By TIOL News Service

CHENNAI, DECEMBER 12, 2018: THE appellant, operating under the warehousing provisions, stock transfer petroleum products like High Speed Diesel Oil (HSD) and Motor Spirit (MS) to their Depots at Renigunta, Neyveli and Pondicherry. The actual sale to the customers takes place from these depots only by adopting the assessable value, prevailing from time to time, with reference to the rate circular received from their Head Office.

The CE duty on both these products were increased on 01.03.2001 and on 12.01.2002.

Alleging that the appellant, in respect of the stocks held at their depots (Pondicherry depot did not have any stock on these dates), had collected the enhanced CE duties from their customers but not deposited with the Central government, a SCN dated 19.02.2004 came to be issued for recovery in terms of section 11D of the CEA, 1944 and consequently the Assistant Commissioner directed the appellant to pay a sum of Rs.12,71,643/- (by accepting the computation made by the appellant) u/s 11D of the Central Excise Act. No penalty was imposed.

The original authority also observed that the appellant had not denied or disputed, in the show cause notice, collection of excise duty, at the revised rate of Central Excise duty, at the time of sale of stock of petroleum products lying as on the date of revision of excise duty rate.

Both, the assessee and Revenue went in appeal before the Commissioner (Appeals), Chennai, who while rejecting the appeal of the assessee accepted the Revenue appeal and enhanced the demand to Rs.15,20,749/-.

The assessee, thereafter, filed an appeal before the CESTAT but the same was rejected. Please see Final Order No.40991/2017 dated 14.06.2017 =  2017-TIOL-3648-CESTAT-MAD.

The assessee has, therefore, challenged this order before the Madras High Court.

It is submitted that Renigunta and Neyveli Depots are independent Depots, not functioning under the appellant's administrative control or direction of the appellant Corporation, and they are lying outside the jurisdiction of Chennai; that notice ought to have been issued to the respective offices, wherein the goods were lying, and not terminal, because the goods were cleared from the appellant's terminal, by paying appropriate duty, as per the provisions of the Valuation Rules.

The High Court extracted s.11D of the CEA, 1944 and inter alia observed–

+ The actual sale to the customers takes place from these depots only by adopting the assessable value prevailing from time to time with reference to their rate circular received from their Head Office. Whenever there is upward revision of rates, the amount is collected from the customers, by the Depots. The additional amount recovered, has to be considered as extra excise duty, which is liable to be paid under Section 11D of the Act.

+ The appellant cannot be permitted to pay duty, on the rates, prevailing on the date of stock transfer, ignoring the upward revision of rates, which is the price, at which the products to be sold, to the customer.

+ Arguments of the appellant that they have no control over the Depots, is no answer to avoid the demand, because, it is the duty of the appellant to maintain the records of the amounts received from the Depots, from the sale of High Speed Diesel and Motor Spirit.

+ Amount that are received from the Depots would include the excise duty, collected by the Depots, at the revised rate. The calculation are accounted, against the appellant. Therefore, the appellant alone is liable to pay the differential excise duty, recovered, in terms of Section 11D of the Central Excise Act.

+ It is not disputed that in the present case there is an upward revision of duty between the date of stock transfer and the date of sale. The difference between the amount, collected by the depot invoice and the value declared for duty purpose, at the time of clearance from the warehouse, has to be treated as an excess excise duty, which has to be paid to the Central Government, under Section 11D of the Act.

+ Appellant is the consignor of the goods and the goods are removed from the terminal of the appellant to the depots only on stock transfer. They being the consignors, are responsible, for accounting to the authorities, for payment of excise duty. Admittedly, there is no sale between the terminal and depots. It is, therefore, the responsibility of the consignor to produce the sale record on stock transfer of goods, and pay the excess amount of excise duty collected due to upward revision of rates.

Holding that the appeal is devoid of merits, the same was dismissed.

(See 2018-TIOL-2571-HC-MAD-CX)