Tribunal overturns duty demand on intermingled petroleum products, ruling in favor of appellant

The Tribunal set aside the demand for duty on intermingled petroleum products classified as MS, ruling in favor of the appellant, a PSU. The appellant successfully argued that duty should be paid based on the applicable rate at the time of removal and presented evidence of the intermingled products meeting HSD specifications. The Tribunal noted industry practices and BIS standards supporting the appellant's position, ultimately concluding that the duty was correctly paid after downgrading the intermingled products to HSD. The appeal was allowed, and the demand for differential duty and penalty were overturned.

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Issues:
Demand of duty on intermingled/ interface quantity of petroleum products and classification as HSD.

Analysis:
The appeal was filed against an order by the Commissioner of Customs, Central Excise, and Service Tax regarding the demand of differential duty on intermingled petroleum products. The appellant, a PSU, received non-duty paid petroleum products through pipelines and stored them in a warehouse. The products were transferred through pipelines in a specific sequence, leading to intermixing of products like SKO and MS. The adjudicating authority demanded duty on intermingled products classified as MS, resulting in the appeal.

The appellant argued that duty is payable on excisable goods only upon removal and that duty should be paid based on the applicable rate at the time of removal. They presented test reports confirming HSD specifications for intermingled products, stating that in the petroleum industry, intermixed products are downgraded and cleared as HSD as per BIS standards. The appellant highlighted a previous order in their favor on a similar issue and contended that the duty was correctly paid after downgrading the intermingled products to HSD.

On the other hand, the Ld. AR supported the findings of the adjudicating authority based on a Board's Circular that suggested accepting the higher value in case of intermixing of products. After hearing both sides and examining the records, the Tribunal found that the main issue was the demand of duty on intermingled products classified as HSD. The Tribunal noted that the appellant had followed industry practices for discharging duty on petroleum products stored in the warehouse.

The Tribunal observed that the intermingled products were either upgraded or downgraded based on test reports confirming HSD specifications. They found that the Board's Circular did not provide guidelines for classifying intermingled products and that in the appellant's own case, a previous order had dropped proceedings on a similar issue. The Tribunal concluded that the appellant correctly discharged duty by downgrading the intermingled quantity to HSD oil, as per industry practices and BIS standards. Therefore, they set aside the demand for differential duty and the penalty imposed, allowing the appeal.

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