2013 (9) TMI 995 - CGOVT - Central Excise

Denial of the benefits of condonation of transit losses - Held that - From wordings of circular, it is unambigously clear that facility of removal of petroleum products without payment of duty from factory of production to export warehousing continues to be available vide Notification No. 46/2001-C.E. (N.T.), dated 26-6-2001. The said circular has specifically stated that no storage losses in export warehouses will be allowed. - refinery shall be liable to discharge the duty on the quantity cleared from factory itself and there will be no question of any abatement with regard to any losses subsequent to removal from refinery. This clarification pertains to clearance of goods on payment of duty. However, in case goods are cleared under bond without payment of duty, the same clarifiction will also apply since there is no explicit mention of allowing transit losses for such clearances. As per said circular storage losses in export warehouse are not permitted, and therefore there is no reason to allow transit loss in the absence of any explicit provision. - Decision in the case of ONGC 2013 (6) TMI 683 - GOVERNMENT OF INDIA followed. - Decided in favour of Revenue.

Summary

Issues Involved:
1. Demand for Central Excise duty due to transit loss/excess.
2. Applicability of warehousing provisions post Notification No. 17/2004-C.E. (N.T.).
3. Interpretation of Circular No. 804/1/2005-CX regarding storage and transit losses.
4. Validity of the Commissioner (Appeals) decision allowing transit losses.

Detailed Analysis:

1. Demand for Central Excise Duty Due to Transit Loss/Excess:
The assessee, engaged in clearing petroleum products under Bond as per Rule 20 of Central Excise Rules, 2002, faced a show cause notice for a duty recovery of Rs. 37,71,224/- due to a discrepancy between the quantity cleared from the factory and received at the storage location, indicating a transit loss/excess. The adjudicating authority confirmed the duty demand based on the withdrawal of warehousing provisions via Notification No. 17/2004-C.E. (N.T.), asserting that duty was payable at the factory gate.

2. Applicability of Warehousing Provisions Post Notification No. 17/2004-C.E. (N.T.):
The Commissioner (Appeals) set aside the Order-in-Original, arguing that the assessee followed Notification No. 46/2001-C.E. (N.T.) procedures and relied on Board's Instruction No. 261/6/20/82-CX-8 and Circular No. 798/31/2004-CX, which allowed transit loss/excess up to 1%. The department contested this, citing that the withdrawal of domestic warehousing via Notification No. 17/2004-C.E. (N.T.) mandated duty payment at the factory gate, negating any allowance for transit losses.

3. Interpretation of Circular No. 804/1/2005-CX Regarding Storage and Transit Losses:
The department argued that Circular No. 804/1/2005-CX clarified that no storage losses are allowed in export warehouses, implying a similar stance on transit losses. The assessee countered that this circular pertained to storage losses, not transit losses, and thus should not apply to their case. The department maintained that the circular's stipulations on the non-remittance of duty for losses post-clearance from the factory gate should apply to both storage and transit losses.

4. Validity of the Commissioner (Appeals) Decision Allowing Transit Losses:
The Government reviewed the statutory provisions and previous decisions, noting that Notification No. 46/2001-C.E. (N.T.) for export warehousing remained valid, but Circular No. 804/1/2005-CX explicitly disallowed storage losses without mentioning transit losses. The Government referenced earlier decisions, including cases involving Mangalore Refinery and Petro Chemicals Ltd. and ONGC Ltd., where no transit loss was permitted under similar circumstances.

Conclusion:
The Government concluded that the Commissioner (Appeals) erred in allowing the transit losses, as the applicable circular and statutory provisions did not explicitly permit such losses. The impugned Order-in-Appeal was set aside, and the Order-in-Original was restored, confirming the demand for duty. The revision application succeeded, reinforcing the principle that no transit or storage losses are permissible post-clearance from the factory under the given legal framework.