TaxTMI 
TaxTMI 
2023 (4) TMI 764
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....ch is a holding company of the appellant had leased out 11 tanks in their terminal at Muttam to the appellant. The finished products were transferred to the terminal at Muttam. It was noticed by DGCEI that appellant had not paid excise duty based on the quantity removed from their refinery, but they had accounted, prepared invoice and paid excise duty based on the quantity of petroleum products received into the leased tanks at Muttam terminal which is located outside the refinery. Thus, there was short payment of duty on the quantity cleared from their refinery when compared to that was received in the tanks at Muttam. Further, though the appellant had obtained permission for storage of the non-duty paid goods at Muttam terminal, the said permission was granted only till 2008. The appellant but continued to avail the facility without written permission from the Department. It appeared to the department that such permission even if allowed cannot form part of the R.G.1 stage (to consider the production quantity) and can only be treated as warehouse to store non-duty paid goods. 2. Secondly, the appellant had put underground pipeline from storage tanks located in their terminal at ....
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....nery, without payment of duty. There were dedicated pipelines for HSD, LSHS etc. for carrying the petroleum products from the refinery to the storage terminals. Excise duty was paid by IOCL, as and when they removed the petroleum products from the terminal. The warehousing facility for the petroleum products was withdrawn by the Government w.e.f. 06.09.2004 vide Notification No.17/2004-CE (N.T) dated 04.09.2004. Therefore, the appellant was required to clear the goods on payment of excise duty from the refinery itself. 7. The appellant was not having storage facility inside the refinery. Therefore, the appellant took the storage tanks of IOCL on lease for storage of their petroleum products. By this arrangement, the petroleum products could be taken through pipelines for storage at the leased tanks at Muttam. The appellant had applied and obtained permission from the Commissioner of Central Excise, Trichy under Rule 4 (4) of the Central Excise Rules, 2002 to store the non-duty paid petroleum products namely HSD, Naptha & LSHS in the leased tanks at Muttam. The department had granted permission upto 31.03.2005 and later was extended upto 31.03.2007 vide letter dated 14.03.2007 and ....
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....ion of demanding differential duty. Moreover, there is no allegation that the appellant has clandestinely removed any quantity without payment of duty. The department while quantifying the duty has calculated the duty only for quantities which were found in excess dispatched and those which were found as excess received were ignored, which is not correct. If the entire quantity sent from refinery and received at tanks for a year is taken as a sample data, it can be seen that appellant had, in fact, paid more duty on receipt quantity than that payable on dispatch quantity. There is no physical loss or shortage warranting payment of duty. Any loss is due to transit loss or human error in measurement, which is permissible if within limits prescribed. 11. Ld. Counsel submitted that during the relevant period, the quantification of duty on the petroleum products sold to oil companies was under confusion and a debatable issue due to difference in quantity at the time of transit. Due to recurring nature of the matter, certain guidelines were issued by the Ministry of Finance, Department of Revenue on 14.02.2014. Based on the Report No.17 of 2013 of the Comptroller and Auditor General (C ....
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....t has fully cooperated by paying part of the duty and interest when pointed out by the officers during investigation. Further, payment of duty for petroleum products when there is difference in quantity after transit to the terminals, was always a debatable issue and there were many litigations pending before various forums. The Department had to issue circular based on the Audit report of the Comptroller and Auditor General which also would establish that confusion prevailed at that time as to the manner in which the quantity of the products that are cleared from the refinery has to be calculated for the purpose of discharging Central Excise duty. The issue being interpretational in nature, the invocation of extended period is incorrect. So also, the appellants had not paid duty on pipeline quantity of naphtha on the bonafide belief that when the quantity is retained in the pipeline, it cannot be said to be cleared from the refinery. Thus, there is no suppression of facts to invoke extended period. Ld. Counsel submitted that for the same reasons, the penalty imposed is without any basis. He prayed that penalties imposed may be set aside. To support his argument on limitation and p....
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.... to variation in temperature, the dip method of measuring etc. Some times, there may be some excess quantity of petroleum product which is still in the pipeline and will result in showing excess quantity received at the terminal at Muttom. For these reasons, there has been confusion in the field as to the calculation of duty on the petroleum products which are cleared from the refinery and transported to the terminals of the Oil Marketing Companies. To obtain uniformity, the Department has issued a clarification dated 14.02.2014 on the basis of the Comptroller and Auditor General Report No.17 of 2013 in which it has been clarified as under : "The Department of Revenue, Ministry of Finance, Government of India in the 'Action Taken Note' on the above mentioned audit para has taken a view that 'the net quantity after adjusting the gain and loss on the quantity cleared from the Refinery to the quantity received at the terminals of the Oil Marketing Companies (OMCs) has to be considered for calculating the duty liability. Since the duty on the clearances during the entire month are to be paid by the 5th / 6th of the following month, the net quantity received at the end of the OMCs bas....
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....arketing Companies. The duty may be paid by the 5th/6th of the succeeding month on the net quantity based on the Joint Certification and the payment particulars may be intimated to this office along with detailed worksheet". In such circumstances, we deem it fit that the questions raised herein be left open and the matter remanded back to the original authority for re-working the issue as per the permission granted in the clarification issued by the Ministry. Accordingly, the appeals are disposed of, leaving it open to the appellant to produce materials before the original authority to carry out the reconciliation of the net loss/net gain . Parties are left to suffer their respective costs." The Tribunal in the case of Bharat Petroleum Corporation Ltd. Vs CC Cochin (supra) had considered a similar issue for the period prior to issuance of the clarification by the department. After taking note of the fact that the demand arises on account of difference in quantity between the quantity that is shown as despatched from the refinery and the quantity that is received at the terminal, the Tribunal held that the direction given by the department as per the said instructions of the Bo....
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.... petroleum products, which are volatile in nature, some times there may be loss in quantity at the time of receipt at terminal. Likewise, there may be receipt of excess quantity reaching the terminal as some quantity may be retained in the pipeline. After considering these situations, based on the C&AG Report, the department has issued clarification that net quantity after adjusting the gain and loss has to be taken for demand of duty. Though this clarification is dated 14.02.2014, we are of the considered opinion that the said method has to be applied for the disputed period also being a clarification issued by the department. All the details with regard to the quantity despatched from the refinery as well as the quantity received at the terminal at Muttam are available in the annexure to the show cause notice. Therefore, we deem it fit to remand this issue to the original authority who is directed to re-quantify the duty liability in accordance with the clarification issued by the department. 19. The second issue is with regard to demand of duty on the pipeline quantity of Naphtha. According to the department, the quantity that is retained in the pipeline has to be construed a g....