(A) Central Excise Act (1 of 1944) , S.4— Excise duty – Demand for – Legality – Real consideration for MOU was to ensure an uninterrupted supply to all the OMCs at various places in India – Price fixed under the MOU was not sole consideration for the sale by one OMC to the other – S.4 (1) (a) of Act of 1944 was not applicable – Computation and demand of excise duty was erroneous since price was not the sole consideration for sale.
In the instant case , MOU was signed by OMCs to sell and purchase petroleum products among themselves at the Import Parity Price (IPP). The MOU aimed to ensure smooth supply and distribution, avoid disruptions, and save transportation costs. Show-cause notices were issued to OMCs, proposing to calculate excise duty based on the price sold to dealers, not the IPP.
Held, where price was not the sole consideration for sale, clause (a) of Section 4(1) would not apply.
For applicability of clause (a) of Section 4(1), the following conditions must be fulfilled: a. The assessee sells the goods for delivery at time and place of the removal; b. The assessee and the buyer are not related; and c. The price is the sole consideration for the sale. Only if all three conditions are fulfilled, the value of the goods for the purpose of computation of excise duty will be the transaction value. In a given case, if it is not proved that the price was the sole consideration for sale, clause (a) of Section 4(1) would not apply. In that case, clause (b) of Section 4(1) would apply.
Object of the MOU was not to sell petroleum products on a commercial basis to other OMCs. The arrangement reflected from the MOU was essentially for ensuring that every OMC gets smooth and uninterrupted supply all over India, irrespective of whether an OMC has a refinery or otherwise in a particular part of India. Thus, real consideration for the MOU was to ensure an uninterrupted supply to all the OMCs at various places in India. Price fixed under MOU was not the sole consideration for sale.
(B) Central Excise Act (1 of 1944) , S.11A(1), S.11AC— Demand for excise duty – Extended period of limitation – Applicability – Revenue had invoked extended period of limitation, claiming that contents of MOU were suppressed – Department was already aware of MOU before notice was issued, especially since same was referenced in decision of Tribunal – There was no allegation of misrepresentation regarding pricing – Neither ground of suppression of MOU nor of misrepresentation was substantiated – There was no allegation made by Revenue of fraud, collusion or wilful mis-statement on the part of appellant – Invoking extended period of limitation and imposition of penalty was illegal
