Case Law Details
Haldia Petrochemicals Limited Vs Commissioner of Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that when there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method.
Facts- The Appellant had commissioned its Petrochemical Complex at Haldia in 2001 and also set up a depot at Budge Budge for catering to domestic and export market. They stock transferred their finished goods to the said depot in February and March 2002. The issue involved in the present appeal is regarding valuation of the said goods cleared from factory to depot on stock transfer basis and eventually sold therefrom. Since there was no prevailing depot price on the date of clearance from factory for the purposes of application of Rule 7 of the valuation Rules and neither was there any ex-factory selling price, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty.
A show cause notice dated 02.04.2003 was issued to the Appellant alleging that they have violated Rule 7 and 9 of Valuation Rules and demanded differential duty on the basis of ultimate sale price of the said goods from the depot over a period of time from 30 March 2002 to 5 November 2002. The Notice was adjudicated and the demand was confirmed vide Order-in-Original dated 30.09.2010. On appeal, the Ld. Appellate Commissioner upheld the order of the adjudicating authority, vide his order dated 10.10.2011(Impugned order). The Appellant is before us against the impugned order.
Conclusion- We observe that when there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method. In this case, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty. We observe that under these circumstances, when there is no other price available, the adoption of import parity price as published by Platts by the Appellant cannot be faulted. The department has adopted the ultimate selling price of the goods from the depot. We observe that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot. Accordingly, we hold that the demand confirmed in the impugned order on the basis of the ultimate selling price of the goods from the depot is not sustainable and accordingly we set aside the same.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellant had commissioned its Petrochemical Complex at Haldia in 2001 and also set up a depot at Budge Budge for catering to domestic and export market. They stock transferred their finished goods to the said depot in February and March 2002. The issue involved in the present appeal is regarding valuation of the said goods cleared from factory to depot on stock transfer basis and eventually sold therefrom. Since there was no prevailing depot price on the date of clearance from factory for the purposes of application of Rule 7 of the valuation Rules and neither was there any ex-factory selling price, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty.
2. A show cause notice dated 02.04.2003 was issued to the Appellant alleging that they have violated Rule 7 and 9 of Valuation Rules and demanded differential duty on the basis of ultimate sale price of the said goods from the depot over a period of time from 30 March 2002 to 5 November 2002. The Notice was adjudicated and the demand was confirmed vide Order-in-Original dated 30.09.2010. On appeal, the Ld. Appellate Commissioner upheld the order of the adjudicating authority, vide his order dated 10.10.2011(Impugned order). The Appellant is before us against the impugned order.
3. In their submissions, the Appellant stated that the Ld. Adjudicating Authority has accepted that there was no sale of subject goods from Appellant’s depot in or around the date of clearance of the said goods from their factory. The Ld. Adjudicating Authority has also accepted that valuation was not possible either under Rule 7 or under Rule 9 of the Valuation Rules. Even after rejecting the applicability of Rule 7 and 9 as alleged in the Notice, the adjudicating authority confirmed the demand of differential duty on the basis of ultimate selling price of the said goods from the depot, which is not sustainable. The Ld. Appellate Commissioner has upheld the adjudicating order dated 30.09.2010 without rendering any additional findings.
4. Appellant submitted that in terms of Section 4(1)(b) of the Central Excise Act, 1944, in cases where the goods are not sold, the value of the goods shall be determined in such manner as may be prescribed i.e., in terms of Rule 7 of the Central Excise Valuation Rules. Further, Rule 7 of the Valuation Rules prescribe that duty on the goods cleared to the depot shall be assessed based on the prevailing depot price and in absence thereof, the same shall be determined based on the depot price nearest to the time of removal. There is no provision in the Valuation Rules which permits chasing the ultimate selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot.
5. It is a settled principle in law that the ultimate selling price of the said goods sold from the depot is of no consequence in determining their assessable value. In this regard, they relied on the following decisions:
(a) Greaves Cotton Limited Vs. Commissioner of Central Excise, Chennai-I [2017 (7) GSTL 350 (Tri.-Chennai)].
(b) Hindustan Petroleum Corporation Limited Vs. C.C., C. Ex., Visakhapatnam – I – [2019 (369) ELT 1398 (Tri.-Hyd.)]
(c) CCE, Chennai Vs. Carborandum Universal Limited [2008 (224) ELT 290 (Tri.-Bang.)].
(d) Nahar SPG & WVG. Mills Limited Vs. Commissioner of Central Excise, Bhopal [2009 (247) ELT 708 (Tri.-Delhi)].
(e) CCE Siliguri Vs. Bharat Petroleum Corporation Ltd., [(2010) 255 ELT 568- (Tri.-Kolkata)]
6. In the light of the above, they contended that the Ld. Appellate Commissioner has erred in determining the differential duty based on the transaction value at which the goods have been actually sold to the independent buyers from the depot from 30 March 2002 to 5 November 2002.
7. Price discovery in the Petroleum/ Petchem Industry benchmark to import parity and Platt (Foreign Journal) acceptable for determination of import parity price. The Tribunals have held that import parity based price can be used for the valuation of petroleum products under the Central Excise regime. The Appellant placed their reliance on the decisions of the Tribunal in the case of Hindustan Petroleum Corporation limited Vs. Commissioner of Central Excise, Visakhapatnam-I [2005 (187) ELT 479 (Bang.)] and Commissioner of Central Excise, Mumbai-IV Vs. Indian Oil Corporation Limited [2014 (308) ELT 502 (Bom.)]. They also submitted that the Hon’ble Apex Court in the case of Varsha Plastics Private Limited Vs. Union of India [2009 (235) ELT 193] has held that PLATT price report or other reputed financial journals which helps in determination of the import parity price is acceptable for the purpose of valuation of goods when prices of contemporaneous imports are not available. Thus, the adoption of the PLATT price by the Appellant is justified.
8. The Appellant also contended that part of demand for the month of February 2002 is hit by limitation. The time-limit for issuance of show cause notice under Section 11A is one year from the relevant date. In the present case, clearances to the depot were effected during February 2002 to March 2002. However, the Notice was issued on 02 April 2004. As such, demand based on the clearance made in the month of February 2002 is hit by limitation.
9. The Appellant also contended that the Show Cause Notice failed to establish any willful suppression or misstatements of facts by them with the intention to evade payment of tax. Hence, invocation of the extended period of limitation is totally unsustainable and penalty is not imposable under section 11AC.
10. The Ld Departmental Representative reiterated the findings of the adjudicating authority in the impugned order. He stated that the import parity price based on Platt cannot be adopted to clear the goods manufactured and cleared from the factory to the depot.
11. Heard both sides and perused the appeal records.
12. We observe that the Appellant has cleared the goods from factory to depot on stock transfer basis. Since there was no prevailing depot price on the date of clearance from factory, they could not adopt the depot price for the purposes of payment of duty as provided under Rule 7 of the valuation Rules, 2000. The next best option available to the assesse was to adopt the ex-factory selling price, if any, available. But, there was no ex-factory selling price available on the date of clearance from the factory to depot. We observe that the adjudicating authority also accepts in the impugned order that no price available as provided in Rule 7 of the Valuation Rules..
13. Since no other value available on the date of clearance from the factory to depot, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. The department contested this value and demanded duty on the basis of the ultimate selling price of the goods from the depot. The Appellant stated that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot.
14. We observe that in case of clearance of goods from the factory to depot on stock transfer basis, the duty is payable as per Rule 7 of the Valuation Rules 2000. The ultimate selling price of the said goods sold from the depot is of no consequence in determining it’s assessable value. This view has been held in the following cases.
(i) In the case of Greaves Cotton Ltd Vs Commissioner of Central Excise, Chennai-I, it has been held as under:
7. The valuation of the goods under Central Excise law is covered by Section 4. The section was amended w.e.f. 1-7-2000. The connected Central Excise Valuation Rules also were amended from this date. Rule 7 of the Central Excise Valuation Rules is applicable for the depot sales. As per the provisions of this rule, goods at the time of clearance from factory are required to be charged to Central Excise duty at such rates prevailing contemporaneously at the depot. Subsequently, if such goods are sold at higher or lower prices from the depot, there is no liability to pay differential duty or refund as the case may be.
7.1 We examined the facts of the case in the light of the amended law for depot clearances. We find that the appellants are not required to pay differential duty in cases where goods have been sold at higher prices from the depot. Like-wise, in cases where goods are sold at lower prices from the depot, the appellants will not be eligible for any refund. The Commissioner (Appeals) in the impugned order has also given detailed findings to the effect as above. He has also recorded there was no provisional assessment during the relevant period. As such, we have no reason to interfere with the impugned order, which is upheld. Consequently, appeal is dismissed.
(ii) In the case of Hindustan Petroleum Corporation Ltd Vs CCE, Visakhapatnam-I, it has been held as under:
6. We have considered the arguments on both sides and perused the records. It is not in dispute that the assessee is manufacturing goods and clearing them from their factory to the depots. It is also not in dispute that they are subsequently, selling the goods from their depots. Therefore, the time of removal of goods is different from the time of sale of the goods and no sale price is available at the time of removal of the goods. Under such circumstances, in terms of Section 4 read with Rule 7 of Central Excise Valuation Rules, 2000 the price to be applied at the time of clearance of goods, is the price nearest to the time of removal at which such goods have been sold. Evidently, if the duty has to be paid at the time of removal of goods the nearest price which will be available is the price at which the goods have already been cleared. The assessee cannot predict the price at which the goods might be cleared after the removal nor can he predict when such sale will take place. A plain reading of Section 4 read with Rule 7 would show that clearance at a price nearest to the time of removal would mean the price which will be available to the assessee at the time of removal as being the price at which the goods were sold. It is impossible for the assessee to predict what will be the price after the removal of goods and when such transaction will take place. Therefore, we find no infirmity in the order of the Learned Commissioner in holding that the price to be reckoned is price at which such goods have been sold at the time nearest to the time of removal.
(iii) In the case of Varsha Plastics Hon’ble Apex case has held that the price available in PLATT’s journal can be adopted for customs purposes. The relevant para of the decision is reproduced below:
21. In so far as the reference to PLATT’s Price Report or other reputed financial journals which are indicators of international prices for the value of imported goods for the purpose of Section 14(1) is concerned, suffice it to observe that once transaction value is rejected on valid grounds, the Customs Authority has to proceed to determine the value of goods by following Customs Valuation Rules and on the basis of contemporaneous import. However, in the absence of any evidence with regard to contemporaneous import, reference to foreign journals that may indicate the correct international price for the purposes of Section 14 may not be irrelevant and relying upon such journal cannot be said to be altogether unreasonable. As to whether in a given case such foreign journal or for that matter PLATT’s Price Report indicate correct international price of the concerned goods for the purpose of Section 14(1) would depend on facts of each case and that would be for the department to establish. The valuation of the imported goods where the transaction value in the opinion of Assessing Authority is liable to be rejected because of invoice manipulation or under-invoicing or un-realistic price or misdeclaration in respect of valuation of goods or description or where transaction value of the goods declared is ridiculously low, which of course the Assessing Authority has to justify, he must proceed to determine valuation of goods by following Customs Valuation Rules. The availability of evidence of contemporaneous import of the same goods obviously provides the best guide for determination of value of the import of goods but in the absence of evidence of contemporaneous import, reference to foreign journal for finding out correct international price of imported goods may not be irrelevant because ultimately the Assessing Authority has to determine value of the imported goods, at which such goods are sold or offered for sale in the course of international trade at the time of importation.
15. We observe that when there is no other price available at the time of clearance of the goods from the factory to depot on stock transfer basis, the only way available is to determine the assessable value based on the best judgment method. In this case, the Appellant discharged duty on the basis of import parity price as published by Platts, an international organization which notifies the prices of petrochemical products worldwide. According to the Appellant, the domestic prices in the Petchem Industry are bench marked to the import parity price and hence they adopted this import parity price for the purpose of payment of duty. We observe that under these circumstances, when there is no other price available, the adoption of import parity price as published by Platts by the Appellant cannot be faulted. The department has adopted the ultimate selling price of the goods from the depot. We observe that there is no provision in the Valuation Rules which permits chasing the selling price of the said goods from the depot and pay duty on the basis of the ultimate selling price from the depot. Accordingly, we hold that the demand confirmed in the impugned order on the basis of the ultimate selling price of the goods from the depot is not sustainable and accordingly we set aside the same.
16. In view of the above discussion, we allow the appeal filed by the Appellant.
(Pronounced in the open court on…14.06.2023…..)
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