2011 (2) TMI 1159 - HC - Central Excise

Transit loss adjustment - as per Circular No. 663, dated 23-9-2002 the loss can be condoned only if the loss incurred in respect of each type of the petroleum product is within the prescribed limit and not by setting off the loss in one product from the gains recovered in the other product - Held that - Government of India in the Assessee s own case 1991 (3) TMI 334 - GOVERNMENT OF INDIA held that the adjustment of transit gains against transit losses are permissible - this is a fit case to grant full waiver. Decided in favor of the assessee

Summary

Issues:
Challenge to order of Commissioner of Central Excise (Appeals)-II Mumbai dated 24-9-2010 and order dated 15-11-2010 declining modification. Dispute over excise duty on petroleum products lost in transit. Interpretation of Circular No. 663 dated 23-9-2002 regarding condonation of losses. Validity of Commissioner's order directing deposit of duty and penalty. Whether transit loss within prescribed limit. Permissibility of setting off transit gains against losses. Granting full waiver and setting aside Commissioner's orders.

Analysis:
The petition challenges the orders of the Commissioner of Central Excise (Appeals)-II Mumbai dated 24-9-2010 and 15-11-2010. The dispute revolves around the levy of excise duty on petroleum products lost in transit during transfer from refinery to warehouse/sales installation via pipeline. The Commissioner's order dated 24-9-2010 directed the petitioner to pay 25% of the duty and penalty confirmed by the original order within four weeks. The duty demand was based on Circular No. 663, dated 23-9-2002, which allows condonation of losses only if within prescribed limits without setting off losses against gains in different products.

The petitioner had appealed the original order dated 31-12-2008, leading to the Commissioner directing full duty payment initially. However, a writ petition resulted in setting aside this order and a fresh directive to deposit 25% of the duty and penalty. The key issue is whether the transit loss falls within the Circular's limits. The judgment notes that setting off transit gains against losses is permissible, citing a previous decision by the Government of India in a similar case.

The Court, considering the facts, deems it appropriate to grant full waiver. Consequently, the Commissioner's orders from 24-9-2010 and 15-11-2010 are quashed, and the Commissioner is instructed to hear the appeals without requiring a pre-deposit. The ruling makes the rule absolute with no costs imposed. The judgment provides clarity on the interpretation of Circular No. 663 and the permissibility of setting off transit gains against losses, ultimately leading to the grant of a full waiver in this case.