Clandestine Removal Not Proven, so duty demand failed where refinery tank-to-tank transfer showed only procedural non-compliance.

Duty demand could not be sustained merely because petroleum products were moved between interconnected refinery tanks without following the procedural requirements of Rule 143A. The record did not establish that the goods were cleared from the refinery without payment of duty, and there was no evidence of clandestine removal or any duty-free clearance outside the premises. Mere procedural non-compliance, without proof of actual removal of excisable goods, was held insufficient to uphold the demand. The impugned order was set aside and the assessee's appeals were allowed with consequential relief.

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Issues: Whether duty demand could be sustained on the premise that petroleum products had been "migrated" from one storage tank to another without following Rule 143A procedure, in the absence of evidence of clandestine removal.

Analysis: The demand was founded mainly on the alleged failure to comply with the procedure prescribed for blending or further processing under Rule 143A of the Central Excise Rules, 1944. The record, however, did not establish that the migrated quantity had been cleared from the refinery without payment of duty. The transfer termed as "migration" was explained as movement of product between interconnected tanks within the refinery, and there was no evidence of clandestine removal or of any duty-free clearance outside the refinery premises. Mere procedural non-compliance, without proof of removal, was insufficient to sustain the demand.

Conclusion: The demand of duty was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: A duty demand cannot be upheld merely for non-observance of refinery procedure where the department fails to prove clandestine removal or other actual clearance of excisable goods without payment of duty.

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