2018 (12) TMI 1846 - AT - Central Excise

Payment of duty on the quantum of petroleum products lost in transit - Levy of penalty on both the Refinery as well as the Raxaul Depot - Department noticed that there was transit loss in the movement of petroleum products from Barauni to Raxaul - HELD THAT - The transit loss had happened in the movement of the petroleum products from their Refinery situated at Barauni to the warehouse situated at Raxaul. Keeping in view the nature of the goods which are volatile, some transit loss is inevitable. The question therefore to be decided is whether such transit loss can be condoned or the appellant should make good by payment of duty on such goods lost. The Board had issued a circular as early as 30/10/1985 in which it has been clarified that transit loss upto 1% was permissible. The Adjudicating Authority had declined to grant the benefit of the circular citing the reason that the Warehousing Provision for petroleum products has since been withdrawn and the circular is applicable only for some other situations - the demand in respect of such transit loss which is not in excess of 1% may be condoned, in view of the circular of the Board dated 30/10/1985. It is the claim of the appellant that wherever transit losses were more than 1% they have already discharged the duty liability. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Duty payment on transit loss of petroleum products during export to Nepal.
- Applicability of circular allowing transit loss up to 1%.
- Dispute over duty liability on goods lost in transit.
- Interpretation of warehousing provisions for petroleum products.

Analysis:
The appeal addressed the duty payment issue concerning transit loss of petroleum products during export to Nepal. The appellant, a manufacturer of petroleum products, transferred goods to an Indian Oil Warehouse at Raxaul for export to Nepal, where transit loss was observed. The Adjudicating Authority ordered duty payment on lost goods, along with penalties on both the refinery and the Raxaul Depot. The appellant argued that transit loss is inevitable due to the volatile nature of goods, citing a circular permitting up to 1% loss. The Revenue contended that duty was owed due to short receipt at the bonded Warehouse. The Tribunal considered the nature of goods and the circular, noting past decisions allowing transit loss up to 1%.

The key issue revolved around the interpretation of the circular permitting transit loss up to 1%. The Adjudicating Authority had denied the benefit of the circular, stating it was not applicable due to withdrawn warehousing provisions. However, the Tribunal found that the circular remained relevant for export warehousing of petroleum products post-2004. Previous decisions by the Tribunal also supported allowing transit loss up to 1%. Consequently, the Tribunal held that transit loss below 1% could be condoned based on the circular, with the appellant already discharging duty for losses exceeding 1%.

In conclusion, the Tribunal allowed the appeals, setting aside the impugned orders. The decision highlighted the significance of considering the nature of goods, relevant circulars, and past precedents in determining duty liability for transit loss during export. The judgment clarified the applicability of the circular permitting transit loss up to 1% and emphasized adherence to established legal principles in resolving disputes over duty payments on lost goods in transit.