The Hyderabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the condonation of losses up to 1% is permissible without scrutiny and quashed the duty demanded on Hindustan Petroleum.
Shri Narendra Dave, Advocate appeared for the Appellant and Shri V.R. Pavan Kumar appeared for the Respondent
The appellant, Hindustan Petroleum Corporation Limited is a Government of India Undertaking which refines crude petroleum and manufactures various finished petroleum products such as HSD, motor spirit, naptha, superior kerosene oil, furnace oil, bitumen, jute batching oil (JBO) and LSHS.
The appellant challenges the order in original dated 2.5.2008 passed by the Commissioner of Central Excise, in which an amount of Rs. 1,06,58,056/- has been demanded from the appellant as a duty under the proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944 along with interest under Section 11AB.
The Central Government can extend the facility of removing thegoods from the factory of production to a warehouse, or from one warehouse to another warehouse without payment of dutyas per Rule 20 of the Central Excise Rules, 2002.
As per the instructions of the Central Board of Excise & Customs dated 1.06.1956, 2.3.1959 and 15.12.1989 losses of petroleum products in storage, pipeline deliveries and transit losses etc. are permissible up to a limit of 1%.
It was contended that as per the Circular dated 19.10.1981, losses up to 1% should be condoned and the authorities need not enter into detailed scrutiny to verify the bona fide of the reported loss. However, if the losses are above 1%, officers may scrutinize the claims.
The Tribunal comprises of Mr Justice Dilip Gupta, president Mr P V Subba Rao, member (technical) observed that when a demand is made, the noticee has a right to put up the defence. Further, the Tribunal viewed that the loss above 1% can be condoned after scrutiny.
The Tribunal while allowing the appeal held that “the appellant is entitled to remission of the losses as claimed and consequently the demand of duty on the appellant cannot be sustained.”
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