IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI Appeal Nos. E/821/2007 (Arising out of Order-in-Original No.21/2007 dated 25.9.2007 passed by the Commissioner of Central Excise, Trichy) For approval and signature: Honble Smt. Jyoti Balasundaram, Vice President Honble Shri P. Karthikeyan, Member (T)
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities? M/s. Chennai Petroleum Corporation Ltd. Appellants Vs. Commissioner of Central Excise, Trichy Respondent Appearance Shri K.S.Venkatagiri, Advocate for the Appellants Shri V.V. Hariharan, Jt. CDR, for the Respondent CORAM Honble Smt. Jyoti Balasundaram, Vice-President Honble Shri P. Karthikeyan, Member (T) Date of Hearing: 25.03.2009 Date of Decision: 25.03.2009 Final Order No. ____________ Per P. Karthikeyan M/s. Chennai Petroleum Corporation Ltd. [CPCL] manufactures various petroleum products and sells most of their production through M/s. Indian Oil Corporation Ltd. [IOC], an entity related to CPCL as per Section 4 of the Central Excise Act. The excisable goods manufactured by CPCL are cleared on payment of duty on the respective value at which the products are sold by IOCL to independent buyers. This is in accordance with the provisions contained in Section 4(1)(b) of the Act read with Rules 9 and 10(a) of the Central Excise Valuation Rules, 2000. During the period 16.3.2005 to 28.2.2007 CPCL charged a higher Refinery Transfer Price (RTP) from IOCL compared to the corresponding price at which the HSD was sold to unrelated buyers on several days. In the impugned order the Commissioner demanded duty on the difference between the RTP and the corresponding sale price by IOC in cases where the price at which IOC had sold consignments of HSD at a lower price compared to RTP. The Commissioner found that In the absence of any evidence indicating any extra consideration siphoned either to the assessee from the related buyer or vice-versa the transaction value as per Section 4(1)(b) of the Act read with Rule 9 of the Central Excise Valuation Rules, 2000 need not be adopted and the Refinery Transfer Price can be considered as the sole consideration for sale at CPCL factory gate. Accordingly he demanded a total differential duty of Rs.7,37,76,177/- along with applicable interest and imposed on CPCL equal amount of penalty under Rule 25 of the Central Excise Rules, 2002.
2. Heard both sides. On a careful consideration of the case records and the submissions by both sides we find that in terms of Rule 10(a) of the Valuation Rules, when the excisable goods are not sold except through an interconnected undertaking the value should be determined as per Rule 9 of the Valuation Rules. As per this rule, the assessable value shall be the price charged by the related person when the excisable goods are arranged to be sold through a related person. We find that the appellants followed the above provisions and paid duty on clearances of HSD during the material period correctly. The impugned demand arises from a wrong reading of the provisions. There is no legal sanction to demand duty from CPCL in cases where the RTP charged on IOC is higher than the corresponding sale price of IOC. We also find that the appellants have rightly relied on the following case law, all of which held that where the goods are sold exclusively to related person, the value shall be determined as per the above Valuation Rules.
(i) Ultra Refrigerators Pvt. Ltd. Vs. CCE 2004 (170) ELT 341
(ii) Pepsico India Holdings Pvt. Ltd. Vs. CCE 2004 (163) ELT 478
(iii) South Asia Tyres Pvt. Ltd. Vs. CCE 2003 (152) ELT 434
(iv) Birdi Steels Vs. CCE 2005 (179) ELT 82
3. We find that the impugned demand is not sustainable in law. We vacate the impugned order and allow this appeal filed by CPCL. (Dictated and pronounced in open court) (P. KARTHIKEYAN) (JYOTI BALASUNDARAM) Member (T) Vice President Rex 2