2013 (6) TMI 683 - CGOVT - Customs

Denial of abatement of duty - loss subsequent to removal from refinery - violation of the condition 2(iii) of the Board s Circular No. 804/1/2005-CX, dated 4-1-2005 - held 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. The para 2(iii) of Circular dated 4-1-2005 states that 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 clarification 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 - Decided in favour of Revenue.

Summary

Issues Involved:
1. Liability for duty on short-received Naphtha at the export warehouse.
2. Interpretation of C.B.E. & C. Circular No. 804/1/2005-CX., dated 4-1-2005.
3. Applicability of Rule 20 of the Central Excise Rules, 2002.
4. Transit and storage losses in the context of excise duty.

Detailed Analysis:

1. Liability for Duty on Short-Received Naphtha at the Export Warehouse:
The main issue revolves around the liability for duty on 655.866 MT of Naphtha that was short-received at the export warehouse. The original authority confirmed the demand of duty amounting to Rs. 43,15,964/- on the grounds that no abatement for losses subsequent to removal from the refinery is permitted as per Para 2(iii) of C.B.E. & C. Circular No. 804/1/2005-CX., dated 4-1-2005. Rule 20(4) of the Central Excise Rules, 2002, specifies that if goods dispatched for warehousing or re-warehousing are not received in the warehouse, the consignor is responsible for the duty.

2. Interpretation of C.B.E. & C. Circular No. 804/1/2005-CX., dated 4-1-2005:
The applicant department contended that the Commissioner (Appeals) failed to appreciate that the circular clearly states that the refinery is liable to discharge duty on the quantity cleared from the refinery itself, with no abatement for any losses after removal. The Commissioner (Appeals) had relied on earlier circulars (Nos. 579/16/2001-CX. and 581/18/2001-CX.) which did not explicitly deny transit/storage losses. However, the department argued that the absence of a provision allowing such losses should be interpreted as a denial of such allowances.

3. Applicability of Rule 20 of the Central Excise Rules, 2002:
Rule 20(1) allows the removal of excisable goods from the factory of production to a warehouse without payment of duty, subject to conditions specified by the Board. Rule 20(4) places the responsibility for duty on the consignor if the goods are not received in the warehouse. The government noted that the original authority correctly applied Rule 20(4) in holding the applicant liable for the short-received quantity.

4. Transit and Storage Losses in the Context of Excise Duty:
The government observed that the Circular No. 804/1/2005-CX., dated 4-1-2005, clearly disallows storage losses in export warehouses and does not provide for any transit losses. The absence of explicit provisions for transit losses in the circulars and notifications indicates that such losses are not permissible. The earlier decision in the case of M/s. Mangalore Refinery and Petro Chemicals Ltd. was cited, where no transit loss was allowed, and the demand for duty was upheld in light of the same circular.

Conclusion:
The government set aside the impugned order-in-appeal and restored the order-in-original, confirming the duty demand on the short-received quantity of Naphtha. The revision application succeeded, reinforcing the principle that no abatement for transit or storage losses is allowed unless explicitly provided by law.