Transit loss tolerance for petroleum products barred duty demand on shortage within the accepted limit.

Duty demand on shortage of petroleum products found at the buyer's end was treated as unsustainable because the shortage was below 0.5% of the clearance quantity and within the accepted transit loss tolerance for petroleum products. The text notes that the High Court, in the appellant's own case, had recognised transit loss up to 1% by relying on the CBEC circular. On that basis, the shortage fell within the permissible limit, the proceedings were not warranted, and the demand could not be sustained.

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Issues: Whether duty demand could be sustained on shortage of petroleum products found at the buyer's end when the shortage was within the permissible transit loss limit.

Analysis: The shortage was less than 0.5% of the clearance made by the appellant. In the appellant's own case, the High Court had recognised transit loss up to 1% for petroleum products, relying on the CBEC circular. On that basis, the shortage in the present case fell within the accepted tolerance limit and the demand could not be justified.

Conclusion: The proceedings were not warranted and the demand could not be sustained. The appeal was allowed and the impugned order was set aside.

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