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Indian Oil Corporation Ltd. Versus Commissioner of C. Ex., Raigad

2015 (3) TMI 1158 - CESTAT MUMBAI

Transaction value for the purpose of charging excise duty - demanding the differential duty - cost of transportation, handling, etc. and one lump sum amount inclusion in excised duty - Held that:- While arriving at the transaction value for the purpose of charging, excise duty, the cost of transportation from the factory to the depot or any other place or premises from where the excisable goods are sold have to be included and no abatement in respect of such charges is permitted. In the present .....

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xcise duty element, the cost of transportation, handling, etc. and one lump sum amount is charged which is inclusive of excise duty.

The appellant’s claim to the contrary is not evident from the invoices raised as there is no mention in these invoices of any charges towards transportation, handling etc. In these circumstances, the contention of the appellant that these are towards transportation and handling charges cannot be accepted. Since the sale takes place at ONGC Nhava Depot, .....

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oes not mean that the appellant is liable to pay duty only for the normal period of limitation. If the appellant does not comply with the provisions of law and the documentary evidences available on record does not support the appellant’s contention, the presumption that the appellant suppressed the facts would naturally arise. The law does not make any distinction between a PSU or non-PSU. In this view of the matter, invocation of extended period of time in the present case is fully justified. .....

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Advocates, for the Appellant. Dr. B.S. Meena and Shri Rakesh Goyal, Additional Commissioners (ARs), for the Respondent. ORDER [Order per : P.R. Chandrasekharan, Member (T)]. - The appeal is directed against Order-in-Appeal No. SRK/492/RGD/2007 dated 10-12-2007 passed by Commissioner of Central Excise (Appeals), Mumbai. 2. Vide the impugned order, the learned appellate authority has upheld the duty demand of ₹ 38,36,525/- along with interest thereon confirmed by the adjudicating autho .....

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course of stock verification it was found that the appellant/assessee were clearing the excisable goods High Speed Diesel (HSD in short) to their ONGC Nhava Depot where the said goods were sold to their customers. The duty liability was discharged on the stock transfer price at the time of removal from the assessee s warehouses. However, on scrutiny of the invoices issued from the said depot, it was found that the assessee was selling the excisable goods from their depot at a higher price than .....

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d order also confirmed recovery of the interest on the above duty amount and also imposed an equivalent amount of penalty. The ground for demanding the differential duty was that the appellant had collected additional amounts from the buyers which were shown in the invoices as other charges , over and above the selling price towards handling, transportation or facilitation. On such additional amounts recovered, the appellant had not discharged any excise duty liability. 4. The learned Couns .....

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that they are also selling the same goods to other buyers on which duty liability is discharged and the price adopted for sale to ONGC depot is the same as those adopted for other buyers. The additional recovery of amounts for the sales effected at ONGC Nhava Depot is on account of transportation charges from the warehouse to the depot, and the same is not includable in the assessable value of the goods sold under Rule 7 of the Valuation Rules. It is also contended that the demand is barred by .....

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a Public Sector Undertaking no motives can be attributed for evasion of duty and hence, penalty is not imposable under Section 11AC. 5. The learned Additional Commissioner (AR) appearing for the Revenue on the other hand contends that duty liability was discharged by the appellant on the stock transfer prices at the warehouse whereas the sale took place at the depot. From the invoices issued by the appellant, it can be seen that a flat rate is charged from the buyers and it is not indicate .....

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f Rule 7 of the Valuation Rules, while arriving at the transaction value for the purpose of charging excise duty, the cost of transportation from the factory to the depot is to be included and no abatement is permitted. Reliance is also placed on the decision of this Tribunal in the case of CCE, Chennai v. Madras Refineries Ltd. - 2007 (207) E.L.T. 582 (Tri. - Chennai) wherein also it was held that transfer charges incurred in relation to storage tanks and pipelines are includible in assessable .....

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after referred to such as such other place ) from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and buyer of the said goods are not related and the price is the sole consideration for sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment .....

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ollected. In other words, the sales took at the ONGC Nhava Depot. We have perused invoices in respect of supplies made by the appellant at the ONGC Depot and these facts also become very clear from the invoices. Further, in these invoices the total amount charged is indicated and there is no bifurcation as to what is the amount charged for towards the price of the goods, the excise duty element, the cost of transportation, handling, etc. and one lump sum amount is charged which is inclusive of e .....

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hstanding the fact that depot was not included as a place of removal, prior to 14-05-2003, the appellant has no case at all. After 14-5-2003, the price at the ONGC depot is clearly the value on which duty liability has to be discharged. The decisions of this Tribunal in the case of VIP Industries Ltd. (supra) and also the Madras Refineries Ltd. case (supra) clearly support this view. Once the duty demand is confirmed, the interest liability is automatic and consequential and has to be confirmed. .....

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ween a PSU or non-PSU. In this view of the matter, invocation of extended period of time in the present case is fully justified. Consequently, the assessee is also liable to penalty under the provisions of Section 11AC of the Central Excise Act, 1944. Therefore, we do not find any infirmity in the impugned order passed by the lower adjudicating and appellate authorities. 7. Thus, the appeal is dismissed as devoid of merits. (Pronounced in Court on ……………..) .....

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ry upto ONGC Barges/Jetty. The terms of delivery is mentioned as door delivery . In one of the purchase orders during the period, it is mentioned in terms of delivery that place of delivery shall be ONGC Jetty at Nhava, Dist. Raigad . The purchase order further stipulates that IOCL have to certify on each delivery challan/invoices that the rate charged is same as applicable to DGS&D/Govt. Organization. Further, from the sale invoice, it is apparent that the delivery has been effected by IOCL .....

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hence, same is eligible for deduction for the purpose of determination of assessable value. As the appellant could not readily provide the details of the expenditure incurred on account of delivery/handling, they had agreed to provisionally discharge the duty liability, pending finalization of the proceedings after their final assessment in the matter. The appellant, vide their letter dated 25-1-2007, had approached the Range Superintendent for assessment of excise duty along with working and o .....

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paid location/depot from where the same was supplied to ONGC through dedicated pipeline upto ONGC Jetty, where delivery was given to ONGC Barges/Jetty. Product price charged ex-terminal to JNPT depot being the wholesale price at the factory gate/warehouse had been adopted as assessable value for payment of duty in respect of supplies made to both the category of supply to (i) JNPT Port Trust, and (ii) IOCL, Nhava depot, from where eventually sales were made to ONGC Barges. It was further stated .....

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sale price and as such these charges were not liable to be includible in the assessable value for levy of duty. It was further contended that during the period January, 2001 to 13-5-2003, the place of removal was defined under the Act at the factory gate or warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty. Thus, when price and transaction value was ascertainable under Section 4(1)(a) of the Act, then all removals inc .....

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hus, the amount of recovery in dispute being totally attributable to facilitation cost towards transport, handling, storage etc. is an independent activity from sale of the product and accordingly, not includible in assessable value. 10. Having considered the rival contentions and from perusal of the records, I find that the adjudicating authority has erred in rejecting the contention of the appellant that the depot price concept was not applicable to them, as from 30-6-2000, depot was not .....

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ncluded in such price. Thus, concept of exclusion of transportation charges remained as such since 28-9-1996. Thus, I, hold that in view of the clear-cut provisions Rule 5 read with Rule 7 read with Section 4(1)(b) of the Act, to exclude the transport/handling charges incurred from the place of removal to place of delivery, the same cannot be added by taking resort of Rule 7 of the Valuation Rules alone. I also hold that the ruling in the case of Ispat Industries Ltd. - 2004 (165) E.L.T. 231 (Tr .....

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matter needs to be remanded to give opportunity to assessee/appellant to produce calculation of the charges incurred, so that excise duty is correctly assessed after reduction from gross amount billed. I further hold that there is no element of suppression or mis-declaration attributable on the part of the appellant. Thus, extended period is not invocable. Penalty under Section 11AC is set aside. 11. Thus, the appeal is allowed in part and remanded for recalculation of assessable value as .....

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value, as held by the hon ble Member (Technical) in terms of Section 4(1)(b) read with Rule 7 of the Central Excise Valuation Rules, 2000, relying on the decision of this Tribunal in the case of VIP Industries Ltd. - 2012 (275) E.L.T. 602 and Madras Refineries Ltd. - 2007 (207) E.L.T. 582? or Place of removal is the refinery and not the depot from where the goods have been sold and, therefore, the cost of transportation, etc. incurred by the appellant from the refinery to the depot is not liable .....

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n 11AC as held by the hon ble Member (Technical); or Extended period of time is not invokable as there is no element of suppression or mis-declaration attributable on the part of the appellant as held by the hon ble Member (Judicial) (Pronounced in Court on 8-10-2014) Sd/- (Anil Choudhary) Member (Judicial) Sd/- (P.R. Chandrasekharan) Member (Technical) 13. [Per : P.K. Jain, Member (T)]. - The case was heard at length, where both the learned counsel for the appellant as also the learned AR .....

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ing provision for petroleum products was withdrawn with effect from the said date. During the period in dispute, when goods were being cleared from the refinery, no duty was paid and the goods were stored in the approved warehouse without payment of duty. When the goods were being cleared from the warehouse, the duty was being paid. 15. In the present case, the appellant had a warehouse within the Nhava Sheva Port premises. They were clearing the petroleum products on payment of duty at the .....

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y tanker trucks. 15.1 While clearing/stock transferring the goods from the warehouse to depot, the duty was paid. For this purpose, the goods were valued as applicable to various customers in Nhava Sheva warehouse. It is to be noted that in the case of goods being transferred from warehouse to depot in Nhava, no sale was taking place and it was a case of stock transfer to their own depot. 15.2 The dispute is relating to the valuation of such stock transfer. The appellant was selling th .....

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r this amount will form part of the assessable value or not. 16. In fact, the dispute can be divided into two periods. The first, one from 1st July, 2000 to 13th May, 2003 and the second is from 14th May, 2003 to 3rd September, 2004. This division is based upon the fact that there was amendment in the definition of place of removal under Section 4 of the Central Excise Act w.e.f. 14th May 2003. It would be important to reproduce the relevant portion of Section 4 of the Central Excise Act wh .....

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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 the money value of the additional consideration, if any, flowing direc .....

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e or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed; (cc)  time of removal , in respect of the excisable goods removed from the place o .....

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ed to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. 17. It is to be noted that clause (iii) in above mentioned Section 4(3)(c) was added with effect from 14-5-2003. The effect of the said change in the pr .....

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ent dispute and is therefore not being discussed). If goods are sold at the place of removal, then the sale value is the transaction value for assessment purpose. This is clear from Section 4(1)(a) itself and I need, not go to the rules. Thus for the period from 14-5-2003 onwards since the depot was considered as the place of removal, the value at which the goods are sold from the depot will be the assessable value and duty has to be charged accordingly. There is no dispute about the fact that t .....

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moval, i.e. warehouse. Thus, valuation will be as per Section 4(1)(b) arid we have to take recourse to the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. It is seen that Member (Technical) has taken the view that the value has to be determined under Rule 7 of the said Rules while Member (Judicial) is of the view that the value has to be determined under Rule 5 read with Rule 7. For appreciating the said Rules, the same are reproduced below :- Rule 5. Where any .....

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al cost of transportation; and (ii) in case where freight is averaged, the cost of transportation calculated in accordance with generally accepted principles of costing. Explanation 2. - For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods. RULE 7. Where the excisable goods are not sold by the assess .....

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e same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. 17.3 A reading of Rule 5 indicates that the said Rule is applicable where the excisable goods are sold for delivery at a place (other than the place of removal). A combined reading of Section 4(1)(a) and Rule 5 would thus indicate that this Rule is applicable when the goods are sold at the place of removal but delivery of the goods is to be given at .....

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ituation in the present case. The appellant has not sold the goods at the time and place of removal but stock transferred to their depot where the goods were stored and later on sold. In view of the above analysis, in my view, Rule 5 of the Central Excise Valuation Rules, 2000 will not be applicable, but the Rule 7 would applicable. Further, Rule 7 very clearly indicates that the value shall be the normal transaction value of such goods sold from such other place at or about the same time. Thus .....

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ed upon the deemed value concept while the new Section 4 is based upon the transaction value. The decision of the Hon ble Supreme Court was with reference to the old Section 4. In fact this Tribunal in the case of the very same assessee i.e. VIP Industries Ltd. in subsequent judgment reported in 2012 (275) E.L.T. 602 (T), has distinguished the same and explained in detail why the said judgment would not be applicable with reference to new Section 4. Member (Judicial) has also quoted another judg .....

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