Excise Duty payment on LPG Bulk Movements on stock transfer to Bottling Plants.- Supreme Court confirms that Board Circulars are binding on the Department
The CBEC had vide Circular No. 563/59/2000-CX, dated 21-12-2000 clarified that,
3. The Commissioners of Central Excise, Vadodara, Indore and Surat had raised the demands against different parties (IOC/GAIL/ONGC) in their jurisdiction for short payment of duty for they had cleared the LPG in bulk but paid the duty at the price fixed by OCC for LPG packed meant for domestic purposes. These demands were also duly confirmed holding inter alia that duty was chargeable on value applicable to the form of LPG at the time of clearance from the factory. Against these orders of Commissioners of Central Excise, Vadodara , Indore & Surat , the IOC, GAIL and ONGC had filed appeals after taking Committee on Disputes clearance in the Tribunal. The Tribunal allowed their appeals taking notice of several considerations put forward by the appellants including the intentions behind the conversion from specific to ad valorem duty, various aspects of administrative price regime applicable to certain bulk Petroleum products including LPG, the instructions by a Circular issued by Ministry of Petroleum as to how price should be calculated and duty paid for LPG when it was cleared for packing in bottling units etc. Tribunal ultimately held that the assessable value for the LPG cleared in bulk by the appellants, for bottling for domestic consumption, should be assessed at the lower value fixed by OCC for that category. [Please see Tribunal judgment reported in 2000 (36) RLT 611(T)].
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.
In spite of this clear clarification, the Department again took the matter to the Supreme Court.
The Supreme Court in CIVIL APPEAL NO.432 OF 2008, held,
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.