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TMI Blog2019 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent activities, if any, by the purchasers. At best, the department could have a case that certain quantity of SKO is not being used for intended purposes, subsequent to the clearance and that applicable duty on the same has escaped payment, at least as applicable to SKO, if not as applicable to MS/HSD - However, the issue not being the subject matter of the appeals, we refrain from coming to a conclusion on this issue. What has been cleared by the appellants at the factory is undisputedly, SKO for use in PDS system. If some quantity of the SKO is not used for the intended purposes, after clearance, duty cannot be demanded from the appellants. Time Limitation - HELD THAT:- There are sufficient reasons to believe that there could be bona fide belief on the part of the appellants. Therefore, extended period cannot be invoked - The SCN is based on a Circular issued in 2002. SCN is issued in 2014, a clear 12 years later. We find that nothing prevented the department from making suitable enquiries and to issue notice in even time. Moreover, no evidence of suppression of facts etc with intent to evade payment of duty has been placed on record. Therefore, the extended period i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued four SCNs which were confirmed by the Commissioner of Central Excise, Mangalore imposing equal penalties on the appellants and penalties under Rule 26 of Central Excise Rules, 2002 on individuals. Hence, the following appeals were filed. SI. No. Appeal No. SCN Date OIO date Period Covered Duty/Penalty (in Rs.) 1. E/20679/2015 02.12.2013 24.12.2014 11/2008 to 10/2013 56,93,40,593 2. E/20671/2016 01.12.2014/ 29.05.2015 16.12.2015/ 20.01.2016 11/2013 to 04/2014 05/2014 to 12/2014 68,63,373 20,08,21,192 3. E/21771/2016 01.12.2016 24.08.2016/ 14.09.2016 01/2015 to 09/2015 11,40,50,591 4. E/20680/2015 HPCL 02.12.2013 24.12.2014 - 6,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) held that the expression for use is to be construed to mean intended for use . Therefore, in the present instance, the expression for ultimate sale through PDS has to be construed to mean intended for sale . The Notification does not put any condition that it needs be actually sold through PDS, it is not permissible to read into the Notification the conditions which are absent in the Notification. He relied upon the following cases: (i) HMT Watch Factory I II Vs CC, Bangalore 2002 (148) ELT 1152 (Tri. Bang.). (ii) CCE, Pondicherry Vs Caterpillar India Pvt Ltd. 2013 (297) ELT 8 (Mad.). He submits that all the conditions of the Notifications are fulfilled, benefit of the same cannot be denied for an eventuality beyond the control of the appellants. He relied upon the following decisions: (i) CCE, New Delhi Vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC). (ii) CCE, Chennai-II Vs Malavika Metals (P) Ltd. 2008 (230) ELT 469 (Tri. Chennai). 2.2. The Learned Counsel also submits that duty has to be paid on the products as it existed at the time of removal. In the instant case, the intermixing between SKO and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Gas. Therefore, mala fide cannot be attributed as there cannot be any intention to evade payment of duty. He relies upon the following decisions: (i) Bharat Electronic Ltd. Vs CCE, Meerut 2004 (165) ELT 485 (SC). (ii) Hindustan Insecticides Ltd. Vs CCE, Delhi 2017 (6) GSTL 218 (Tri. Del.). (iii) CCE, Indore Vs Nepa Ltd 2013 (298) ELT 225 (Tri. Del.). (iv) CCE Vs Chennai Petroleum Corporation of India 2007 (211) ELT 193 (SC). 2.4. He submits that as a consequence penalty under Section 11AC or Rule 25 cannot be imposed on the appellants. Regarding the penalty under Rule 26 imposed on M/s HPCL and Shri V.K. Jain, he submits that it is a settled position that Rule 26 is not applicable to a company inasmuch as said Rule contemplates elements of knowledge and belief attributable to a natural person. He relies upon Apple Sponge and Power Ltd. Vs CST, Audit-I 2018 (362) ELT 894 (Tri. Mum.) Kakateeya Fabs (P) Ltd. Vs CCE, Bhopal 2018 (15) GSTL 350 (Tri. Del.). He also submits that as there is no positive evidence against Shri. V.K. Jain that he involved in clearance of goods without payment of duty therefore penalty canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in PDS and whether the demand raised by Revenue is barred by time. Factual matrix of the case is already explained above. The department relies on the circular of 2002 and seeks duty on that part of the SKO, which is used as interface for pumping HSD/MS SKO, as applicable to MS/HSD as the case may be in terms of the CBEC Circular of 2002. 5. We find that Co-Ordinate Bench of tribunal at Ahmedabad had dealt a case with identical facts, in the case of IOCL Vs CCE ST, Vadodara (Supra), The Bench observed on the applicability of the circular as follows. 4. .On careful reading of the above Circular, we find that the Circular suggests that even on clearance of SKO, the price of HSD/MS should be applied. However, this proposal of the Board Circular does not flow from any statutory provision. As discussed above, the appellant have correctly applied the price of respective goods cleared from the factory at the time of removal. Therefore, we do not find any support of any statutory provisions in the Board Circular. The Hon'ble Supreme Court time and again held that the board Circular cannot vitiate the law or the Board Circular cannot be issued contrary to the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, whatever activity mentioned in clause (iii) shall not apply to the goods which are not specified in Third schedule. For this reason, intermixing of SKO with HSD/MS does not amount to manufacture. 6. As per our above discussion, the differential duty demand raised on interface quantity of SKO is clearly not sustainable. Hence, the impugned orders are set-aside and the appeals are allowed. 10. The dispute in the present case is arising in respect of SKO (PDS) which after its clearance from the refinery, got inter mixed with MS/HSD during the process of transportation through the pipeline. Such SKO (PDS) has been used as a buffer between transportation of MS and HSD. The portion of SKO which has got inter mixed has been accounted as MS or HSD at the other end of the pipeline, depending upon its character. In the result, the portion of SKO which got inter-mixed is no longer available as SKO. This resulted in increase in the quantum of MS/HSD accounted at the other end. While there is no dispute regarding the payment of duty in the increased quantity of MS/HSD, the Department was of the view that the quantum of SKO not accounted as such at the other end, is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale should be read as intended to sale as held by Apex Court in the case of M/s Dalmia Dadri Cement Ltd (supra). The Notification exempts the SKO cleared for ultimate use and no other conditions which are to be fulfilled by the appellants are attached. Therefore, in view of the case law cited above, duty cannot be demanded on the portion of SKO subsequently used as interface beyond the appellants premises. 7. In view of our discussion in the foregoing paras, we find that the issue is no longer Res Integra on merits. We find that the issue is squarely settled by the coordinate bench at Ahmedabad in the case of IOCL Vs CCE Vadodara (supra). The ratio was followed by Kolkata Bench in the case of Numaligarh Refinery Ltd Vs CCE Shillong. We also find that the goods are to be assessed in the form they are cleared from the factory and as the appellants have satisfied the conditions of Notification at the time of removal of goods from factory, duty cannot be demanded from them for subsequent activities, if any, by the purchasers. At best, the department could have a case that certain quantity of SKO is not being used for intended purposes, subsequent to the clearance and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department from visiting the site. Nothing prevented the Department from inquiring into the process within the refinery in the matter of production of naphtha, Sulphur and electricity. Generation of electricity was also used for the running of the refinery. The electricity was supplied to Tamil Nadu Electricity Board (partly). In the circumstances, there was no suppression on the part of the assessee and, therefore, we are of the view that the Department was wrong in invoking the extended period of limitation under the show-cause notice dated 22nd December, 1998 for the period December 1993 to July 1998. The demand to that extent is beyond limitation. The assessee succeeds in that regard. 9. In view of the above, we find that the appellant s contentions are acceptable. The Show Cause Notice is based on a Circular issued in 2002. Show Cause Notice is issued in 2014, a clear 12 years later. We find that nothing prevented the department from making suitable enquiries and to issue notice in even time. Moreover, no evidence of suppression of facts etc with intent to evade payment of duty has been placed on record. Therefore, we find that the extended period is not invokabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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