2021 (11) TMI 114

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.... the appellant determined the interface quantity of Superior Kerosene Oil (SKO for short) which was supplied through pipeline with Motor Spirit (MS for short) and High Speed Diesel (HSD for short). The appellant paid duty on such interface quantity of adopting assessable value of SKO (non Public Distribution System (PDS) at the prevalent rate. The case of the department is that the appellant, instead of paying excise duty on the interface quantity of SKO as per rate prevalent for SKO, they should have paid excise duty higher of the two duties, after determining the duty payable on SKO and duty payable on MS/HSD. The contention of the department is solely based on CBEC Circular No. 636/27/2002-CX dated 22.04.2002 which is issued under F. No.....

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....and SKO. Accordingly, the duty on these products is payable as per price of the respective product prevailing at the time of removal of the goods. As regards MS and HSD, the duty was paid on the transaction value. As regards SKO, since the same was not sold, the duty was paid on the prevailing price of SKO on the basis of sale price prevailing for SKO naturally which is higher than the price of SKO sold under Public Distribution System, therefore, the correct price was adopted by the appellant while clearing the interface quantity of SKO. The sole reliance of the Adjudicating Authority is on the Board Circular dated 22.02.2002, which is reproduced below:- "Petroleum products movement through pipeline - Rate of duty on intermixed qu....

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....itigation. The existing instructions vide Board's letter F. No. 21/13/66-CX. III, dated 20-3-67 and F. No. 11A/9/70-CX.9, dated 27-3-1973 accept the off-setting of gain observed in one product against loss observed in another product. Though in the scheme of accountal of one product for the other, the duty payable on the interface SKO (comingled products) taken as MS or HSD is presently more than the duty liability on the shortage of imported SKO, however, the situation can be reverse also. Furthermore, it is a fact that the SKO imported under concessional duty is not fully utilised for the intended purpose and in such case, the concessional duty cannot be extended. The Board is therefore, of the view that in the event of inter mixing of th....

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....isting law but cannot create law by itself. Therefore, the above Board Circular dated 22.04.2002 having without support of any Act or Rule, is not binding on the assessee. 5. As regards the issue that after removal of goods, intermixing of SKO with MS/HSD amounts to manufacture, we find that there is no charge in the show cause notice that the activity of supplying HSD/MS with interface SKO amounts to manufacture. Therefore, on this point, the adjudication order travelled beyond the scope of show cause notice which is not permissible in the law. The adjudicating authority has relied upon clause (iii) of Section 2(f) for holding that activity amounts to manufacture, which reads as under:- " 2 (f) "manufacture" includes any ....