Relief to Nayara Energy, No Duty on Goods when there is no loss of Goods at Loading and Unloading stage: CESTAT [Read Order]

As a relief to Nayara Energy Limited, the Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held no duty on goods when there is no loss of goods at the loading and unloading stage.

The appellant owns a refinery at Vadinar, Gujarat with a capacity of 20 Million Metric Tons per Annum with a complexity of 11.8, capable of processing some of the toughest crudes to produce high-quality products such as MS, HSD, Naptha, Aviation Turbine Fuel, etc. Due to the shutdown for 35 to 40 days for maintenance and upgradation of the plant and machinery of its refinery, the MS and HSD are usually stored in storage tanks and within the refinery premises.

Since the storage tanks could not store finished goods required for supply in the domestic market therefore, such MS and HSD were required to store outside the refinery premises for which the appellant obtained permission from the Commissioner to store HSD and MS outside the refinery premises fulfilment of certain conditions. One of the conditions inter alia in Para 2(v) thereof was that no remission of duty shall be permitted against loss of HSD and MS during handling, transit, storage or in the case of accident or natural calamity whatsoever.

The appellant paid the excise duty of Rs. 49,26,453/- on the said volume difference of 356.215 KL between the loaded and unloaded HSD, the same was intimated to the jurisdictional Deputy Commissioner. Thereafter, the appellant filed the refund claim for Rs. 49,26,453/- erroneously paid on the ground that there was no actual loss of several goods.

The Assistant Commissioner rejected the refund claim and held that the word ‘whatsoever’ in condition 2(v) of the Commissioner’s letter dated 03.10.2018  was much enough to cover the expansion and contraction of the hydrocarbon fuels which was a natural/scientific phenomenon.

It was contended that there is no actual physical difference in the quantity of loading and unloading, the difference is only due to contraction which is due to temperature difference which is a normal phenomenon of the petroleum product. Further stated that given para 2(v) of the Commissioner’s order, the appellant is not entitled to the remission of duty concerning such shortage.

It was evident that if there is physical loss due to handling, transit, storage or in case of accident or natural calamity whatsoever, no remission shall be permitted. There is no loss of the goods, para 2(v) shall apply only in a case where there is an actual loss in the quantity. Further viewed the quantity remains the same, the variation in KL is only due to the density of the goods due to different temperatures at the time of loading and unloading therefore, it cannot be said that there is any loss of a quantity of the goods.

A Coram comprised of Mr Ramesh Nair, Member (Judicial) held that since there is no loss of the goods at loading and unloading as a stage, no duty demand is sustainable and the duty so paid by the appellant is required to be refunded to the appellant.  The Tribunal set aside the impugned order and allowed the appeal.

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