Cumulative transit loss assessment allowed where overall naphtha shortage stayed within permissible tolerance, defeating duty demand.

Transit loss in the movement of naphtha sent to multiple destinations was required to be assessed on a cumulative basis across all loading and unloading points, not destination-wise in isolation. Excess discharge at one destination and short discharge at another could not be treated as separate taxable transit gain and loss events when the overall quantities showed a net loss within the permissible tolerance. On the aggregate and monthly calculations, the loss remained within the 1% limit and within the circular-based condonation guidelines, so the duty demand and interest could not be sustained. The impugned orders were quashed and the amount recovered was directed to be refunded.

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Issues: Whether transit loss in the movement of naphtha was to be computed destination-wise or on the basis of the total quantity loaded and unloaded at all destinations taken together, and whether duty demand could be sustained when the overall loss was within the permissible limit.

Analysis: The quantity loaded from Mumbai and the quantity ultimately unloaded at the three destinations had to be viewed cumulatively for determining transit loss. Merely because one destination showed excess discharge and another showed short discharge, it could not be said that there was a taxable transit gain at one place and transit loss at another. On the overall figures, the total loss was within the 1% permissible limit. The monthly and aggregate calculations also showed that the loss remained condonable under the applicable circular-based guidelines.

Conclusion: The duty demand and interest could not be sustained, as the assessee's overall transit loss was within the permissible limit.

Final Conclusion: The impugned orders were quashed and the amount recovered from the assessee was directed to be refunded.

Ratio Decidendi: Transit loss for a consignment moved to multiple destinations must be determined on an overall cumulative basis, and a demand cannot be sustained where the aggregate loss remains within the permissible tolerance.

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