Valuation of Petroleum Products under MOU for IPP is not Transaction Value

[CBEC Circular No. 913 dated 3rd February 2010]

Sub: Valuation of MS and HSD sold amongst OMCs – MOU – Withdrawal of instructions dated 14-2-2007.

Attention of field formations is invited to the Board’s instructions issued from F No. 6/21/2003-CX.I (Pt) on 14 -2 -2007, a copy of which is available on the departmental web-site cbec.gov.in. The issue discussed in the said instructions is regarding valuation of petroleum products sold by one oil company to other oil company based on import parity price as per MOU entered between them.

2. In the aforesaid instructions field formations were directed to decide the cases pertaining to SCNs issued to the Oil companies on the inter company sale during the relevant period on the basis of the decision of CESTAT, Bangalore in the case of CCE Vishakhapatnam vs HPCL [2005(187) ELT 479 (Tri.Bang.)] as the SLP filed by the department had been dismissed by the Hon’ble Supreme Court as reported in 2006(196) ELT A 72 (SC).

3. Subsequently, in another decision on the same subject in the case of BPCL V/s Commissioner of Central Excise Nasik, CESTAT vide its order No. A/220/09/EB/C-II dated 17-6-2009 [2009(242) ELT. 358 T], has held that price as per MOU cannot be considered as ‘transaction value’ under section 4 and decided the case in favour of the department. M/s BPCL, have reportedly filed an appeal against this order of CESTAT before the Supreme Court after obtaining COD clearance.

4. In view of the aforesaid developments, it has been decided to withdraw the Board’s instructions dated 14-2-2007. However, as the appeal of BPCL is pending before the Supreme Court, field formations are directed to consign all the pending show cause notices on the issue to the call book pending a final verdict from the Supreme Court. Further, for the cases within the review/appeal period necessary action to file appeal may be taken immediately.

[F.No. 6/21/2003-CX.1 (Pt)]