1991 (4) TMI 153 - CGOVT - Central Excise

Summary

Issues:
1. Transit losses of low sulphur heavy stock (LSHS) during transportation.
2. Consideration of losses and gains in transit losses cases.
3. Allocation of special type of wagons by Railways.
4. Reconciliation of losses and gains on a periodic basis.

Analysis:
1. The judgment pertains to transit losses of low sulphur heavy stock (LSHS) during transportation by tank wagons to the installation of Indian Oil Corporation at Tirunelveli in February and March 1987. The applicants reported losses in thirteen consignments and excess in eighteen out of thirty-one consignments during the relevant period. The Assistant Collector and the Collector (Appeals) allowed condonation of losses up to 0.5% and 1% respectively. However, the plea for setting off losses against gains was not considered by the lower authorities.

2. The applicants explained that LSHS is a heavy residual stock fuel oil obtained from the primary distillation of Bombay High Crude, which solidifies at normal ambient temperature and needs to be heated for handling. Due to its characteristics, it may not be fully discharged at the destination, leading to over-carriage and excess receipts in some consignments. The specially designed wagons used by the applicants are reloaded within a week to ten days for consecutive dispatches.

3. The Government observed that when full discharge of LSHS does not take place, the goods are not lost but reflected in substantial gains. Therefore, it would be improper to consider losses only without accounting for gains, especially when there is no negligence or mala fide intent on the part of the applicants. The judgment cited a previous case related to adjusting losses and gains for different items to support the decision to consider losses and gains on a periodic basis.

4. In light of the above discussions, the Government directed the Assistant Collector to reconsider the case, taking into account both losses and gains on a periodic basis and determining duty on net losses alone after allowing condonation up to permissible limits. The reconciliation of losses and gains was ordered to be done on a monthly basis due to the frequency of rake movement. Two other revision applications relating to similar transit loss issues were also disposed of in the same terms as the main case.