2018 (10) TMI 468 - AT - Central Excise

Clandestine removal - adjustment of shortages and excesses of different products - Remand Order - Revenue As the main applicant viz. MMTC Ltd. has approached the Hon'ble Apex Court, therefore, order of this Tribunal dated 18.2.2017 has merged with the order of the Hon'ble Apex Court. Held that - The factual matter is that the appellant transport fuel from their factory to their warehouse under ARE-3 procedure. The same Pipeline is used to transport four different products. Between any two in different products of SKO transported. Consequently, at the warehouse the product received is partially mixed with SKO. The appellant pay duty at the warehouse on the quantity received at the warehouse. The appellant were discharging Central Excise duty at the warehouses at the material time. It is clear from that the direction was to reconcile excess and shortages against each other and if still there is shortage then the same needs to be charged to duty at highest rate in term of Clause (h) of the circular, after adjusting for permitted losses. The impugned order does not reconcile the excess with shortages before arriving at final shortage and to that extent is in the violation of direction in remand. Appeal allowed by way of remand.

Summary

Issues:
Appeal against demand of Central Excise duty and interest; Adjustment of shortages/excess of different products; Interpretation of CBEC Circulars; Reconciliation of quantities; Compliance with remand directions.

Analysis:
The appeal was filed against a demand for Central Excise duty and interest by the Indian Oil Corporation Ltd. The appellant argued that the products transported through a Pipeline were not exactly identical in quantity and quality due to mixing with SKO. They relied on various CBEC Circulars and past judgments supporting the adjustment of shortages/excess of different products on an annual basis. The AR contended that the duty assessment should be done in accordance with the CBEC Circular dated 23.09.2002. The Tribunal noted that the products dispatched and received were different in quality and quantity, emphasizing the need to adjust shortages/excess of different products. The Circular prescribed a procedure for reconciliation, including generating reports on a quarterly basis and submitting annual accounts certified by Chartered Accountants.

The Tribunal highlighted that the impugned order did not reconcile excess with shortages before determining the final shortage, contrary to the remand directions. As a result, the order was set aside and remanded to the original adjudicating authority for compliance with the reconciliation process as per the CBEC Circulars. The direction was to reconcile shortages against excess and charge duty at the highest rate if there is still a shortage after adjusting for permitted losses. The Tribunal emphasized the importance of following the CBEC guidelines for reconciliation on an annual basis to avoid double payment of duty and ensure compliance with statutory provisions.

In conclusion, the Tribunal found that the impugned order failed to adhere to the reconciliation process outlined in the CBEC Circulars and remand directions. Therefore, the order was set aside and remanded for proper assessment of duty based on the reconciliation of shortages/excess of different products in accordance with the Circulars and past judgments cited during the proceedings.