2012 (9) TMI 457 - CGOVT - Central Excise

Demand of duty and penalty - warehousing of Petroleum products - storage loss beyond the permissible limit of 0.5% - applicant neither paid any duty on it nor mentioned such losses in the monthly return which was beyond the permissible limit - applicant has contended the cumulative losses for the month may be calculated for all the storage tanks Held that - No set off of a gain or loss in a tank is permitted against the loss or gain in another tank - applicant has not furnished specific reasons for more losses in certain storage tank. Therefore there is no ground for condoning losses exceeding the permissible limit demand and penalty confirmed

Summary

Issues:
- Appeal against Order-in-Appeal No. 167/CE/DLH/09 regarding storage loss beyond permissible limit.
- Consideration of cumulative losses for all storage tanks.
- Application of Board Circular dated 15-12-1989 for condonation of storage losses.
- Nature of petroleum products and guidelines for condonation of storage losses.
- Historical appreciation of variations in storage losses.
- Duty liability on goods clearance and absence of evidence for clandestine removal.
- Application of case laws in similar circumstances.
- Adjudication of losses exceeding permissible limit.
- Rejection of Revision Application by the Government.

Analysis:
The revision application was filed by M/s. Indian Oil Corporation Ltd. against Order-in-Appeal No. 167/CE/DLH/09, concerning storage loss beyond the permissible limit of 0.5%. The initial demand of duty was contested, leading to a series of orders culminating in the current revision application. The applicant argued that losses were within the prescribed limit and should not incur duty liability based on various grounds raised in the appeal.

The applicant highlighted the Board Circular dated 15-12-1989, advocating for the condonation of storage losses on a cumulative basis. They emphasized the volatile nature of petroleum products and the susceptibility to temperature variations, citing guidelines for condonation issued by C.B.E. & C. and Rule 21 of CER'02 providing for remission of duty on goods lost by natural causes.

Moreover, historical orders and circulars were referenced to support the condonation of losses as natural and mostly attributable to day-to-day operations. The applicant also relied on specific case laws and previous orders where storage losses beyond 0.5% were allowed based on merit and in line with guidelines issued by the Ministry of Finance.

The Government's analysis focused on the adjudication of losses exceeding the permissible limit of 0.5%. They noted that the adjudicating authority had already condoned losses up to the limit and confirmed the demand on losses exceeding this threshold. The Government found no grounds for condoning losses beyond the permissible limit, citing specific instructions and clarifications by C.B.E. & C.

Ultimately, the Government upheld the impugned Order-in-Appeal, rejecting the Revision Application for being devoid of merit. The decision was based on the lack of specific reasons for losses exceeding the permissible limit and the inapplicability of cited case laws to the current circumstances. The judgment emphasized the importance of adhering to prescribed limits and guidelines in determining duty liability for storage losses.