Tribunal allows appeal on duty demand for Lube Base Oil transit loss

The Tribunal allowed the appellant's appeal, setting aside the duty demand imposed for receiving less quantity of Lube Base Oil than stated in the invoices during transportation. It held that transit loss, within permissible limits, is applicable to goods like Lube Base Oil, justifying the appellant's entitlement to input credit based on the invoiced quantity. The decision emphasized the recognition of quantity loss due to evaporation in goods transported through pipelines, aligning with previous judgments supporting such allowances.

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Issues:
- Duty demanded on less receipt of goods than mentioned in the invoices
- Entitlement to Cenvat credit on the differential quantity due to transit loss

Analysis:
1. Duty Demand on Less Receipt of Goods:
The appellant, a manufacturer of petroleum products, appealed against an order demanding duty due to receiving less quantity of Lube Base Oil than mentioned in the invoices during transportation. The revenue contended that the appellant, having received less quantity as per the invoices, should not be entitled to Cenvat credit on the differential quantity. A show cause notice was issued, and the demands were confirmed along with interest and penalty. The appellant challenged this order.

2. Contentions and Submissions:
The appellant argued that Lube Base Oil, being a petroleum product, is subject to evaporation or weighment differences during transportation, and a transit loss of 1% is permissible based on a judgment by the Hon'ble High Court of Bombay. Therefore, they claimed entitlement to input credit as per the invoiced quantity. On the contrary, the revenue argued that transit loss on Lube Base Oil is not permissible as it is not a volatile product like Naphtha, citing a previous judgment in the appellant's case.

3. Judgment and Analysis:
After hearing both sides, the Tribunal considered the submissions. It was noted that goods like Lube Base Oil, transported through pipelines, are prone to quantity loss due to evaporation. Referring to the previous judgment by the Hon'ble High Court of Bombay, it was established that transit loss can be allowed for such goods. The Tribunal found the transit loss in this case, varying from 0.01% to 0.72%, to be within permissible limits. Consequently, the Tribunal held that the appellant is entitled to input credit based on the invoiced quantity. The impugned order demanding duty was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal's decision emphasized the allowance of transit loss for goods like Lube Base Oil during transportation, leading to the appellant's entitlement to input credit as per the invoiced quantity.

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