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TMI Blog2024 (6) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... f Central Excise Act, 1944. (ii) I also impose a penalty of Rs.30,74,603/- [ Rs. Thirty lacs Seventy Four thousand Six Hundred Three only] upon the party under Section IMC of Central Excise Act 1944." 2.1 Appellant is engaged in compression of natural gas received from GAIL (India) Ltd., such compression amounts to manufacture, resulting in a new product Compressed Natural Gas (CNG). Appellant was registered with Central Excise Department and was paying Central Excise duty under sub- heading No.27112100 of Central Excise Tariff Act, 1985. They were also availing Cenvat credit on inputs/capital goods and input services. 2.2 During the course of audit of the account of the appellant, it was observed that appellant was selling CNG through its own pumping stations [known as company operated CNG filled station (COCO)] and also through bulk buyers like BPCL and HPCL for sell to their petrol pumps. 2.3 The clearance of the gases out to the bulk buyers and the appellant on the basis of transaction value determined after deducting bulk discount determined as per the agreements entered with the said bulk buyers from the retail sale price of the CNG from petrol pump. 2.4 As per the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the department was dismissed by Hon'ble Supreme Court as Mahanagar Gas Ltd. Vs CCE 2018 360 ELT A133 (SC). * Bhagyanagar Gas Ltd. Vs CCE Final Order No.A/30404/2023 dated 29.11.2023. * Extended period of limitation not invokable and the substantial demand is time barred. Reliance is placed by the following cases:- * Accurate Chemicals Industries Vs CCE, Noida 2014 (300) ELT 451 (Tribunal); * CCE, Noida Vs Accurate Chemical Industries 2014 (310) ELT 441 (Alld); 3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 Impugned order records following findings:- "I find that the appellants are selling the goods to M/S HPCL/BPCL (a public Limited Co) under an agreement dated 06.11.2009 and 23.03.2009 respectively. The terms and conditions are identical in both the agreements. I find that in para 4 of the said agreements the following have been agreed upon: "In consideration of the space provided to it by HPCL/BPCL, CUGL shall pay a sum known as License Fee of Rs. 0.06 (six paisa) per kg of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n value; C 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 directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. In this context, I find that the appellant's case is not covered under the said section in as much as additional consideration is flowing back by way of rent of the installation of the dispenser of the CNG. It is mentioned in the para 4 of the agreement that the appellant will pay the Licence fee @ Rs.0.06 per kg but there is no mention of the rent in the agreement, which is the additional consideration flowing back, and thus the case of the appellant is not covered under Section 4(1)(a) of the Act ibid. Moreover, nonpayment of rent in the rented premises of the HPCL/BPCL, is an extra consideration. Licence Fee @ Rs.0.06 per kg of CNG is intrinsic to the product, petrol pum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscount from the retail sale price of the CNG from the pumping stations or the petrol pump/pumping stations of BPCL and HPCL. 4.4 Compressed CNG is sold by the appellant through their own pumping stations referred as COCO and through the petrol pumps of the bulk buyers. The Retail Sale Price of the case is fixed for sale from both the outlets and is uniforms throughout the state irrespective of the fact whether the CNG is sold from COCO outlet or the petrol pump of the bulk buyer. Whatsoever is method for determination of assessable value the expenses incurred by the bulk buyers at their petrol pumps for selling CNG from their retail outlets (petrol pumps) cannot be added to the assessable value. Undisputedly the sale transaction in terms of the Central Excise Act, 1944 in case of the sale to the bulk buyers was completed at the point of clearance of the CNG by the appellant to the bulk buyer, which is the factory gate. Once the sale transaction has been completed at the factory gate, the expenses incurred by the bulk buyer cannot be made the part of the assessable value determined at the factory gate. These expenses have been incurred by the bulk buyer for selling the goods from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o OMCs. The agreement between the appellant and OMCs clearly shows that the trade margin were being decided at fixed level by the parties to such agreement. In terms of Clause 6.1 of the agreement, OMCs are not entitled to any remuneration or compensation of any nature whatsoever for installing equipment and other facilities at the site of the OMC. The Trade Margin is decided after considering the costs and expenses incurred by OMCs including their profits. The above terms of the agreement clearly show that the transaction between the appellant and the OMCs is at arms length and cannot be doubted. Hence the Trade Margin cannot be included in the assessable value at the Appellant's end and hence the demand raised against the Appellant on Trade margin is not sustainable. Our views are also based upon the Tribunal judgment in case of Mahanagar Gas Ltd - 2017 (348) ELT 175 (Tri.), wherein in identical facts, the Tribunal held as under : "5. We have considered the rival submissions and perused the records. 5.1 We find that the common issue involved in the above appeals is whether price charged for sale of CNG to OMCs can be considered as transaction value for the purpose of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is incorrect and not supported by any evidence on record. It is noteworthy that this Tribunal in the case of BPCL/HPCL (supra), wherein the service tax demanded on the very same amount received by OMCs from MGL, claiming such amount as commission paid for rendering of services under Business Auxiliary Service for marketing of CNG manufactured by the appellants, has been set aside holding that the OMCs themselves are buying the goods from MGL and MGL is charging VAT/sales tax while selling the CNG to BPCL/HPCL and BPCL/HPCL are also paying VAT/sales tax on the entire value, including the so-called commission and, hence, the transaction between them is sale/purchase transaction and VAT/sales tax has been paid at both ends the same cannot be considered as service contracts. 5.3 We find that the appellants‟ contention that OMCs, being bulk buyers, have been given higher discount also needs to be accepted in the absence of any allegation/substantiation of mutuality of interest between appellants and OMCs, as both are independent entities. We also find that there is a distinct difference in the transactions of the appellants with PPs, wherein MGL supply CNG through the outlets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not hold out to be as agents of MGL and it is clearly understood that this agreement is on principal-to-principal basis and MGL shall not be liable for any of the acts of omission/commission of OMCs. We also find from record that when CNG is supplied by MGL through PPs, there is no sale between MGL and PPs, as the sale takes place between MGL and the ultimate customers/vehicle users and the PPs act as agents of MGL; that the PPs were/are issuing cash memos/invoices/bills of MGL, when they supply CNG to customers/vehicle owners; that the PPs are acting as agents of MGL, for which they get specified service charges and the PPs are paying service tax on such amount; that, in contrast, as far as OMCs are concerned, sale of CNG takes place between MGL and OMCs at OMCs outlets and OMCs issue their cash memos/bills/invoices to their customers/vehicle owners and MGL do not have any role to play in such transactions; that commission paid to PPs was Rs. 1.20/kg, Rs. 1.74/kg, Rs. 1.90/kg and Rs. 2.45/kg during different periods, whereas discount given to OMCs was Rs. 1.20/kg, Rs. 1.40/kg, Rs. 2.42/kg, Rs. 2.62/kg and Rs. 2.74/kg during different periods. From the above discussions, we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, this was the only methodology which anybody could have adopted. Since the activity of manufacture takes place at each of the compression station the appellants are having centralized registration for each of the locations, which are the factories of MGL. 5.5 The ld. AR‟s arguments that manufacture and sale is taking place simultaneously would not be correct, as CNG is drawn from stationary cascades and dispensed through dispenser. Further, even if the transaction of purchase and sale between the buyer and seller takes place simultaneously on account of peculiar nature of the product, such transaction has to be treated as sale on principal-to- principal basis based on the Hon‟ble Supreme Court judgment in the case of BayyanaBhimayya, Always Agencies, etc. cited supra by the appellants. 5.6 Since we are of the view that the appellants have a strong case on merits itself and are allowing the appeals on merits, we are not discussing the alternate propositions like non-applicability of extended period, etc. The penalties imposed on the appellants are also not sustainable. With the above discussions, we set aside the impugned orders and allow the appeals with consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceeds. These documents on records clearly evidence that the transaction involved is one of purchase and sale of goods by the appellant on a principal-to-principal basis and not as an agent of anybody else. Following the decision of this Tribunal in the case of Pratap Singh & Sons cited supra, we set aside the impugned order and allow the appeal. The Tribunal in following cases has held that the agreement between the parties reflects the real state of affairs and hence the same is a guiding factor for determining the passing of title to the goods from one party to another: (i) Mahindra & Mahindra Ltd - 1995 (76) ELT 481 (SC) (ii) Hindustan Petroleum Corpn. Ltd - 2005 (187) ELT 479 (Tri) (iii) Indian Oil Corporation - 2014 (300) ELT 539 (Tri, Del) 6. In the present case also the value of the goods between the Appellant and OMCs is fixed as per the agreement and hence the same cannot be disputed. The Revenue has relied upon the judgment of Maruti Udyog Ltd - 2010 (257) ELT 226 (Tri, LB) and Coromandal Fertilizers Ltd - 1984 (17) ELT 607 (SC), and Supreme Petrochem Ltd - 2009 (240) ELT 38 (Tri, LB). However, we find that the said judgments are not applicable to the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts (P) Ltd - 2015 (322) ELT 819 (SC), Metal Tubes -2000 (126) ELT 1260 (Tri.), Simplex Infrastructures Ltd - 2016-TIOL-779-HC-KOL-ST, Blue Star Ltd - 2000 (120) ELT 415 (Tri.) and Amway India Enterprises Pvt. Ltd - 2017 (3) GSTL 69 (Tri.-Del)." 4.6 This decision has been followed by Hyderabad Bench of this Tribunal in case of M/s Bhagyanagar Gas Ltd. Vs CC, Guntur Final Order No.A/30404/2023 dated 29.11.2023. 4.6 We also note that following decision of M/s Mahanagar Gas Ltd., Commissioner (Appeals) himself has given relief to the appellant, in similar circumstances by holding as follows:- "4.1 I have gone through the facts of the case, the averments made at the time of the personal hearing and all other documents/material available on record. It is observed that: (i) The Commissioner (Audit), Kanpur, vide the Orders/ Commr(A)/ CEx/APPL/ KNP / 2018 dated 07.03.2018 and 128/COMMR (A) / CEX / APPL/KNP/ 2018 dated 05.03.2018, had remanded the case pertaining to the periods April, 2012 to February, 2013 and March, 2013 to November, 2013 respectively, inter alia, to determine the money value of the space & man power provided by M/s BPCL/M/s HPCL, for the purpose of applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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