[Order per : P.G. Chacko, Member (J)]. - The appellant, Oil & Natural Gas Corporation Ltd. (ONGC, for short), has obtained the requisite clearance from the “Committee of Secretaries” for pursuing these appeals.
2. The appellant is engaged in the manufacture of petroleum products including liquified petroleum gas (LPG) falling under SH 2711.19 of the Schedule to the Central Excise Tariff Act, 1985. The dispute in the present case relates to the valuation, for assessment of duty, of LPG (domestic) cleared in bulk from the appellant’s factory (refinery) to Oil Marketing Companies (OMCs), namely, Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation Ltd. (IOCL) during the period from June, 2002 to December, 2004. The appellant sold the goods to the OMCs at a price which was referred to as “Import Parity Price” and the OMCs sold the same, after bottling in cylinders, to their dealers at a price fixed, under a scheme called “Administered Price Mechanism” (APM), by the Oil Co-ordination Committee under the Ministry of Petroleum, Government of India, and the dealers, in turn, supplied the goods in cylinders at the same “APM price” to domestic consumers. The clearance of LPG (domestic) in bulk from the refinery to the OMCs were effected under cover of Central Excise invoices (issued under Rule 11 of the Central Excise Rules, 2002) and on payment of duty on the “APM price” which was shown as the assessable value in such invoices. In respect of these sales, however, the appellant collected the higher price (net of statutory levies and admissible deductions like freight and insurance), namely, “import parity price” (IPP) from the OMCs by issuing commercial invoices. On a perusal of the Central Excise invoices issued under Rule 11 ibid, the department found the appellant to have certified in each invoice as follows: “CERTIFIED THAT THE PARTICULARS GIVEN ABOVE ARE TRUE AND CORRECT AND THE AMOUNT INDICATED REPRESENTS THE PRICE ACTUALLY CHARGED AND THAT THERE IS NO FLOW OF ADDITIONAL CONSIDERATION DIRECTLY OR INDIRECTLY FROM THE BUYER.” But, on going through the corresponding commercial invoices, it was noted that the price (IPP) charged to, and recovered from, the buyers (OMCs) was higher than the value (APM price) shown in the statutory invoices on which duty had been paid. The department considered the price actually collected by the appellant from the buyer, to be the correct assessable value being the “transaction value” defined under Section 4(3)(d) of the Central Excise Act. Show-cause notices were issued to ONGC on this basis and the demands of differential amounts of duty raised therein for different periods, all post-1-7-2000, came to be confirmed by the Commissioner of Central Excise, who also imposed penalties on ONGC under Section 11AC of the Central Excise Act. Hence these appeals.
3. The learned counsel for the appellant explained the scheme of Administrative Price Mechanism (APM) for controlled petroleum products, which was abolished w.e.f. 1-4-2002 in respect of all such products barring kerosene distributed through the public distribution system (PDS) and LPG (domestic). Accordingly, the prices of LPG (domestic), both ex-refinery and ex-storage, were determined by the competent authority which was the ‘Oil Co-ordination Committee’ (OCC) prior to 1-4-2002 and the ‘Petroleum Planning & Analysis Cell (PPAC) from 1-4-2002. The learned counsel submitted that the quantum of excise duty payable on the goods was also determined by the said authority, whether it be for the period prior to 1-7-2000 (date with effect from which Section 4 of the Central Excise Act was amended to introduce “transaction value” concept) or from 1-7-2000 to 31-3-2002 or from 1-4-2002. He submitted that it was not open to any petroleum refinery to determine the assessable value of LPG (domestic) differently. It was particularly pointed out that any subsidy given by the Government to compensate any loss due to APM was not includable in the assessable value.
In the above context, the learned counsel referred to the following circulars :-
No. 223/57/96-CX. dated 21-6-1996
No. MF(DR) F. No. 354/81/2000-TRU dated 30-6-2000
No. 549/45/2000-CX. dated 18-9-2000
No. 563/59/2000-CX. dated 21-12-2000
No. 354/55/2002-TRU dated 23-4-2002
No. 796/29/2004-CX. dated 4-9-2004.
He argued that the show-cause notices were contrary to the CBEC’s circulars and hence ab initio bad in law. In this connection, Shri Hidayatullah referred to a few decisions of the Supreme Court on the binding effect of clarificatory circulars, tariff advices etc. issued by CBEC, such as :
Ranadey Micronutrients v. Collector, (S.C.)
Collector v. Jayant Dalal Pvt. Ltd., (S.C.).
4. The learned counsel, further, referred to a plethora of decisions of the Tribunal and claimed that the valuation issue was no longer res integra. The following are the cited decisions :
(i) Gas Authority of India Ltd. v. Commissioner, (Tri.-LB);
(ii) HPCL v. Commissioner, (Tri.-Mum.);
(iii) HPCL v. Commissioner, (Tri.-Bang.);
(iv) HPCL v. Commissioner, (Tri.-Bang.);
(v) BPCL v. Commissioner, (Tri.-Bang.);
(vi) IOCL v. Commissioner, (Tri.-Bang.);
(vii) Mangalore Refinery & Petrochemicals Ltd. v. Commissioner, Final Order No. 1893/2006 dt. 10-11-2006 in Appeal No. E/647/06, reported in 2007 (78) RLT 508 (CESTAT-Bang.)
(viii) Reliance Industries Ltd. v. Commissioner, Final Order Nos. A/121 & 122/WZB/Ah’bad/07 dt. 29-12-2006 (Tri.-Ahmd.);
(ix) HPCL v. Commissioner, 2007 (ECR) 399 (Tri.-Del.);
(x) ONGC v. Commissioner (order Nos. A/1535-1541/WZB/AHD/08 dated 6-8-2008 in appeals Nos. E/941-947/2006); and
(xi) ONGC & IOCL v. Commissioner [order Nos. A/2587-2589/WZB/AHD/08 dated 26-11-2008 in appeal Nos. E/1438, 1439 & 1341/08 = (T)].
The learned counsel also pointed out that Civil Appeal No. 432 of 2008 filed by the department against the Tribunal’s decision in MRPL case [vide (vii) above] was dismissed on merits by the Supreme Court. According to him, the facts of MRPL case and the present case being similar, the present appeals are only liable to be allowed in view of the Apex Court’s order in C.A. No. 432/2008 ibid. Drawing support from the Supreme Court’s decision on the scope of Article 141 of the Constitution of India in the case of Shenoy & Company & others v. Commercial Tax Officer & Others, (S.C.), Shri Hidayatullah argued that the Apex Court’s order in MRPL case had necessarily to be followed by the Tribunal as binding law on the point in question in the present case. He has also relied on Halsbury’s Laws of England and also P.H. Advani v. Harpal Singh & others, AIR 1975 Bombay 120, in support of his plea that this Bench cannot take any view contrary to earlier decisions of Co-ordinate Benches.
5. The learned JCDR sought to distinguish all the decisions cited by the learned counsel. Quoting from the Supreme Court’s judgment in CCE, Bangalore v. Srikumar Agencies, (S.C.) = (S.C.), he argued that observations of courts were not to be taken out of their context so as to be read as Euclid’s theorems or as statutory provisions. He opined that such observations must be read in the context in which they appeared. According to the learned JCDR, the plea for following the earlier decisions of the Tribunal in the cases of GAIL, HPCL etc. was made without regard to the distinct fact situations obtaining in those cases, which, according to the JCDR, are clearly distinguishable from the facts of the instant case. In GAIL’s case, the claim of ONGC was that, though they were clearing LPG in bulk, the price fixed under APM for sale in cylinders should be made the assessable value in respect of the sale of goods in bulk to OMCs. The JCDR pointed out that there was nothing to indicate that ONGC was receiving from the OMCs a price higher than the price at which LPG in cylinders was sold by the OMCs. In the present case, admittedly, the appellant was selling their product to the OMCs at a price higher than the APM price at which the latter sold the goods in cylinders. In HPCLs cases reported in and 2007 (ECR) 399, the issue was all about recovery of duty under Section 11D of the Central Excise Act and was different from the issue involved in the present case. In HPCLs case reported in and in RILs case, the question considered by the Tribunal was whether the subsidy received from the Government by these manufacturers was includible as “additional consideration” in the assessable value of the products sold at APM price. In HPCLs case reported in and in BPCLs case reported in , the issue was whether the transaction value of the goods sold to other OMCs was to be rejected on the basis of the higher price at which identical goods were sold to dealers. The learned JCDR, thus, sought to distinguish the case on hand from the cases cited by the learned counsel.
6. JCDR admitted that the facts of MRPLs case and those of the instant case were essentially similar. However, he pointed out that the decision in MRPLs case was rendered by the Tribunal merely following the GAIL decision and the HPCL decision [], without regard to the distinct facts of those cases and without any discussion on the real issue involved in the case on hand, i.e., whether the actual price realised by MRPL from their buyers (OMCs), which was indisputably higher than the APM price on which they had paid duty in respect of LPG (domestic) sold in bulk to the OMCs, should be the assessable value being the transaction value as defined under Section 4(3)(d) of the Central Excise Act. The learned JCDR submitted that the observations of the Tribunal in MRPL case were not based on the facts of that case but on two earlier decisions of the Tribunal, which were factually distinguishable. He also submitted that, in MRPL case, the Bench did not consider the crucial amendment to Section 4 of the Central Excise Act, which had come into force with effect from 1-7-2000. The fact that the provision of the old Section 4 for acceptance of value fixed by any other law as assessable value was no more in force was also not considered by the Bench. The JCDR, therefore, argued that it was not correct to follow the Tribunal’s decision in MRPL case as a precedent in the instant case. With reference to para 26 of the Board’s circular dated 30-6-2000, the learned JCDR submitted that the circular clearly reflected the Government’s view that, if the manufacturer was selling the goods to OMCs or any other person at APM price, then that would be the transaction value. According to him, the circular did not mean that, where the manufacturer was selling the goods at a price higher than the APM price, then also the APM price was to be taken as transaction value.
7. Shri B.K. Singh, while acknowledging the fact that the Civil Appeal of the department against the MRPL decision of the Tribunal was dismissed by the Hon’ble Supreme Court, argued that the order passed by the Court was not an authority on the issue agitated before it by the Revenue. In the Civil Appeal, it had been contended by the department that the amended Section 4 of the Central Excise Act was applicable to the facts of MRPL case wherein the transaction value was available in the form of “import parity price” which was actually realized by ONGC from the OMCs for LPG sold in bulk (domestic). The law which was in force during the period relevant to MRPL case demanded assessment of duty on transaction value defined under Section 4(3)(d) of the Act. The learned JCDR argued that, on this issue, the apex court’s order passed sub silentio and, therefore, it was not a precedent to be followed in the present case. The learned JCDR claimed support from Municipal Corporation of Delhi v. Gurnam Kaur [1989] 1 SCC 101 in the context of invoking the rule of sub silentio. In this connection, he also referred to Collector v. Surgichem, (Tribunal) and the Apex Court’s judgment dated 16-2-2001 in Civil Appeal No. 6459 of 1998 [A-ONE Granites v. State of U.P. & others]. In MRPL case, the department had specifically pleaded in their Civil Appeal that the concept of “transaction value” had been brought into effect on 1-7-2000 replacing the concept of “normal (deemed) value” through an amendment of Section 4 of the Central Excise Act. The department had also pleaded that, as per the amended provisions of Section 4, duty of excise was chargeable on the transaction value if the manufacturer and the buyer were not related and the goods were sold for delivery at the time and place of removal and price was the sole consideration for the sale. The department had also specifically pleaded that the facts of GAIL and HPCL cases considered by the Tribunal in MRPL case were significantly different. It was also brought to the notice of the Hon’ble Supreme Court that MRPL had sold their product to OMCs at ex-refinery price and not at APM price and had not received any subsidy from the Government. It was, therefore, contended that MRPL was liable to pay duty on the transaction value, i.e. the actual price realized by them from the buyers. The Hon’ble Supreme Court did not address this plea and, therefore, the issue passed sub silentio. The apex court dismissed the Civil Appeal holding that the case was covered in favour of the assessee by circular No. 563/59/2000-CX. dated 21-12-2000. Referring to the said circular, the learned JCDR submitted that it was for accepting the APM price of LPG packed in cylinder as sale price of the product even when cleared in bulk. That was not the issue in the present case. The issue in the present case was whether the transaction value, i.e. the higher price received by ONGC from the OMCs, should be accepted or the APM price should be accepted for the purpose of assessment of LPG sold in bulk to the OMCs. Therefore, according to the learned JCDR, the principle embodied in the above circular was not applicable to the present case. For this reason also, according to the learned JCDR, the Apex Court’s order in MRPL case is not a precedent for the present case. Contextually, he argued that the order of the Supreme Court should not be interpreted in a manner inconsistent with the provisions of statute. In this connection, he relied on the Apex Court’s judgment in Ravindra Singh v. Phool Singh, (S.C.). In another context, the learned JCDR relied on Commissioner v. Ratan Melting & Wire Industries, (S.C.) = (S.C.) in support of his contention that the aforesaid circular was contrary to statutory provisions and hence non est in law. In the context of discussing the effect of the amendment of Section 4 of the Act, the learned JCDR submitted that a substantial change was decipherable in the replacement of ‘normal value’ by ‘transaction value’. He pointed out that, in the case of Commissioner v. Grasim Industries Ltd., (S.C.), a Division Bench of the Apex Court had referred the question to a Larger Bench.
8. We have given careful consideration to all the submissions. To recapitulate a few essential facts:- The goods in question is LPG sold and cleared in bulk by ONGC from their refinery to OMCs during the period, June, 2002 to December, 2004. The buyers bottled the commodity in cylinders and sold the same to domestic consumers through dealers at “APM price” which was the ex-storage price fixed by OCC, Ministry of Petroleum, Government of India. It was on the basis of this price that ONGC paid CE duty on LPG cleared in bulk to the OMCs under cover of CE invoices. ONGC, however, collected from the OMCs a higher price by issuing commercial invoices in respect of the same goods. The OMCs received compensation [difference between the ex-refinery price paid to ONGC and the ex-storage price (APM price) collected from dealers] from the “Oil Pool Account” maintained by the Ministry of Petroleum. ONGC did not receive any subsidy or compensation from the Government. The issue agitated before us is whether ONGC was liable to pay duty on the ex-refinery price actually collected from the buyers (OMCs) being the “transaction value”.
8.1 Parliament introduced the concept of transaction value replacing the concept of normal price by amending Section 4 of the Central Excise Act w.e.f. 1-7-2000, which was a “fundamental departure” as acknowledged in CBEC’s Circular dated 30-6-2000 cited by counsel. We have seen excerpts from the said Circular in the Tribunal’s judgments in HPCL’s case [] and BPCL’s case [] and the same are reproduced below.
“4. The definition of “transaction value” needs to be carefully taken note of as there is fundamental departure from the erstwhile system of valuation that was essentially based on the concept of ‘Normal Wholesale Price’, even though sales were effected at varying prices to different buyers or class of buyers from factory gate or Depots etc., had to be determined.
5. The new Section 4 essentially seeks to accept different transaction values, which may be charged by the assessee to different customers, for assessment purposes so long as these are based upon purely commercial consideration where buyer and the seller have no relationship and price is the sole consideration for sale. Thus, it enables valuation of goods for excise purposes on value charged as per commercial practices rather than looking for a notionally determined value.”
We also note that the Hon’ble Supreme Court itself was called upon to consider the distinction between ‘normal price’ and ‘transaction value’ in the case of Grasim Industries (vide supra) and that their Lordships referred the following question for consideration by a Larger Bench :
“Whether the concept of “Transaction value” makes any material departure from the deemed normal price concept of the erstwhile Section 4(1)(a) of the Act”.
It appears, the question is yet to be considered by Larger Bench.
8.2 The amended Section 4(3)(d) of the Central Excise Act defines ‘transaction value’ as follows :
“transaction value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of the assessee, by reason of, or in connection with, the sale, whether payable at the time of the sale or at any other time, including, but not limited 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.”
The amended Section 4(l)(a) lays down that the assessable value for payment of duty of excise shall be the transaction value in a case where the goods are sold by the assessee for delivery at the time and place of removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale. This provision of law makes it clear that, for the transaction value (as defined supra) to be reckoned as the assessable value, there are three conditions to be satisfied viz. (i) sale of the goods by the assessee for delivery at the time and place of removal, (ii) the assessee and the buyer not to be related, (iii) the price to be the sole consideration for the sale. In the present case, admittedly, the appellant satisfied all these conditions and, therefore, the assessable value of LPG which was sold in bulk, ex-refinery, to the OMCs should be its ‘transaction value’ as defined under the new Section 4(3)(d) ibid. From the definition, it is clear that the transaction value of excisable goods is the price actually paid or payable for the goods when sold and includes, in addition to such price, any additional consideration which the buyer is liable to pay to, or on behalf of, the assessee by reason of, or in connection with, the sale. In the present case, the amount actually paid by the buyer to ONGC as price of LPG (bulk), ex-refinery, is the one mentioned in the commercial invoice and that must be the transaction value of the goods. Even assuming that the amount “payable” (another term used in the definition of ‘transaction value’) as price of the goods under APM was the price fixed by OCC for LPG packed in cylinders, called “APM price”, it cannot be said that such amount would per se constitute ‘transaction value’. This is because transaction value (as defined) includes, in addition to the amount payable as price, any additional amount which the buyer is liable to pay to the assessee by reason of, or in connection with, the sale. Under the contract of sale between ONGC and every OMC (buyer) in this case, the latter was liable to pay the ex-refinery price (or “import parity price”) which was an amount higher than “APM price”, and the differential amount being additional consideration for the sale would get included in transaction value. Therefore, it cannot be gainsaid that the price actually paid by the OMCs to the appellant is the transaction value as defined under Section 4(3)(d), which is the price mentioned in ONGC’s commercial invoices. The question to be considered is whether the appellant was liable to pay duty based on this transaction value instead of APM price during the period of dispute.
8.3 We note that, in the Civil Appeal filed by the Department before the Apex Court against the Tribunal’s order in MRPL case, a case identical to what has been pleaded before us by the learned JCDR was presented by the Revenue. We have perused the text of the Civil Appeal. The relevant pleadings of the appellant are as follows :-
“It is submitted that M/s. MRPL had raised the actual amount in their Bill but had paid duty on the Subsidized Value. It was also found that they had collected a higher transaction value from their Oil Marketing Companies (i.e. actual cost) whereas they had discharged duty only on the APM price. The oil companies had sold the SKO (PDS-Public Distribution Scheme) and LPG (Domestic) under a subsidized price to the consumer as fixed by the Government. It is further submitted that the Assessee had not received any compensation from the Oil Pool Account. They were recovering the entire transaction value from the Oil Marketing Company.
It is respectfully submitted that the Tribunal failed to appreciate that when the assessee M/s. MRPL were receiving the full compensation value from their buyers, at the time of clearance from their factory gate, the same should be the Assessable Value for payment of duty in terms of Section 4 of the Central Excise Act, 1944. It is therefore respectfully submitted that for the clearances effected directly from the Refineries on or after 6-9-04, the transaction value should be the criteria for payment of duty and accordingly, the demand confirmed by the Commissioner in the impugned Order-in-Original was legally correct and appropriate.
It is respectfully submitted that by Finance Act, 2000, a new Section 4 had been brought in with effect from 1-7-2000 according to which concept of Assessable Value had been replaced with that of “Transaction Value”. As per the new Section 4, if the manufacturer and the buyer are not related and the goods are sold by the assessee for delivery at the time and place of removal and the price is the sole consideration for the sale, then duty is chargeable on the Transaction Value. In the present case M/s. MRPL and the Oil Marketing Companies are not related and the products are sold at factory gate and the price is the sole consideration for the sale, so the Assessable Value shown in the Invoice should be taken as the Transaction Value.
It is respectfully submitted that in the present case M/s. MRPL had sold SKO/LPG at the refinery gate to various Oil Companies, which were not related to it, the price was the sole consideration and hence as per Section 4 the selling price should be considered as the Transaction Value. It is therefore submitted that the price at which M/s. MRPL sold the products to the Oil Marketing Companies should be considered as the transaction value as per Section 4”.
The Apex Court’s order in the above appeal reads as below :
“Having heard learned counsel on both sides, we are of the view that the issue involved in this case is squarely covered by the Circular issued by Central Board of Excise & Customs, New Delhi, bearing No. 563/59/2000-CX. dated 21st December, 2000 (at page 67 of Volume-I) which circular is binding on the Department.
Hence, this Civil Appeal stands dismissed with no order as to costs.”
8.4 The Board’s Circular dated 21-12-2000 referred to in the above order of the Hon’ble Supreme Court in MRPL’s case had outlined the dispute between the Department and LPG producers regarding the valuation of LPG cleared in bulk from petroleum refineries/gas extraction plants to OMCs for bottling in cylinders for sale to domestic consumers. It also referred pointedly to the Tribunal’s Larger Bench decision [Order No. 1528-1538/99-A dated 27-10-99] in GAIL’s case reported in 2000 (36) RLT 611 = wherein it had been held that the assessable value of LPG (bulk) sold to OMCs for bottling for domestic consumption should be the value fixed by OCC for LPG packed in cylinders for distribution to domestic consumers. The Circular also explained the circumstances in which the Civil Appeal filed by the Department in GAILs case came to be withdrawn. Paragraphs 4, 5 and 6 of the above Circular are reproduced below:
“4 As the view taken by Tribunal did not appear to be strictly in accordance with the provisions of Sec. 4, the Department filed a Civil Appeal in the Supreme Court, after obtaining the clearance from the Committee on Disputes and also after obtaining the opinion of the learned Attorney General. The Hon’ble Supreme Court, however, during the course of hearing, desired that the matter should be resolved by the two Departments i.e. Department of Revenue and Ministry of Petroleum. The matter was accordingly recently discussed first in the Board and thereafter in a meeting held between the representatives of Department of Revenue and Department of Petroleum & Natural Gas. The various aspects of the dispute were examined and it was inter alia noted that the product was being marketed under administered price regime and the producers/marketing oil companies had no choice but to sell the products at prices fixed by OCC. It was also a fact that LPG whether it was cleared in packed condition from refinery or when packed in an outside bottling unit, was sold at same price to consumers as fixed by OCC. It was felt, therefore, that it may not be appropriate to insist on Supreme Court’s ruling as to whether as per Section 4 higher value (and resultant excise duty) in second category of cases is legally justified. Both the Departments agreed that even if Supreme Court agreed with revenue view point the Oil Companies will not be able to recover any duty. After discussions with representatives of Ministry of Petroleum and considering Hon’ble Apex Court direction to resolve the dispute essentially between Govt. and PSUs, it has been decided by the Govt. that in the special circumstances of production and marketing of LPG with Administered Price regime, we may accept the order of the CEGAT vide their order No. 1528 to 1538/99-A dated 27-10-1999 in the case of M/s. Gas Authority of India Ltd. v. Commissioner of Central Excise, Vadodara, subject to the condition that the refineries/oil companies who have already paid up the demands raised by the Central Excise Department and consequently may be entitled for refund will not be paid any interest on the refund amount held admissible subject to the principle of unjust enrichment being satisfied. It has also been agreed that the oil companies will scrutinize their records and wherever LPG has been cleared at lower price meant for LPG packed (Domestic) but actually sold in bulk, they will forthwith pay differential duty on such LPG bulk.
5. Department has moved Supreme Court for withdrawal of its appeal based upon the above decision.
6. The above principle agreed in the particular CEGAT judgment on the issue of LPG valuation for excise duty purposes, will apply also in all other disputes on same issue including those at show cause notice stage or where assessment of LPG were being made on provisional basis as per Board’s instruction, or other reasons pending settlement of the issue before CEGAT. These cases may be decided accordingly.”
Thus, what was reflected in the Board’s Circular mainly was an agreement between Department of Revenue and Ministry of Petroleum to accept the view taken by the Tribunal in GAILs case. The Circular also held that the principle would also apply “in all other disputes on same issue”. In this connection, it is pertinent to note that the period of dispute in GAILs case was prior to 1-7-2000 when the “deemed normal price” concept of the erstwhile Section 4(1)(a) of the Act was in force. Clause (ii) of the proviso to the said Section 4(1)(a) read as follows :
(ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, not withstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be normal price thereof;” (underlining added)
The “APM price” fixed by OCC and considered by the Tribunal in GAILs case was seemingly covered by the above proviso to the erstwhile Section 4(1)(a) of the Act. In other words, under the pre-1-7-2000 provisions of Section 4, there was room for accommodating “APM price” as assessable value. The issue dealt with by the Tribunal in the above case and discussed by the Board in the above Circular should be viewed in this perspective. In the regime of “transaction value”, post-1-7-2000, there is no question of ‘deeming’ the value of excisable goods and that is why provisions like what was contained in the aforesaid proviso to the erstwhile Section 4(l)(a) are conspicuously absent in the amended Section 4 of the Act. Therefore, in our view, the Board’s Circular, which did not deal with any valuation dispute for post-1-7-2000 period, is not generally applicable to all disputes regarding valuation of LPG (bulk) sold by its manufacturers to OMCs, post-1-7-2000, for further sale in packed form for domestic consumption. In MRPLs case, however, it was made applicable because, apparently, the Department failed to persuade the Hon’ble Supreme Court to consider the different complexion of the issue for post-1-7-2000 period vide the Court’s order in Civil Appeal No. 432 of 2008 (supra). Their lordships also observed that the Circular was binding on the Revenue, which, in our view, meant that the agreement between the Department of Revenue and the Ministry of Petroleum to accept the Tribunal’s decision in GAILs case on the pre-1-7-2000 valuation issue was binding on the Department.
8.5 As we have already noted, the real valuation issue with reference to the amended provisions of Section 4 of the Act for the period of dispute (post-1-7-2000) which was raised in the Civil Appeal was not addressed in MRPLs case. Therefore the Hon’ble Supreme Court’s order can be said to have passed sub silentio in respect of the said issue. As to what would constitute sub silentio, we may quote from “Salmond on Jurisprudence” by Fitzgerald [vide (Bom.)] :
“A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio.”
In MRPLs case, the Apex Court decided in favour of the assessee on the basis of the agreement between the Department of Revenue and the Ministry of Petroleum as disclosed in the Board’s Circular dated 21-12-2000. The substantive issue as to what should be the assessable value of LPG (bulk) sold by MRPL to the OMCs during the relevant period post-1-7-2000 - whether it should be the transaction value as per the law made by Parliament or the lower price fixed by Executive for LPG (packed) meant for domestic consumption - was not argued before, or considered by, the court. It, therefore, passed sub silentio as rightly submitted by the learned JCDR. We also note that the rule of sub silentio was applied in the cases of Surgichem (supra) and A-ONE Granites (supra). In the case of A-ONE Granites, the Hon'ble Supreme Court also held that a judgment which passed sub silentio was not a binding authority on the point under Article 141 of the Constitution. We quote from the said case :-
“Precedents sub silentio and without argument are of no moment. This rule has ever since been followed.
In State of UP. & Anr. v. Synthetics and Chemicals Ltd. & Anr., (1991) 4 SCC 139, reiterating the same view, this Court laid down that such a decision cannot be deemed to be a law declared to have binding effect as is contemplated by Article 141 of the Constitution of India and observed thus :
“A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141”.
In the case of Arnit Das v. State of Bihar, 2000 (5) SCC 488, while examining the binding effect of such a decision, this Court observed thus :-
“A decision not expressed, not accompanied by reasons and not proceeding on a conscious consideration of an issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. That which has escaped in the judgment is not the ratio decidendi. This is the rule of sub silentio, in the technical sense when a particular point of law was not consciously determined.”
Therefore, although the facts of the present case are similar to those of MRPLs case, the apex court’s order in MRPLs case having been passed sub silentio in respect of the substantive valuation issue cannot, in our view, be followed as a binding precedent under Article 141 of the Constitution for the present case. In this scenario, the Hon’ble Supreme Court’s decision in Shenoy & Co case, cited by the learned counsel, does not appear to be of any aid to the appellant.
8.6 Relying on Halsbury’s Laws of England etc., the learned counsel has urged that this Bench follow the earlier decisions of Co-ordinate Benches. But, in none of the cases other than MRPLs case had any Co-ordinate Bench been called upon to address the valuation issue which we have been examining in the present case. As rightly pointed out by the learned JCDR, the question considered in most of those cases was whether the subsidy received by the assessees (Oil Companies) from the Oil Pool Account was liable to be included in the assessable value of the goods. Some of those cases like GAILs case and HPCL [] involved valuation disputes pertaining to periods prior to 1-7-2000. We are, by and large, impressed with the manner in which all those cases were distinguished from the instant case by the learned JCDR. As observed by the Hon’ble Supreme Court in the case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [AIR 1980 SC 674], “A case is decided on its particular conspectus of facts. When the facts materially vary, the law selectively shifts its focus”. The following observations of the Hon’ble Supreme Court in Commissioner v. Srikumar Agencies [ (S.C.) = (S.C.) are also quite apposite to this context: “Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.” The significant factual difference between the present case and the cases of GAIL, HPCL, BPCL and IOCL referred to by the learned Advocate is that, in the instant case, the assessee did not receive any compensation or subsidy from the Oil Pool Account and they recovered ex-refinery price from the buyers (OMCs) by issuing them commercial invoices in respect of LPG (bulk) on which duty was paid on a lesser value (APM price) under statutory invoices. On account of this factual difference, the decisions rendered by Co-ordinate Benches in different Oil Companies’ cases cited by the learned counsel cannot be followed by us in deciding the present case. We have not found anything in Halsbury’s Laws of England to be in support of the learned counsel in this context.
8.7 There was a feeble suggestion at the bar that the difference between ex-refinery price recovered by ONGC from their buyers (OMCs) and the ex-storage price (APM price) on which duty was paid by ONGC be reckoned as a subsidy paid by the Government to ONGC through the OMCs. This plea is not supported by documentary evidence. Even if it be assumed that ONGC received subsidy from Government indirectly, the amount could only be included in the assessable value of the goods sold by ONGC to the OMCs as per the ratio of the Hon’ble Supreme Court’s decision in Commissioner v. Mazagon Dock Ltd. [ (S.C.)]. In the said case, the respondent had manufactured and supplied jack-up rigs to ONGC under a contract in the year 1988. The respondent was entitled, under a policy of the Government, to receive subsidy to the extent of 20% from Government and 10% from ONGC. The Revenue wanted to include the entire subsidy (30%) in the assessable value of the goods. The Apex Court held as under:
“In our view the subsidy of 20% from the Government cannot be said to be additional consideration as it is not received from the buyer either directly or indirectly. Therefore, that would not be includable in the price of the goods for the purposes of excise. However, it is an admitted position that 10% subsidy was received by the Respondent from the buyer. It is therefore additional consideration received by the Respondent from the buyer. The fact that it is received under a policy of the Government does not detract from the above position. It is therefore includable.”
8.8 Though we could have decided this case finally on the basis of the findings we have recorded hereinabove, we would rather like to follow judicial discipline by causing the matter to be placed before the Hon’ble President for constitution of Larger Bench to consider and decide on the substantive issue, on which the view taken by us happens to be contrary to the view taken by a co-ordinate Bench in MRPLs case. The issue to be considered by Larger Bench is framed as follows :-
“Whether a manufacturer of LPG selling the product in bulk, post-1-7-2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price (APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f. 1-7-2000.”
9. The Registry is directed to place the records before the Hon’ble President.
(Pronounced in Court on 24-9-2010)