TaxTMI 
TaxTMI 
2026 (2) TMI 331
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....er section 11AA of the Central Excise Act and penalty under section 11AC(1)(a) of the Central Excise Act. 2. The appellant is engaged in the manufacture and clearance of ATF classified under Chapter 27 of the Central Excise Tariff Act, 1985 [the Central Excise Tariff Act] For operational reasons, the ATF intended for supply as fuel to foreign going aircraft cannot be dispatched directly from the refinery to such aircrafts. It is, therefore, cleared to various warehouse facilities across India, all of which are separately registered under rule 9 of the Central Excise Rules, 2002 [the 2002 Rules] or the Central Excise Rules, 2017 [the 2017 Rules] These warehouses store ATF and upon requisition from airlines, dispatch it to the foreign going aircraft through mobile tankers. 3. According to the appellant, the procedural framework adopted by the appellant is that the concerned warehouse obtains Form CT-2 certificate from the jurisdictional excise authority and forwards the same to the appellant. The refinery of the appellant then clears ATF to the warehouse without payment of excise duty following the procedure prescribed under Circular No. 804/1/2005-CX dated 04.01.2005. This Cir....
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....le to penalty under section 11AC(1)(a) of the Central Excise Act. 6. The appellant filed a detail reply to the show cause notice and denied the allegations made therein. 7. However, the Principal Commissioner, by order dated 27.11.2024, confirmed the entire duty demand as proposed in the show cause notice with interest and penalty was also imposed under section 11AC(1)(a) of the Central Excise Act. The reasons assigned for confirming the order are: "30. I have gone through the SCN, relied upon documents, written submission of noticee and record of personal hearing. The issues to be decided by me are as follows: (i) Whether the noticee was entitled to duty free clearance from the refinery/factory? (ii) Whether the noticee was entitled to clear Aviation Turbine Fuel (herein referred to as ATF) without payment of duty from the factory to the warehouse? (iii) Whether interest can be demanded from the noticee? (iv) Whether penalty can be imposed upon them under section 11AC(1)(a) of the Central Excise Act? 31. Regarding point no. 1, the duty free clearances can be done under Rule 19 or under an exemption notification. Rule 19 o....
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....4.09.2004 with effect from 06.09.2004. ***** ***** From comparison of Notification No. 47/2001-CE (NT) dated 26.06.2001 and successor Notification No. 17/2004-CE (NT) dated 04.09.2004, it is evident that Sl. No. 1 of Notification No. 47/2001CE (NT) dated 26.06.2001 (which included ATF) was removed. Thus, the facility of removal of ATF without payment of duty from the factory of production to a warehouse or from one warehouse to another warehouse was withdrawn with effect from 09.09.2004. ***** 34. The noticee has also stated that under Rule 16(3) of Central Excise Rules 2017, the responsibility for payment of duty on the goods that are removed from the factory of production to a warehouse shall be upon the consignee. In this regard, I note that both the refinery/factory and the warehouses belong to M/s Bharat Petroleum Corporation Ltd. Since, the Company is the same it does not matter whether the duty is demanded from the BPCL refinery or BPCL warehouse." (emphasis supplied) 8. This appeal has been filed to assail this order of the Principal Commissioner. 9. Shri Gopal Mundhra, learned counsel for the appellant made the following submiss....
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....ule 19 itself is not applicable for ATF by virtue of the proviso added to the rule 19, the Notification automatically becomes inapplicable in the case of the appellant; (ii) The appellant is not correct in contending that amendment to rule 19 does not impact rule 20 or Notification No. 46/2001. Two Notifications were issued under rule 20, namely, Notification No. 46/2001 dated 26.06.2001 which extends facility of removal of goods to warehouse and consequent export under rule 19 and Notification No. 47/2001 dated 26.06.2001 which extends facility of movement of goods specified therein from one warehouse to another without payment of duty. The former Notification dated 26.06.2001 is not applicable in case of the appellant by virtue of the proviso added to the rule 19 and the later Notification is also not applicable in case of the appellant as ATF is not a specified good under the said Notification. Therefore, the appellant was required to remove the goods on payment of central excise duty but it failed to do so; (iii) The contention of the appellant that the exemption claimed by them under Notification No. 08/2022 is justified is incorrect. The said Notification ex....
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....craft. Rule 18 of the 2017 Rules is identical. 16. Rule 19 of the 2002 Rules deals with export without payment of duty and is reproduced below: "19. Export without payment of duty.- (1) Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Principal Commissioner or Commissioner, as the case may be. (2) Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, for use in the manufacture or processing of goods which are exported, as may be approved by the Principal Commissioner or Commissioner, as the case may be. (3) The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board." 17. Rule 19 of the 2017 Rules is identical. 18. Rule 20 of the 2002 Rules deals with warehousing provisions and is reproduced below: "20. Warehousing provisions.- (1) The Central Government may by notification, extend the facility of removal of any....
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....port procedure governing the movement of goods to which warehousing provisions have been extended by the Central Government by Notification No. 47/2001 date 26.06.2001. It clarified the export procedure under ARE-1/ARE-3, including movement of goods through intermediate warehouses and use of Form CT-2. 23. Circular No. 581/18/2001 dated 29.06.2001 was also issued by the Central Government clarifying conditions for export under bond from warehouse including evidentiary requirement and documentary co-relation between removal and export. 24. Notification No. 17/2004 dated 04.09.2004 was issued by the Central Government amending Notification No. 47/2001 dated 26.06.2001 by withdrawing the facility of warehouse-to-warehouse transfers of petroleum products like ATF. 25. Circular No. 798/31/2004 dated 08.09.2004 was issued clarifying that even after restriction on petroleum products under Notification No. 47/2001, warehousing for export on such products remains valid under Notification No. 46/2001. The relevant portion of the Circular is reproduced below: "CIR NO. 798/31/2004-CX. DT. 08/09/2004 Export Warehousing Facility to petroleum products I am directed to s....
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....asis supplied) 26. Circular No. 804/01/2005 dated 04.01.2005 was also issued in view of logistical constraints in directly fuelling international flights. It permitted use of intermediate storage tanks registered as bonded warehouses under rule 9 for supply of ATF to foreign going aircraft, provided documentation is maintained. 27. Notification No. 02/2022 dated 30.06.2022 was issued by the Central Government amending rules 18 and 19 of the 2017 Rules. The relevant portion of the Notification is reproduced below: "2. In the Central Excise Rules, 2017 (hereinafter referred to as the said Rules), in rule 18, before the explanation the following proviso shall be inserted, namely: - "Provided that nothing contained in this rule shall apply to Motor spirit, commonly known as petrol, High speed diesel oil and Aviation Turbine Fuel." 3. In the said Rules, in rule 19, the following proviso shall be inserted, namely: - "Provided that nothing contained in this rule shall apply to Motor spirit, commonly known as petrol, Highspeed diesel oil and Aviation Turbine Fuel." 28. At the same time, Notification No. 08/2022 dated 30.06.2022 was issued by the....
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....ner to include all supplies that culminate to the foreign going aircraft being fuelled with ATF. 34. In this connection reliance can be placed on the judgment of the Supreme Court in Assessing Authority-cum-Excise and Taxation Officer, Gurgaon and Another vs. East India Cotton Mfg. Co. Ltd. [1981 (7) TMI 205 - Supreme Court] 35. The provisions of section 8(3)(b) of the Central Goods and Service Tax Act, 2017 came for interpretation before the Supreme Court. Section 8(3)(b) is reproduced below: "8. (1) Every dealer, who in the course of Inter-State trade or commerce- (a) sells to the Government any goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in subsection (3), shall be liable to pay tax under this Act, which shall be three per cent of his turnover. ***** (3) The goods referred to in clause (b) of subsection (1)- (a) ***** (b) are goods of class or classes specified in the certificate of the registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this....
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....r subtracted unless there are adequate grounds to justify the inference that the legislature clearly so intended. ***** ***** Now here we find that the expression used by the legislature as also the rule making authority is simpliciter "for use-in the manufacture-of goods for sale" without any addition of words indicating that the sale must be by any particular individual. The legislature has designedly abstained from using any words of limitation indicating that the sale should be by the registered dealer manufacturing goods. It is significant to note that where the legislature wanted to restrict the sale to one by the registered dealer himself, the legislature used the qualifying words "by him" after the words "for resale" in the first sub-clause of section 8(3)(b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second sub- clause of section 8(3)(b) the legislature did not qualify the words "for sale" by adding the words "by him". This deliberate omission of the words "by him" after the words "for sale" clearly indicates that the legislature did n....
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....r "exclusively" or "entirely" in regard to duty paid pig iron but these expressions were not used. Thus, the benefit of the exemption could not have been denied. The relevant portions of the judgment of the Supreme Court are reproduced below: "9. The respondent based the claim for exemption on Notification No. 30/60, dated 1st March, 1960 issued by the Central Government in terms of Rule 8(1) of the Central Excise Rules, 1944 (hereinafter called the Rules) exempting steel ingots in which duty-paid pig iron is used from so much of the duty leviable thereon as is in excess of Rs. 30/- per ton. By Notification No. 120 of 1960, dated 1, October, 1960, Notification No. 30/60 was amended by substituting the figures and words "29.35 per metric ton" for the words and figures "30 per ton". 10. By Notification No. 75/62, dated 24th April, 1962, the Central Government in exercise of powers conferred by rule 8(1) of the Rules exempted steel ingots falling under Item 26 of the First Schedule to the Act and specified in Column 2 of the Table appended to the notification from so much of the duty of excise leviable thereon as is in excess of duty specified in the corresponding en....
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....rightly held that the contention of the Revenue fails on two broad grounds. First, there cannot be double taxation on the same article. Counsel for the Revenue gave the example of excise duty on motor car, in spite of the fact that there was duty on tyres and duty on metal sheets. The analogy is misplaced. In such cases the duty is on the end product of motor cars as a whole. The duty on tyres and the duty on metal sheets do not enter the area of duty on motor car. Second, Notification No. 30/60 grants exemption to duty-paid pig iron. The High Court rightly said that the Notification does not say that exemption is granted only when duty paid pig iron is used and that the exemption would not be available if duty-paid pig iron is mixed with other non-duty paid materials. If the intention of the Government were to exclude the exemption to duty paid pig iron when mixed with other materials then the notification would have used the expression "only" or "exclusively" or "entirely" in regard to duty-paid pig iron. The object of the notification was to grant relief by exempting duty-paid pig iron." (emphasis supplied) 41. In M/s. JMK Energy vs. Commissioner of Customs, Delhi [2023 (2....
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....ides for it, it is not correct to read such notifications as confining the exemptions to products made "entirely", "exclusively" or "only" from the specified material and that proportionate relief should be given even in those cases where material other than that specified is used. ***** 14. In this connection we may note that in 1980 when Notification No. 44/80-C.E., dated 24-4-1980 was issued it read that in order to claim benefit of exemption under the notification the fibres and tops should have been manufactured exclusively out of wastes. Therefore, the Government, whenever it felt inclined to confer the benefit of exemption on manufactures exclusively out of waste, took care to introduce this concept in issuing the notification itself. This would also give an indication that when no such word is to be found in the notification the intention was not to deny wholly the benefit if the manufacture was not exclusively out of the waste but to grant it pro rata." (emphasis supplied) 43. In Aravali Ispat Ltd. vs. Collector of Central Excise, Jaipur [1986 (26) E.L.T. 259 (Tribunal)] the Tribunal held: "4. We have carefully considered the pleas on both ....
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....authorized representative appearing for the department also placed reliance upon the judgments of the Supreme Court in Commissioner of Customs (import), Mumbai vs. Dilip Kumar and Company and others [2018 (361) E.L.T. 577 (S.C.)] and on State of Gujarat vs. Arcelor Mittal Nippon Steel India [(2022) 6 SCC 459] to contend that grant of benefit of concessional rate of customs duty under the Notification has to be strictly construed and when the text of the Notification is plain and clear, no words can be added or deleted. 47. In the instant case, it is seen that the Notification No. 08/2022 dated 30.06.2022 does not mention that ATF should be directly supplied from the place of manufacture to the foreign going aircraft and it cannot be supplied through the warehouses of the appellant. The only requirement contained in Notification No. 08/2022 is that the fuel must be "supplied as fuel to foreign going aircraft". The Notification does not mention that exemption will be granted to ATF supplied from the place of manufacture "only" when it is supplied from the place of manufacture to the foreign going aircraft. 48. It has, therefore, to be held that the appellant would be entitled t....