By TIOL News Service

MUMBAI, JAN 04, 2014: THIS is the second round litigation. When the case came up earlier, the Tribunal had vide Order dated 16/8/2010 remanded the case back to the adjudicating authority with the specific directions.

The adjudicating authority has once again confirmed the demand and hence the appellant is before the CESTAT.

The appellant is manufacturer of petroleum products including motor spirit (petrol), High speed diesel oil etc. During the period of dispute (July 2005 to February 2008), MS and HSD manufactured in their refinery were marketed to various wholesale dealers through their depots at Wadala, Vashi and Loni. The practice was to convey the petroleum products from the refinery through a pipeline system, viz. Mumbai-Pune Pipeline (MPPL), to the said depots, wherefrom the goods were sold to the wholesale customers.

The appellant started using new software from 1.7.2005 and gave up provisional assessments that was being resorted to earlier. Accordingly, during the period from July 2005 to February 2008, the appellant computed the amount of duty to be paid on a consignment of a particular petroleum product removed from their refinery on a given date on the basis of "normal transaction value" of the "greatest aggregate quantity" of such goods depotwise. While doing so, appellant applied rule 7 of the Valuation Rules, 2000.

The department was of the view that the appellant had adopted the incorrect transaction value of MS and HSD by not considering the transaction value at which the "greatest aggregate quantity" of identical goods was sold on a particular day "across all the depots taken as a unit". Inasmuch as according to the department, HPCL should have taken the assessable value of the highest aggregate quantity sold, taking into consideration all the depots together at about the same time rather than to take the value of highest aggregate quantity sold at a particular depot over a period of time.

Consequently, SCN followed and the proceedings culminated in confirmation of demand of Rs.10.79 Crores with penalties and interest and which as mentioned is the second round of proceedings.

Before the CESTAT the appellant submitted that the issue involved has been clarified by the Board vide Circular 251/85/96 dated 14/10/1996 and again vide Circular 354/81/2000-TRU dated 30/06/2000 and in view of the same the valuation done by them is proper in law.

The Revenue representative justified the order passed by the adjudicating authority and laid emphasis on the findings of the order wherein after considering the meaning of the term "aggregate quantity" and the fact that aggregate means plural and not singular, it was concluded that the values prevalent in all depots should be taken together to arrive at the aggregate value of all the quantities sold on the day of removal and the value prevalent at a particular depot would not constitute aggregate quantity.

The Bench adverted to the instructions of the Board issued in the year 1996 & 2000 and observed -

+ The Board Circular clarifies that when the goods are sold from different depots what is to be taken is only the value at a particular depot from where the goods are ultimately going to be sold and not the values prevalent at other depots.

+ The new section4 introduced form 01/07/2000 envisages that the value has to be determined for each removal of excisable goods. In other words, the new Section 4 envisages the possibility of the goods being sold at different values to different places and to different customers and each of such values were acceptable for the purpose of assessment of duty, so long as the other conditions prescribed therein are satisfied.

+ If the Revenue's contention is accepted, this object of multiple transaction values would get defeated if the value of the aggregate quantity of goods sold from all the depots are taken into account for arriving at the value. On a given day, then there would be only one value irrespective of the fact that the goods are removed from different refineries and sold from different different depots. Such an interpretation of law, in our view defeats the purpose and object of new Section 4 which to levy excise duty on transaction value for each removal.

+ The expressions of "such goods" and "such other place" (in rule 7) are significant. "such goods" refers to goods of the same kind and quality and "such other place" means the place from which the goods would be ultimately sold on removal from the factory. In other words if the goods are to be sold after removal from the factory at Mumbai through the depot at Ahmedabad, it is the price prevailing at Ahmedabad at that particular time which would be relevant for the purpose of determination of assessable value for the goods cleared at Mumbai factory at a given date. If we take the value of the aggregate quantity of goods from all the depots throughout the country, the expression "such other place" loses its meaning and significance.

+ It is a settled position of law that while interpreting no word should be rendered redundant or surplus. If the view taken by the adjudicating authority is accepted, it would result in an absurd situation as it would render the word "such goods" and "such other places" redundant.

In fine, the order of the adjudicating authority was set aside and the appeal was allowed.

(See 2014-TIOL-20-CESTAT-MUM)