The Chennai bench of Customs Excise and Services Tax Appellate Tribunal (CESTAT) granted relief to the Indian Oil Corporation Limited (IOCL).
The bench ruled that even though there is a difference of price between sale made through OMC on depot and in case of sale made to OMC even at lower price, the same has been held under Section 4(1)(a) of the Central Excise Act, 1944 as transaction value and the demand of duty has been dropped.
The fact is that, earlier the petroleum product was based on Administered Pricing Mechanism (APM) however, Government of India, Ministry of Petroleum and Natural Gas (MOP & NG) passed a resolution for phase wise dismantling of Administered Pricing Mechanism of petroleum products and full deregulation was to be placed in 2002.
As per resolution notified in the gazette vide No. 224 dated 21.11.1997. MOP & NG advises Oil Marketing Companies (OMCs) to enter into an Memorandum of Understanding (MOU) to ensure availability of petroleum products throughout the country at a uniform price so that consumers who are far away from refinery locations are not charged unreasonably higher prices as compared to consumers in non-refinery locations.
Oil Marketing Companies entered into MOU to ensure that consumer price of petroleum products is maintained on a uniform basis throughout the country and there is no disparity in price charged by OMC to the end customers at any given location.
Two show cause notices, first in December 2003 and other in May 2004. It was for the period from June 2002 to March 2003 and from April 2003 to December 2003 respectively were issued to the respondent. The adjudicating authority decided all the show cause notices holding in favour of the respondent.
The appellant’s (revenue) counsel submitted that the respondents were clearing goods to their own unit as well as to HPCL, BPCL and IBP. There is no transaction value available in terms of Section 4(1)(a) of the Central Excise Act as there is only exchange of product/goods and charging of agreed price from each other for such product.
Further asserted that the agreed price charged on the bartered basis does not represent the transaction value under Section 4 of the Central Excise Act, 1944.
Conversely, the respondent, IOCL submitted that the commissioner has passed the impugned order after taking stock of all the facts and settled legal position on the identical issue therefore, there is no error in the impugned order hence the same may be upheld.
He strongly submitted that even though revenue’s appeals are pending before the Supreme Court, this appeal being very old of 2005 cannot be kept pending therefore, and may be taken up for disposal.
The panel of Ramesh Nair and C L Mahar observed that there is no infirmity in the impugned order hence, the same is upheld. Additionally the tribunal stated that there is no stay in none of the appeals of the revenue before supreme court. Thus took up the appeal for disposal.
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