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Issues:
- Duty liability on High Speed Diesel (H.S.D.) used for flushing out Superior Kerosene Oil (SKO) from the pipeline during export process. Analysis: The case involved a dispute regarding the duty liability on H.S.D. used for flushing out SKO from the pipeline during the export process. The Appellants, who were manufacturers and exporters of H.S.D., cleared the diesel for home consumption and export through a pipeline from the refinery to the jetty. The pipeline needed to be kept filled to prevent bursting due to pressure, so when not pumping H.S.D., it was filled with SKO. Before exporting H.S.D., a small quantity was pumped into the pipeline to flush out the SKO, creating a mixture stored separately for distillation. The Department demanded duty on the H.S.D. used for flushing out SKO, arguing it was not exported, thus duty was due. The Adjudicating Authority upheld the demand, leading to this appeal. The Appellants argued that the process was a technical requirement to ensure only pure H.S.D. was exported, and the mixture always remained within the bonded warehouse, so no removal of goods occurred. They also contended that even if duty was due, Rule 16 of Central Excise Rules, 2002 allowed bringing back duty-paid goods for further processing, refining, or reconditioning, with Cenvat credit available. They cited a precedent to support their position. The Department reiterated the Adjudicating Authority's findings, stating the current rules did not permit bringing back cleared goods or provide Modvat credit for H.S.D. They mentioned a now-defunct notification allowing bringing back petroleum product mixtures for reprocessing. The Tribunal noted that the Appellants had been operating under the old Central Excise Rules, 1944, with provisions for bringing back mixtures of SKO and H.S.D. for refining and reprocessing under Rule 143A. While the current rules lacked specific provisions for this, Rule 33 included a Transitional Provision deeming old notifications valid if consistent with the new rules. The Tribunal found the demand for duty on the H.S.D. used for flushing out SKO would result in repeat duty payment, as the diesel returned to the refinery for processing and clearance. Considering Rule 143A and the old notification's relevance and consistency with the new rules, the Tribunal deemed the Adjudication Order unsustainable and struck it down, allowing the appeal with any consequential relief.
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