While oil companies are forced to bear the subsidy burden on LPG and kerosene, they are also being told to pay excise duty on these products at the refinery gate price level instead of the subsidised prices, which these companies charge their dealers.
Indian Oil Corporation has taken up the case with the government, seeking a clarification from the ministry of finance on the issue. The excise department has issued notices to oil companies demanding excise duty on ex-refinery prices of kerosene for public distribution system and domestic LPG.
IOC has asked the government that the ministry of finance should either issue an order under Section 37B of the Central Excise Act or administrative instructions to state that excise duty on the two products be payable only on the subsidised prices charged by oil companies to dealers.
Similar demands were earlier made by the excise department, but after a clarification from the ministry of law, these demands up to June 30, 2000 were dropped.
The law ministry had held that the prices fixed by oil companies for dealers was the maximum price fixed under the law.
The ministry of finance later issued a clarification that the assessable value of LPG and kerosene is only the subsidised prices charged by oil companies.
The Central Bureau of Excise and Customs issued a circular to this effect after the Supreme Court directed the dispute to be resolved by the department of revenue and the ministry of petroleum.
Oil companies maintained that even after dismantling of the administered price mechanism, subsidy continues under the PDS Kerosene and Domestic LPG Subsidy Scheme 2002.
The refinery gate price is calculated on the basis of import parity price though oil companies are not allowed to charge that price from the consumers. In the case of LPG, the retail price is Rs 92 a cylinder lower than the import parity price while that of kerosene is Rs 11 a litre less.
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