Such explanation is an after thought and is not based on records. Further the learned Commissioner (Appeals) in the impugned order by observing in para-7, the supplier of crude oil, used to issue invoice for refined oil. The price of refined oil consisted the value of crude oil plus processi .....

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ssessee clearly show that they are showing Rs. one per KG as Excise duty and such amounts have been recovered by them. The Commissioner (Appeals) have erred in accepting the contention of assessee that there is no recovery of any amount, which is contrary to records as maintained by the assessee. Further the Commissioner (Appeals) have erred in accepting this explanation of the assessee and not accepting the records which clearly evidence recovery in the name of Excise duty. Further the Commissi .....

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ordingly the learned A.R. prays for setting aside the impugned order and restoration of the Order-in-Original. 5. Heard. The learned Counsel for the respondent-assessee defended the facts and vehemently argued that the basic ingredients for charging of Excise duty under Section 11D, being absent, the Commissioner (Appeals) rightly held in favour of the assessee. It is admitted fact on record that the respondent-assessee received crude oil on which no Excise duty was chargeable. It is further adm .....

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