Exemption for Public Distribution System goods depends on intended destination, not incidental pipeline use, CESTAT held.

Skimmed kerosene oil cleared as interface or intermix in a pipeline was held eligible for exemption under the notification covering goods intended for sale through the Public Distribution System. CESTAT Bangalore applied its earlier order in the assessee's own case and held that entitlement depended on the intended destination of the goods, not on their incidental physical use during pipeline transport. The department's objection that the goods were not actually used in the Public Distribution System was rejected, the exemption was allowed, and the demand confirmation was set aside.

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Issues: Whether skimmed kerosene oil cleared as interface/intermix in the pipeline was eligible for exemption under the notification for goods intended for sale through the Public Distribution System.

Analysis: The dispute turned on the applicability of the exemption notification and the accompanying circular to SKO used only as interface during transportation. The Tribunal followed its earlier order in the assessee's own case and held that eligibility under the notification depended on the intended destination of the goods and not on their actual physical use during pipeline operations. The department's objection based on alleged non-use in the Public Distribution System was therefore not accepted.

Conclusion: The exemption was held applicable and the appeal was allowed in favour of the assessee.

Final Conclusion: The demand confirmation was set aside and the assessee succeeded on the exemption issue.

Ratio Decidendi: Where an exemption notification turns on goods being intended for sale through the Public Distribution System, eligibility is determined by the intended destination of the goods and not by their incidental use as interface during transport.

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