Interpretation of 'for use' in excise exemptions for public distribution where pipeline mixing occurred; appeal dismissed

Interpretation of 'for use' is treated as 'intended for use' for central excise exemption claims where goods are cleared for the public distribution system; such clearance retains exemption even if consignments intermingle during pipeline transport, provided there is no evidence of clandestine removal or diversion, in which case recovery on mixed consignments may be warranted. The tribunal applied the Supreme Court's reasoning on the scope of 'for use' and found the demand in the show cause notice without merit, resulting in dismissal of the appeal.

---

---

Issues: Whether, for goods cleared at nil rate under Notification No. 12/2012-CE, the expression "for use" requires proof of actual end-use as opposed to intended use, and whether central excise duty can be recovered on SKO lost by inevitable intermixing during pipeline transport.

Analysis: The Tribunal examined the scope of the phrase "for use" in the notification in light of the Supreme Court ruling in State of Haryana v. Dalmia Dadri Cement Ltd., which held that "for use" means "intended for use" and does not require proof of actual subsequent use where there is no evidence of fraudulent certificates or clandestine diversion. Applying that principle, the Tribunal found the goods in question were cleared with the intention of use in the public distribution system; there was no evidence of clandestine removal, no end-use condition attached to the exemption, and the revenue failed to establish the quantity/content of SKO in intermixing (no sampling or laboratory report). The Tribunal therefore concluded the demand for recovery of duty on account of inevitable intermixing lacked merit.

Conclusion: The appeal is dismissed and the demand for recovery of central excise duty on SKO arising from intermixing is rejected; decision is in favour of the assessee.

---