2015 (1) TMI 24 - AT - Central Excise

Transit loss - Naphtha - duty has been demanded on account of less receipt of goods than mentioned in the invoices - Held that - There is no doubt that the Lube Base Oil are being transported through pipeline. If any goods are transported through pipeline or by other means of transports, if they are not solid, there is every chance of loss of quantity of the goods by way of evaporation. Therefore, as held by the Hon ble High Court of Bombay in the appellant s own case (2013 (3) TMI 481 - BOMBAY HIGH COURT) transit loss can be allowed. I also find that in this case the transit loss is varying between 0.01 and 0.72% which is admissible in the facts and circumstances of the case. Therefore, I hold that there may be variation in the transportation of the quantity of the goods accordingly, transit loss is allowable. Hence, I hold that the appellant is entitled for input credit as shown in the invoices. Accordingly, the impugned order is set aside - Decide in favour of assessee.

Summary

Issues:
- Duty demanded on less receipt of goods than mentioned in the invoices
- Entitlement to Cenvat credit on the differential quantity due to transit loss

Analysis:
1. Duty Demand on Less Receipt of Goods:
The appellant, a manufacturer of petroleum products, appealed against an order demanding duty due to receiving less quantity of Lube Base Oil than mentioned in the invoices during transportation. The revenue contended that the appellant, having received less quantity as per the invoices, should not be entitled to Cenvat credit on the differential quantity. A show cause notice was issued, and the demands were confirmed along with interest and penalty. The appellant challenged this order.

2. Contentions and Submissions:
The appellant argued that Lube Base Oil, being a petroleum product, is subject to evaporation or weighment differences during transportation, and a transit loss of 1% is permissible based on a judgment by the Hon'ble High Court of Bombay. Therefore, they claimed entitlement to input credit as per the invoiced quantity. On the contrary, the revenue argued that transit loss on Lube Base Oil is not permissible as it is not a volatile product like Naphtha, citing a previous judgment in the appellant's case.

3. Judgment and Analysis:
After hearing both sides, the Tribunal considered the submissions. It was noted that goods like Lube Base Oil, transported through pipelines, are prone to quantity loss due to evaporation. Referring to the previous judgment by the Hon'ble High Court of Bombay, it was established that transit loss can be allowed for such goods. The Tribunal found the transit loss in this case, varying from 0.01% to 0.72%, to be within permissible limits. Consequently, the Tribunal held that the appellant is entitled to input credit based on the invoiced quantity. The impugned order demanding duty was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal's decision emphasized the allowance of transit loss for goods like Lube Base Oil during transportation, leading to the appellant's entitlement to input credit as per the invoiced quantity.