Short-receipt duty demand on furnace oil fails where revenue cannot prove actual non-receipt despite temperature variation adjustment.

A duty demand on alleged short receipt of furnace oil and other oils procured under Chapter X procedure was found unsustainable because the department did not prove actual non-receipt of inputs. The assessee had produced reconciliation material, railway documents, a chartered accountant's certificate and invoice-wise quantity reconciliation, which negated the short-receipt allegation. The temperature variation allowance was treated as a volume recalculation under the ASTM table-based 15 C standard for petroleum products, not as evidence of transit loss or non-receipt. The legal point stated is that an invoice price adjustment or temperature-based reduction, by itself, does not establish non-receipt; the burden remains on revenue to prove actual shortage.

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Issues: Whether duty demand was sustainable on the alleged short receipt of furnace oil and other oils obtained under Chapter X procedure, and whether the temperature variation allowance reflected non-receipt of goods for the intended manufacture of exempt urea.

Analysis: The department's case rested on balance-sheet references to claims for short receipt and on the fact that the supplier had allowed a price adjustment described as temperature variation allowance. The record, however, showed that the assessee had placed reconciliation material, railway-related documents, and a chartered accountant's certificate before the adjudicating authority, and the statement furnished in appeal indicated invoice-wise reconciliation of quantities. On that basis, the alleged short receipt was not proved. As to the temperature variation allowance, the Board circular adopted ASTM table-based volume reduction at 15 C for petroleum products, and the allowance represented a recalculation of volume rather than a transit loss or proof that goods were not received.

Conclusion: The demand was not sustainable. The finding that there was no established short receipt and that the temperature variation allowance did not show non-receipt of inputs was upheld in favour of the assessee.

Ratio Decidendi: A duty demand for alleged short receipt of inputs cannot be sustained merely from an invoice price adjustment or temperature-based volume reduction unless the department proves actual non-receipt; the burden of proof remains on the revenue.

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