2017 (6) TMI 507 - AT - Central Excise

Refund of duty paid on clearance from refinery - appellant received ATF which is duty paid from the refinery. During the storage, the goods became unfit for supply as ATF and hence they were suitably dyed and cleared as SKO by filing exemption at nil rate of duty in terms of N/N. 04/2006 - refund in terms of Rule 5 - Held that - in terms of Rule 5 of the CER 2002, the rate of duty applicable to any excisable goods shall be as prevalent on the date when such goods are removed from the factory or the warehouse. Refund of duty in terms of Rule 16 - Held that - Refund of such duty can be considered only if such goods are returned to the factory of the same manufacturer or any other manufacturer. This condition prescribed in Rule 16 of the Central Excise Rules is not applicable to the appellant since the goods i.e. ATF has not been returned to the factory. Remission of duty u/r 21 - claim of remission on the ground that the goods have become unfit for consumption - Held that - such remission of duty is applicable only to the manufacturer where such goods have been manufactured - In the present case, since the ATF has not been manufactured in the appellants premises, Rule 21 is not applicable to the appellant. Refund of duty paid on the ATF cannot be considered in terms of Rule 5, Rule 16 or even Rule 21 - appeal dismissed - decided against appellant.

Summary

Issues:
Refund of duty paid on Aviation Turbine Fuel (ATF) converted to Superior Kerosene Oil (SKO) for Public Distribution System (PDS).

Analysis:
1. The appellant, a public sector undertaking, stored duty paid and non-duty paid ATF at its installation. Due to contamination rendering the ATF unfit for supply, the appellant converted it to SKO for PDS, attracting nil rate of duty under a specific notification. A refund claim for the duty paid ATF was rejected, leading to the present appeal.

2. The appellant argued that since the ATF was cleared as SKO for PDS with nil duty rate, the duty paid at the time of clearance should be refunded. The appellant also cited a relevant tribunal decision and claimed entitlement to duty remission under Rule 21 of the Central Excise Rules due to goods being unfit for consumption before removal from the warehouse.

3. The Department contended that the appellant's premises were registered as a dealer, not a manufacturer. It suggested the appellant could have returned the ATF to the manufacturer for credit and reprocessing under Rule 16. As the appellant did not follow this procedure, the refund was denied.

4. The Tribunal noted the goods' conversion into SKO amounted to manufacture, but since SKO for PDS was exempt from central excise duty, no duty was paid at clearance from the appellant's premises. Refund eligibility hinges on returning goods to the factory, which did not occur in this case, as per Rule 16.

5. The alternative plea for remission under Rule 21 was dismissed since it applies to manufactured goods, not goods like ATF that were not produced at the appellant's premises. Therefore, the Tribunal concluded that none of the rules cited by the appellant warranted a refund of duty paid on the ATF. The appeal was rejected, affirming the lower authorities' decision.

This detailed analysis of the judgment addresses the issues involved comprehensively, highlighting the arguments presented by both parties and the legal reasoning behind the Tribunal's decision to reject the appeal for refund of duty paid on the converted ATF.