By TIOL News Service

MUMBAI, JULY 28, 2014: THIS is a Revenue appeal.

The Commissioner (A) had set aside the order of the adjudicating authority and accepted the assessable value declared by the appellant based on the transaction value with the Oil Marketing Companies (OMC) as per the Memorandum of Understanding (MOU) reached based on the direction of the Government and also by holding that appellant and other oil marketing companies are not related persons and even if they are considered as inter-connected undertaking, the transaction value would prevail.

The Revenue representative submitted before the CESTAT that in this case the appellant had sold Air Turbine Fuel (ATF) to OMCs for a value based on Import Parity price. However, in respect of the same goods sold to others, M/s IOCL had been discharging duty liability on a higher price. Therefore, in respect of ATF sold to OMCs, the same price should be adopted, inasmuch as the sale to OMC is governed by a consideration other than price in view of the mutuality of assistance to be provided by the OMCs amongst themselves. Reliance is placed on the decision in Bharat Petroleum Corporation Ltd. 2009-TIOL-1850-CESTAT-MUM, wherein it was held that reciprocal arrangement between the OMCs is a factor influencing the price and, therefore, the sale price of the goods to OMCs could not be considered as a sole consideration for sale and the sale price to independent buyers should have been adopted for the discharge of excise duty.

The respondent submitted that an identical issue has been decided in the cases of HPCL 2006-TIOL-1776-CESTAT-MUM (affirmed by the Apex Court)and M/s Kochi Refineries Ltd. – 2011-TIOL-276-CESTAT-BANG wherein the goods were cleared to OMC based on Import Parity Price and the Tribunal held that the same can be considered as assessable value.

The Bench observed –

"4.1 In particular, we have noted that para 19 of the BCPL case order relied upon by the Revenue, it has been held that IPP based price cannot be considered as transaction value as it was an artificially fixed notional value. In such an agreement, price was definitely not the sole consideration for sale. It is based on this reasoning, it was held in the BPCL case that sale price to OMC cannot be accepted as sole consideration for sale. However, we find that the reasoning adopted is flawed as Import Parity Price is not an artificially fixed price. It is an actual price at the time and place of import which is also place for the sales effected by the Refinery or OMC to another OMC. To say that such a price is an artificially fixed notional value is completely contrary to facts. Import price cannot be influenced by the marketing companies situated in India. Therefore, there is a major flaw in the reasoning adopted in the order relied upon by the Revenue. On the contrary, in the orders relied upon by the learned Counsel, it has been clearly held that import price agreed between one OMC and another based on the MOU reached between them can be considered as a transaction value and such a finding was also be upheld by the Hon’ble Apex Court in the case of HPCL (supra). This order prevails over all other decisions."

Holding that there is no merit in the appeal filed by the Revenue, the same was dismissed.

(See 2014-TIOL-1352-CESTAT-MUM)