Condonable transit loss for petroleum products up to 1% was recognised, barring duty demand on the inevitable warehouse movement loss.

Transit loss of volatile petroleum products moving from a refinery to a bonded warehouse was treated as partly inevitable, and loss up to 1% was regarded as condonable under the Board's circular dated 30.10.1985. The earlier withdrawal of the general warehousing provision did not displace the export warehousing facility for petroleum products, and prior decisions were relied on to support the same treatment. Duty demand was therefore not sustainable to the extent of the condonable loss, and the assessee obtained relief on that limited issue.

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Issues: Whether transit loss of petroleum products occurring during movement from the refinery to the bonded warehouse could be condoned to the extent of 1% and whether duty could be demanded on such loss.

Analysis: The loss occurred in the course of transporting volatile petroleum products, where some transit loss was treated as inevitable. The Board's circular dated 30.10.1985 permitted transit loss up to 1%, and the earlier withdrawal of the general warehousing provision did not displace the export warehousing facility for petroleum products. The Tribunal also noted prior decisions allowing the same benefit.

Conclusion: Transit loss up to 1% was condonable and no duty demand survived to that extent; the assessee's appeal was allowed.

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