Tribunal adjusts duty payments for excise duty on petroleum products in pipeline

The Tribunal partially allowed the appeal, setting aside the penalty imposed under Rule 25 of the Central Excise Rules, 2002. It directed the adjustment of later duty payments against the demand for non-payment of excise duty on petroleum products in the pipeline during de-bonding of storage tanks in 2002. The Tribunal found the duty demand for 2002 sustainable, considering the products were cleared when other duty-paid products were pumped through the pipeline. It also noted the duty had been paid in full for the disputed quantity in 2004, exceeding the 2002 demand, and ordered action on the adjustment of duty payments and pending refund claims.

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Issues:
Non-payment of excise duty on petroleum products in the pipeline during de-bonding of storage tanks; Imposition of penalty under Rule 25 of Central Excise Rules, 2002.

Analysis:
The appeal challenged an order by the Commissioner (A) Customs, Cochin, regarding the non-payment of excise duty on petroleum products in the pipeline during the de-bonding of storage tanks. The appellants, engaged in manufacturing and marketing petroleum products, had de-bonded two tanks storing MS and HSD on 6.9.2002 without paying duty, while SKO and Naphtha tanks remained bonded. The Revenue demanded duty on the MS and HSD in the pipeline during de-bonding, arguing that all products in the common pipeline should have been de-bonded. The original authority confirmed a duty demand of &8377; 19,97,845 and imposed a penalty of &8377; 2 lakh. The Commissioner (A) upheld the duty demand for 2002 but noted that the demand for 2004, when warehousing provisions were withdrawn, was not sustainable as duty had been paid in full. The appellant contended that they had paid more duty in 2004 than the demanded amount for 2002, even though de-bonding the pipeline was not done. They argued for interest liability at most, with a potential refund of excess payment.

The appellant's counsel argued that the duty on the disputed quantity was discharged in 2004 when warehousing provisions were withdrawn, resulting in a higher duty payment than the 2002 demand. They emphasized that the duty paid in 2004 was significantly more than the current demand. The counsel also disputed the penalty under Rule 25, stating the appellant, a Public Sector Undertaking, had followed warehousing provisions diligently for years without intent to evade duty.

The Revenue contended that the pipeline should have been de-bonded along with the storage tank in 2002, regardless of later duty payments. They supported the lower authority's findings.

After hearing both sides, the Tribunal acknowledged that duty had been paid in 2004 for the disputed quantity, exceeding the 2002 demand. While the MS and HSD in the pipeline were technically not in bond on 6.9.2002, an equivalent quantity was presumed to be in the pipeline. The Tribunal found the duty demand for 2002 sustainable as the products were cleared when other duty-paid products were pumped through the pipeline. The Tribunal directed the adjustment of latter duty payments against the current demand, along with applicable interest. The penalty under Rule 25 was set aside due to the absence of evidence indicating an intent to evade duty.

In conclusion, the appeal was partially allowed, setting aside the penalty, and the Tribunal directed further action regarding the adjustment of duty payments and pending refund claims.

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