TaxTMI 
TaxTMI 
2019 (7) TMI 165
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....ry which are connected to five section lines. Petronet MHB Ltd. (jointly owned by HPCL, ONGC and MRPL) are responsible for transporting petroleum products after clearance from refinery to oil marketing companies at Hasan. After clearance from the refinery, Petronet transfers all the products through a single Petronet MHB Pipeline (cross country pipeline) in a particular sequence i.e. HSD 3- HSD 4- HSD 3- SKO - MS 3 - SKO - HSD 3 in batches. The liquid that forms between batches is called transmix or interface which is essentially an intermix between adjacent products of differing density/viscosity moving through the same pipeline. SKO is used as intermediary/plug to separate both products i.e. HSD and MS. On receipt of the products at Hasan by pipeline, HPCL takes MS-SKO interface into MS tank and HSD - SKO interface into HSD tank and sold as MS or HSD as the case maybe. The interface of SKO constitutes around 0 to 2% of the total volume. Revenue contends that a portion of the SKO is not used for the intended clearance for previous system and as such exemption contained in Notification No. 12/2012 dated 17.03.2012 is not applicable and in terms of CBEC Circular No. 63/27/2002-CE da....
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....CCE, Panchkula - 2016 (341) ELT 328 (Tri.) held that an item is required to be assessed in the form it is cleared from manufacturer's factory and not on the basis of the its future use, after clearance, unless it is requirement of entry. 2.1. The Learned Counsel further submits that the appellants have rightly availed the benefit of notifications No. 4/2006 & 12/2012 as the case maybe. As per the wordings of the Notification, the intention of the legislature was to exempt Kerosene cleared for ultimate sale to PDS from levy of Excise Duty. The thin line of difference between actual use and intended use has to be appreciated in order to decide the eligibility of the assessee to the exemption. Hon'ble Supreme Court in the case of State of Haryana Vs Dalmia Dadri Cement Ltd. - 2014 (178) ELT 13 (SC) held that the expression "for use" is to be construed to mean "intended for use". Therefore, in the present instance, the expression "for ultimate sale through PDS" has to be construed to mean "intended for sale". The Notification does not put any condition that it needs be actually sold through PDS, it is not permissible to read into the Notification the conditions which are absent in t....
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....vour of the appellants therein i.e. BPCL, on identical facts. Therefore, there is nothing wrong in the appellants having a bona fide belief of the activity done by them to be correct. He relied upon the following cases: (i) CCE Vs Chemphar Drugs & Liniments - 1989 (40) ELT 276 (SC). (ii) Padmini Products Vs CCE - 1989 (43) ELT 195 (SC). (iii) Pusham Pharmaceuticals Company Vs. CCE, Bombay - 1995 (78) ELT 401 (SC). (iv) Ugam Chand Bhandari Vs CCE - 2004 (167) ELT 491 (SC) (v) Escorts Ltd. Vs CCE, Ahmedabad - 2015 (319) ELT 406 (SC). He further submits that the appellants are a subsidiary of ONGC, a Public Sector Undertaking under the administrative control of the Ministry of Petroleum and Natural Gas. Therefore, mala fide cannot be attributed as there cannot be any intention to evade payment of duty. He relies upon the following decisions: (i) Bharat Electronic Ltd. Vs CCE, Meerut - 2004 (165) ELT 485 (SC). (ii) Hindustan Insecticides Ltd. Vs CCE, Delhi - 2017 (6) GSTL 218 (Tri. Del.). (iii) CCE, Indore Vs Nepa Ltd - 2013 (298) ELT 225 (Tri. Del.). (iv) CCE Vs Chennai Petroleum Corporation of India -....
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....ded together. Learned counsel for the appellants, reacts saying that the issue is otherwise decided by the tribunal as cited by him and that their reliance on the order was to bring home the point that if a commissioner could decide the matter in appellants favour in 2018/19, the appellants could have bona fide belief of that they are not required to pay any further duty on SKO used as interface. 4. Heard both sides and perused the records of the case. Brief issues for consideration in the instant case is as to whether the appellants are liable to pay excise duty on the part of the SKO, which is used as interface for pumping HSD/MS, after clearance from their availing of an exemption meant for SKO for sale in PDS and whether the demand raised by Revenue is barred by time. Factual matrix of the case is already explained above. The department relies on the circular of 2002 and seeks duty on that part of the SKO, which is used as interface for pumping HSD/MS SKO, as applicable to MS/HSD as the case may be in terms of the CBEC Circular of 2002. 5. We find that Co-Ordinate Bench of tribunal at Ahmedabad had dealt a case with identical facts, in the case of IOCL Vs CCE & ST, Vadoda....
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....o the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or iii. which, in relation to the goods specified in Third Schedule involves packing or re-packing of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;" From the reading of the above clause, it is clear that the activity specified in the said clause (iii) will amount to manufacture only in respect of the goods specified under Third schedule. It is undisputed that the products of the appellant are not specified under third schedule, therefore, whatever activity mentioned in clause (iii) shall not apply to the goods which are not specified in Third schedule. For this reason, intermixing of SKO with HSD/MS does not amount to manufacture. 6. As per our above discussion, the differential duty demand raised on interface quantity of SKO is clearly not sustainable. Hence, the impugned orders are set-aside and the appeals are allowed. 10. The dispute in the present case is arising in respect of SKO (PDS) which after it....
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.... appellants premises, albeit availing an exemption. Revenue seeks to demand duty in view of the fact that a part of the SKO is not used for intended clearance and gets mingled with MS/HSD. What has been cleared by the appellants at the factory is undisputedly, SKO for use in PDS system. If some quantity of the SKO is not used for the intended purposes, after clearance, duty cannot be demanded from the appellants. In view of the case law cited above, we find that there is force in the appellant's contention. 1 6. The appellants contended further that they have cleared the SKO, availing the Notifications 4/2006 or 12/2012, for ultimate sale to PDS. They contend that 'for sale' should be read as 'intended to sale' as held by Apex Court in the case of M/s Dalmia Dadri Cement Ltd (supra). The Notification exempts the SKO cleared for ultimate use and no other conditions which are to be fulfilled by the appellants are attached. Therefore, in view of the case law cited above, duty cannot be demanded on the portion of SKO subsequently used as interface beyond the appellants' premises. 7. In view of our discussion in the foregoing paras, we find that the issue is no longer Res Integra ....
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....e of Bharat Electronics Ltd (Supra) intention to evade payment of duty cannot be alleged in case of Central Government undertaking. We find that Apex Court held, in the case of Chennai Petroleum Corporation (supra), that 7. The question still remains as to whether the Department was right in invoking the extended period of limitation under Section 11A of the Central Excise Act. In this connection, we are of the view that there was no suppression on the part of the assessee. As stated above, the assessee is a Public Sector Company. It is owned by the Government of India. The Department was aware that the assessee was a refinery. Nothing prevented the Department from visiting the site. Nothing prevented the Department from inquiring into the process within the refinery in the matter of production of naphtha, Sulphur and electricity. Generation of electricity was also used for the running of the refinery. The electricity was supplied to Tamil Nadu Electricity Board (partly). In the circumstances, there was no suppression on the part of the assessee and, therefore, we are of the view that the Department was wrong in invoking the extended period of limitation under the show-cau....