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TMI Blog2016 (3) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... temperature, variation in viscosity while dip reading, temperature and density at the time of measurement of stock. In this regard, the appellant referred to circular No. 55/89-CX.8 dated 15.12.1989 which provides for condonation of shortage and handling losses of petroleum products in a refinery and in the method of determining the quantities of petroleum products for the purpose of accountal in statutory excise records. Shortage of finished goods at the factory and depots is concerned, the appellant has debited the duty on its own and informed the department vide various letters dated 9.1.2000, 12.6.2000 and 13.2.2001. The goods sold from depot are excisable goods on which excise duty has already been paid and this fact has not been rebutted by the department either in the show cause notice or even in the order-in-original. Therefore, keeping in view the facts and circumstances and the evidence on record, I am of the considered opinion that the shortages found are very minor in nature, i.e. 0.6% which is well accepted in petroleum products as observed in the judgments cited above. Also find that in the show cause notice also, there is no allegation that there is clandestine re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year ending March, 2001 Raw materials Base oil Additives Total Base oil Additives Total (i) Opening stock 1,289,610 97,965 13,87,575 5,314,142 305,732 5,619,514 (ii) Purchases during the year 17,069,732 1,691,353 18,761,085 8,344,561 1,363,708 9,708,269 (iii) Consumption during the year 13,033,145 1,485,628 14,518,772 11,764,522 1,452,554 13,217,076 (iv) Sales during the year 60,000 5,148 65,118 114,461 - 114,461 (v) Closing stock 3,976,587 200,577 4,177,165 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse. The appellant manufactured the goods and cleared the same to their depot on payment of duty and from the depot the goods are sold to the customers and the goods stored at depot are duty paid goods. On annual basis, the stock is also verified at each of the depots and the excess/shortage compared to the book stock at the depot is ascertained. During the audit of central excise records, the auditor verified the form 3CD (audit report) under the Income Tax Act for the period ending on March 2000 and March 2001 and observed shortages in respect of certain finished goods and raw materials as stated in the tables above. The appellant clarified that they have paid the duty of ₹ 1,06,612/- towards the shortage of inputs and towards the shortage of finished goods observed in the factory in order to avoid disputes. Thereafter the appellant was issued show cause notice dated 25.3.2004 by the department requiring the appellant to show cause for payment of ₹ 37,44,287/- on account of excise duty along with interest and penalty. The appellant replied to the show cause notice explaining the reasons for the shortage of raw material as well as finished goods in the factory and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips (P) Ltd. reported in 2001 (137) ELT 198 (T); (iii) IPCL vs. CCE reported in 2005 (181) ELT 99 (T). It is his further submission that the shortage of finished goods has been observed not only in the stock lying in the factory but also in various depots. He also submitted that as regards shortage of finished goods at the factory, the appellant has already paid the duty of ₹ 21,315/-, ₹ 56,847/- and ₹ 49,765/- and intimated the department and the balance of shortage pertains to the stock lying in the depot, which is duty paid and no further duty is required to be paid and moreover, there is no allegation of goods removed without payment of duty in the show cause notice and there is no evidence to substantiate the clandestine removal of goods. He further submitted that the entire demand is time barred as it relates to financial year 1999-2000 and 2000-01 whereas the show cause notice was served on 26.3.2004 which is after a period of one year from the relevant date. He also submitted that the alleged demand in this case is based on shortages of raw material and finished goods as shown in form 3CD i.e. report under the Income Tax Act whereas the fact of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extract of the said circular is reproduced hereunder:- It is seen that vide Board s letters F. No. 261/11-A/2/76-CX.8, dated 13-12-1976 and F. No. 8/82/65-CX.3, dated 22-4-1968, it was clarified that all tanks for storage of bulk oil in the refineries as well as marketing installations must be measured both before and after each operation of either receipt into or discharge of oil from the tanks. The difference noticed in the dip readings measured between two operations should constitute the storage loss. 3. The handling losses on the other hand would mean those losses which takes place in the course of discharge of petroleum products from the storage tank into the tank wagon/tank lorry. For the purpose of accountal in RG. 1, quantity determined on the basis of difference of dip of the storage tank taken before and after discharge of petroleum products should be taken as the quantity removed. For the purpose of accountal in AR 3As and GP1s or GP2s or other clearance documents, quantity determined on the basis of difference of dip of the tank wagon/Tank lorry taken before and after filling should be taken as quantity cleared. The difference between the two quantities menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellants procured inputs in sealed railway rakes from the plants of Indian Oil Corporation and Hindustan Petroleum Corporation. The consigned quantity and the quantity of receipt are measured through manual measurement process and the difference between the consigned quantity and the quantity of receipt is on an average 2.42% as mentioned in the statement enclosed with the appeal marked Exhibit D. The oil is highly volatile in nature and is subject to change in quantum due to change in temperature and other atmospheric conditions. The measurements are taken on the manual basis and there will always be a tolerance error in measurement and the Modvat credit cannot be denied on such difference in weight or measurements under Rule 57A of the Central Excise Rules, 1944. Similar view has been expressed in the case of Commissioner of Central Excise, Rajkot v. Bombay Dyeing Mfg. Co. Ltd. reported in 1998 (97) E.L.T. 101 (Tribunal). In the present case, the minor shortage of the inputs was due to dryage and due to handling is sufficient and logical reasons shown by the appellants. The duty has been taken does not exceed the duty paid on the invoices merely because after receipt it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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