Supreme Court Sets Aside Excise Duty Demand On Oil Marketing Companies For Inter-Supply Of Petroleum Products
Live LawIn a significant relief for Oil Marketing Companies, the Supreme Court ruled that prices under the MoU for inter-supply of petroleum products, designed to ensure smooth nationwide distribution, do not constitute "transaction value" and are exempt from excise duty due to their non-commercial nature. The Court addressed the issue of whether the prices charged under a Memorandum of Understanding between Oil Marketing Companies could be treated as the transaction value for excise duty purposes. The Court rejected the excise department's argument that the prices on which OMCs were engaged in the inter-supply would qualify as transaction value to levy the excise duty. According to the Court, though the OMCs were engaged in inter-supply of the petroleum products, the price was not the sole consideration for the sale as they entered into an MoU not for commercialization but 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.
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