TMI Blog2023 (4) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... d after it is received at the terminals at Muttam. There is no allegation of clandestine removal. It can be reasonably perceived that loss of the quantity is due to temperature variation, the variation caused in dip method of measurements etc. As the goods are 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. Demand of duty on the pipeline quantity of Naphtha - HELD THAT:- According to the department, the quantity that is retained in the pipeline has to be construed a goods already cleared from the refinery and therefore the appellant is liable to duty. The Ld. Counsel for appellant has submitted that they maintain some quantity of Naphtha in the pipeline to facilitate transportation of Naphtha upto the port which cannot be considered as quantity cleared from the refinery. It is seen that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 Muttam to Chidambaranar Oil Jetty on shore, located at Nagore for clearing the white petroleum oils, viz. Naptha, Superior Kerosene and High Speed Diesel through ship. It was noticed that appellant had not paid duty on the stock of Naptha of 1048 Kilo Litres @ NAT, which was lying in the pipeline after being cleared from the refinery. 3. On being pointed out these lapses, the appellant paid an amount of Rs.76,40,875/- on 04.09.2008 towards duty on pipeline quantity of Naptha. Further, they also paid Rs.36,98,213/- on 16.03.2011 towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 further extended to 31.03.2008 vide letter dated 30.07.2007. 8. Though no further extension of permission was given by the department, the appellant continued the facility of storage of non-duty paid goods at IOCL terminal, Muttam for the periods 2008-09, 2009-10, 2010-11. The appellant had informed the department vide letters dated 17.02.2009, 21.02.2009 and 26.06.2009 that they are continuing the facility of storage for the years upto 2009-10 also. The Department had not objected to the storage facility which was continued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity 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 AG), the department has issued instructions 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 Manufacturing Companies (OMCs) has to be considered for calculating the duty liability. It is argued by the Ld. Counsel that though the period involved in the present case is prior to 31.01.2011 and the clarification issued as per C AG Report No.17 of 2013 is dated 14.02.2014 the said clarification has to be applied for quantific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity 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 penalty, the Ld. Counsel relied upon the decision in the case of U.P. State Sugar Cane Dev. Corpn. Ltd. Vs CCE Allahabad- 2009 (242) ELT 260 (Tri.-Del.) and Mangalore Refinery Petrochemicals Ltd. Vs CCE ST Mangalore - 2015 (40) STR 1093 (Tri.- Bang.). The decision of the jurisdictional High Court in the case of Assistant Commr. of GST CE Vs Shri Ram Value Services Pvt. Ltd. - 2009 (8) TMI 1174 -MADRAS HIGH COURT was relied to argue that extended period of limitation could not be invoked when there are conflicting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 based on the Joint Certification (JC) can be calculated and the duty on the excess quantity can be paid . The C AG has accepted the view of the Ministry and requested the department that the SCNs transferred to call book may be taken out and adjudicated. In view of the decision, as accepted by the C AG, taken by the Ministry, you are directed to adhere to the decision hence forth in respect of the clearances to Oil Marketing Companies. The duty may be paid by the 5th/6th of the succeeding month on the net qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, 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 Board has to be applied. Relevant part of he said decision of the Tribunal is as under : 3.2 The Learned Counsel further submitted that the benefit of monthly adjustments between the excess quantity received and the short quantity received at the end of the OMCs vis-a-vis the quantity removed at the refinery end may be permitted even for the periods under dispute, in line with the Department of Revenue circular as above. Learned Counsel further submitted that the appellant is in a position to giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods already cleared from the refinery and therefore the appellant is liable to duty. The Ld. Counsel for appellant has submitted that they maintain some quantity of Naphtha in the pipeline to facilitate transportation of Naphtha upto the port which cannot be considered as quantity cleared from the refinery. It is seen that the appellant has paid duty much before issuance of the show cause notice and therefore the department ought not to have imposed penalty. 20. We find that both the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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