Storage loss in bonded tanks must be computed on opening balance plus monthly receipts, not closing book balance.

Storage loss in bonded tanks had to be computed on the total quantity consisting of the opening balance plus receipts during the month, in line with the Board's circular on monthly accounting of storage losses. The Department's method of calculating shortage against the closing book balance was contrary to the prescribed basis. Applying the circular, the lower authorities found the loss within the permissible limit and the issue was decided in favour of the assessee.

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Issues: Whether storage loss in bonded tanks was to be computed with reference to the opening balance plus receipts during the month, or by taking the shortage against the closing book balance.

Analysis: The Board's circular on monthly accounting of storage losses prescribed that the percentage of loss must be calculated on the total quantity consisting of the opening balance and the quantity received during the month. The lower authorities applied that circular and found the loss to be within the permissible limit. The departmental method of calculating loss against the closing book balance was contrary to the circular and the prescribed basis for computation.

Conclusion: The issue was decided in favour of the assessee and against the Department.

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