Demand against Oil PSUs under Sec.11D of Central Excise Act for differential duty – CBEC Directions
PSU Oil Companies are favourite whipping boys for Revenue hungry Commissioners. Because they pay huge Revenues. I was told by an official of the Kochi refinery that theirs was the only major manufacturing unit in Kerala and they were the target for all the wings of Revenue. Most of the demands were against them; most of the cases were against them; they contributed most for the audit paras and they had to provide the maximum guest houses and vehicles for the departmental officers.
Many Commissioners found the Oil Companies good hunting ground for demanding hundreds of Crores of differential duty collected by the Oil Companies but not deposited with the government. Section 11D gave the commissioners a great opportunity to write in their resumes that they confirmed duties amounting to hundreds of Crores. The great Vijay kelkar who was Petro secretary even wrote to the Finance secretary that these Commissioners had to be reigned and such huge silly demands should be avoided.
The Oil Company Dealers get their products from the refineries and also import them. These are all mixed in the tanks and cleared to bunks at a price fixed and later the prices may be changed and these depots collect excess amounts. But the excess amount has nothing to do with excise and if there is an excess, it goes into the Oil Pool Account.
But the Excise-man is interested in his pound of flesh and demands have been issued to collect this amount under Section 11D of the Central Excise Act.
Revenue has not won a single case in Tribunal or above.
Tribunal had held that section 11D is applicable only when the excess duty is collected by a person who is liable to pay duty and the duty is collected as representing excise duty.
Since the Depots of the Oil companies are not liable to pay duty and they did not collect these amounts as representing excise duty, they were held to be not liable to pay the amounts under section 11D.
In 2008, Section 11D had been amended to include ‘every person' who has collected any amount in excess of the duty, within the ambit of section 11D. Now a dealer would also be covered.
Fine, but the Oil Companies' depots do not collect any amount as representing excise duty. In fact their invoices do not mention excise duty at all.
But the Board seems to be convinced that there is still hope and these amounts can be retrieved.
Board had sought the opinion of the AG who had very correctly opined:
(a) the extra amount should have been collected as representing duty of excise;
(b) The price revision took place upon revision of administrated price as opposed to revision in excise duty, presumably the extra amount collected from buyer could not have been collected as representing excise duty. If that is so, Section 11D would not be attracted.
(c) Tribunal in the case of Bharat Petroleum Corporation Ltd. vs. CCE, Meerut 2002 (140) ELT 646 (T) has correctly held that no demand could be raised against the appellant under section 11D as it was not the manufacturer of the concerned goods.
At a meeting of the Board held on 23.07.08, Board decided that by virtue of amendment in Section 11D vide Finance Act, 2008 the differential duty, if any collected by ‘a person' would be recoverable under section 11D subject to the condition that such extra amount has been collected as duty of excise. Hence, as regards cases post amendment to section 11D of Central Excise Act, each case should be examined on merits and a view taken based on facts thereof.
Board wanted CCs and to bring this to the notice of field formations under their charge for needful action. And Board seeks a report.
Oil is slippery even for Revenue.
CBEC's Letter F.No.6 / 9A /2008- CX1 ; dated: February 27 2009