Case Law Details
Chennai Petroleum Corporation Ltd Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that net quantity after adjusting the gain and loss has to be taken for demand of duty in case of petroleum products.
Facts- The appellant is a Public Sector Undertaking and is engaged in the manufacture of petroleum products. Based on intelligence that appellants were not discharging the appropriate duty on the quantity of petroleum products cleared through pipelines from their refinery, the officers of DGCEI visited their refinery and collected details. It was noted that the appellant was clearing their final products through pipeline to the terminal located at Muttom which is 1.2 kms away from their refinery and is owned by M/s. Indian Oil Corporation Ltd. (IOCL). IOCL which 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.
Conclusion- In our considered opinion, the demand is raised only because of the difference in quantity when the petroleum products are dispatched from the refinery and 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. 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 dispatched 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.
FULL TEXT OF THE CESTAT CHENNAI ORDER
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