RIL hit in ministries' crossfire over excise

Reliance asked to pay Rs 494.30 crore along with penalty and interest.

The dispute between the ministries of finance and petroleum over applicable excise duty on kerosene and LPG refuses to die down with Reliance Industries Ltd receiving a notice from the excise authorities.

The private sector refiner has been asked to pay a differential duty of Rs 494.30 crore with equivalent penalty and interest for the period between July 2000 and February 2005 for selling kerosene and LPG to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum.

The excise department had earlier slapped such notices on Oil and Natural Gas Corporation, demanding Rs 84 crore. A Reliance Industries spokesperson declined to comment.

The situation has arisen since excise duty is being calculated on the transfer price and not on the end price.

The transfer price is the one at which petroleum products are sold to oil marketing companies (OMCs) by refiners, and is based on the import parity price. For diesel, petrol, LPG and kerosene, it is higher than the price at which the end consumer buys them.

The ministry of finance has refused to give any clarification on this matter despite requests by the oil companies.

Both ONGC and RIL have conveyed to oil companies that if the excise authorities do not rectify the calculation, the liability of any additional excise duty with interest and penalty will have to be borne by the OMCs. Of the Rs 494.30 crore demanded from RIL, IOC's share comes to Rs 260.12 crore.

The OMCs have been demanding that since the prices of LPG and kerosene continues to be administered by the government, the determination of the assessable value of these two products should be the same as the one prevalent during the administered price mechanism regime prior to April 1, 2002.

The excise department had made similar demands earlier but, after a clarification from the ministry of law, excise demands made on companies up to June 30, 2000, were dropped.

At that time, the law ministry had held that the prices set by OMCs for dealers were the maximum set under the law.

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DUTY-BOUND

RELIANCE INDUSTRIES asked to pay a differential duty of Rs 494.30 crore with equivalent penalty and interest for the period between July 2000 and February 2005 for selling kerosene and LPG to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum