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OFFICE OF THE
COMMISSIONER OF CUSTOMS, |
PUBLIC
NOTICE NO. 79 /2001
Sub: Excise Duty payment on LPG Bulk Movements
on stock transfer to
Bottling Plants.
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Govt. of India, Min. of Finance, Dept. of
Revenue, New Delhi, Circular No.563/59/2000-CX., vide F.No.06/02/1998-CX.1
dated 21.12.2000, is reproduced below for the guidance of the.
C11/22/2001-AP(PORT) (T.S. JAYACHANDAR)
CUSTOM HOUSE, CHENNAI-1. ASSTT. COMMR. OF CUSTOMS (APPG.)
DATE : 23.04.2001
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CIRCULAR
NO.563/59/2000-CX
F.NO.06/02/1998-CX.1 DATED
21.12.2000
In relation to production and marketing of LPG (Liquified
Petroleum Gas) in packed form for Domestic use, disputes have been persisting
for quite some time between the Department and the assesses as to the price to
be adopted for assessment purposes. L.P.G. is obtained in Petroleum Refinery or
in Gas Extraction Plant of oil fractionators, and the marketing companies in
the public sector handle the supply and distribution of LPG in packed cylinders
for domestic consumers and also in bulk or in packed cylinders for industrial
consumers. Major part of the LPG is not bottled in cylinders in the premises
where these are produced and the same is removed in bulk form to various
bottling plants. The Oil Co-ordination Committee (OCC) has been fixing from
time to time different prices for LPG bulk and the LPG packed (domestic or
industrial which is meant for domestic or industrial supply. The price for LPG
bulk is always higher than the price for LPG packed (domestic). As far as LPG
cleared in packed form (generally in cylinders) from the refinery/extraction
plant itself is concerned, these were assessed to duty on the price fixed by
the OCC for LPG (packed domestic or industrial, as the case may be) and no
disputes / difficulties arose in these cases. Similarly for LPG bulk cleared
from the refinery/extraction plant for industrial users, duty was being charged
and paid at the higher price fixed for LPG bulk. Difference of opinion however
arose between the Department of Revenue and the Oil Companies/Extraction Plants
about value to be taken for assessment purposes in respect of LPG cleared in
bulk, but meant for packing in cylinders in separate bottling units for
domestic use subsequently. The Audit and the Department took the view that as
per section 4 of the Central Excise Act, the duty has to be charged on the
goods in the form in which they are cleared at the time and place of
production. The OCC had fixed the price both for packed LPG for domestic
purpose and the bulk LPG, and since the goods were cleared in bulk from the
factory (i.e., refineries/extraction plants), they had to discharge duty at the
prices fixed for the LPG in bulk.
2.
The refineries/extraction plants on the other hand
contended that the sale of the LPG is governed by the prices fixed by the OCC
under the guidelines fixed by Ministry of Petroleum and Natural Gas. The LPG
cleared in bulk form the factory and packed into cylinders subsequently in
bottling units is sold only at the lower price for packed LPG for domestic use
as fixed by the OCC. Therefore, they should not be asked to discharge duty
liability on the price fixed for the bulk, when they were actually selling the
L.P.G. after clearance and packing in a bottling unit (though in an outside
premises), at lower price as per administered price regime and collecting duty
from customers accordingly.
3.
The Commissioners of Central Excise, Vadodara,
Indore and Surat had raised the demands against different parties
(IOC/GAIL/ONGC) in their jurisdiction for short payment of duty for they had
cleared the LPG in bulk but paid the duty at the price fixed by OCC for LPG
packed meant for domestic purposes. These demands were also dully confirmed
holding interalia that duty was chargeable on value applicable to the form of
LPG at the time of clearance form the factory. Against these orders of
Commissioners of Central Excise, Vadodara, Indore & Surat, the IOC, GAIL
and ONGC had filed appeals after taking Committee on Disputes clearance in the
Tribunal. The Tribunal allowed their appeals taking notice of several
considerations put forward by the appellants including the intentions behind
the conversion from specific to advalorem duty, various aspects of
administrative price regime applicable to certain bulk Petroleum products
including LPG, the instructions by a Circular issued by Ministry of Petroleum
as to how price should be calculated and duty paid for LPG when it was cleared
for packing in bottling units etc. Tribunal ultimately held that the assessable
value for the LPG cleared in bulk by the appellants, for bottling for domestic
consumption, should be assessed at the lower value fixed by OCC for that
category. [Please see Tribunal judgement reported in 2000 (36) RLT 611 (T)].
4.
As the view taken by Tribunal did not appear to be
strictly in accordance with the provisions of Sec.4, the Department filed a
Civil Appeal in the Supreme Court, after obtaining the clearance from the
Committee on Disputes and also after obtaining the opinion of the learned
Attorney General. The Hon’ble Supreme Court, however, during the course of
hearing, desired that the matter should be resolved by the two Departments i.e.
Department of Revenue and Ministry of Petroleum. The matter was accordingly
recently discussed first in the Board and thereafter in a meeting held between
the representatives of Department of Revenue and Department of Petroleum &
Natural Gas. The various aspects of the dispute were examined and it was
interalia noted that the product was being marketed under administered price
regime and the producers/marketing oil Companies had no choice but to sell the
products at prices fixed by OCC. It was also a fact that LPG whether it was
cleared in packed condition from refinery or when packed in an outside bottling
unit, was sold at same price to consumers as fixed by OCC. It was felt,
therefore, that it may not be appropriate to insist on Supreme Court’s ruling
as to whether as per section 4 higher value (and resultant excise duty) in
second category of cases is legally justified. Both the Departments agreed that
even if Supreme Court agreed with revenue view point the Oil Companies will not
be able to recover any duty. After discussions with representatives of Ministry
of Petroleum and considering Hon’ble Apex Court direction to resolve the
dispute essentially between Govt. and PSUs, it has been decided by the Govt.
that in the special circumstances of production and marketing of LPG with
Administered Price regime, we may accept the order of the CEGAT vide their
order No.1528 to 1538/99A dated 27.10.99 in the case of M/s.Gas authority of
India Ltd. Vs. Commissioner of Central Excise, Vadodara, subject to the
condition that the refineries/oil companies who have already paid u the demands
raised by the Central Excise Department and consequently may be entitled for refund
will not be paid any interest on the refund amount held admissible subject to
the principle of unjust enrichment being satisfied. It has also been agreed
that the oil companies will scrutinize their records and wherever LPG has been
cleared at lower price meant for LPG packed (Domestic) but actually sold in
bulk, they will forthwith pay differential duty on such LPG bulk.
5.
Department has moved Supreme Court for withdrawal
of its appeal based upon the above decision.
6.
The above principle agreed in the particular CEGAT
judgement on the issue of LPG valuation for excise duty purposes, will apply
also in all other disputes on same issue including those at show cause notice
stage or where assessment of LPG were being made on provisional basis as per
Board’s instruction, or other reasons pending settlement of the issue before
CEGAT. These cases may be decided accordingly.
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