By TIOL News Service

BANGALORE, APRIL 20, 2017: DURING the disputed period, appellant effected sale of Poly Iso Butane (PIB) to various Oil Marketing Companies (OMCs) pursuant to competitive bidding procedure in which various suppliers including appellant took part.

The Department disputed the transaction value between appellant and BPCL on the ground that both are related parties as per Section 4 of the Act. After process of adjudication, Commissioner confirmed demand of differential excise duty along interest and penalty.

Appellant is before the CESTAT and challenges the impugned order on merits as well as revenue neutrality and limitation.  Following case laws are also cited in support viz. Bharti Telecom Ltd - 2008-TIOL-124-SC-CX and Universal Luggage Mfg. Co. Ltd - 2005-TIOL-152-SC-CX. Revenue is also in appeal seeking imposition of equivalent penalty u/s 11AC and relies on the apex court decision in Dharamendra Textile Processors: - 2008- TIOL -192-SC-CX-LB .

After considering the submissions made by both sides, the Bench observed-

+ The various public sector units including OMCs are mandated by the Central Vigilance Commissioner to adopt the open tender procedure for procurement of goods. Such procedure is mandated with the objective of transparency in procurement and the possibility of lowest price discovery by open competition. Since the price of procurement of PIB for supply to BPCL has been decided by such an open tender procedure, it cannot be said that the transaction value has been influenced by the relationship between KRL and BPCL.

+ Further, there are also instances where KRL has supplied the same product at lesser prices than that to BPCL. It is also noted that the price of the product is also volatile as in the case of most petroleum products whose prices are ultimately depending on the price of crude oil. In the above circumstances, it cannot be said that the price at which KRL has supplied to BPCL is a preferential price influenced because of the special relationship between KRL and BPCL.

+ Revenue has not brought on record any evidence to indicate that price is not the sole consideration for sale of product to BPCL .

+ Transaction value is acceptable during disputed period in respect of clearances made to BPCL.

The assessee appeal was allowed and the Revenue appeal was dismissed.

(See 2017-TIOL-1319-CESTAT-BANG)