Excise Appeal No.10292 of 2020
(Arising out of OIA-RAJ-EXCUS-000-APP-192-2019 dated 11/12/2019 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax- RAJKOT)
NAYARA ENERGY LTD
VERSUS
C.C.E. & S.T.-RAJKOT
APPEARANCE:
Ms. Dimple Gohil, Advocate for the Appellant
Shri Vijay Iyengar, Assistant Commissioner (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
Final Order No. A/ 10464 /2023
RAMESH NAIR
DATE OF HEARING: 09.02.2023 DATE OF DECISION: 17.03.2023
The brief facts of the case are that the appellant owns a refinery at Vadinar, Gujarat with the 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 shut down for 35 to 40 days for maintenance and upgradation of plant and machinery of its refinery, the MS and HSD usually stored in storage tanks and within the refinery premises. Since the storage tanks did not have the capacity to store finished goods required for supply in domestic market therefore, such MS and HSD was required to store outside the refinery premises for which the appellant have obtained permission from the Commissioner to store HSD and MS outside the refinery premises on fulfillment 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 handing, transit, storage or in the case of accident or natural calamity or whatsoever. The appellant stored HSD of 77061.703
K15/78603.629 KL/64030.568 MT in a vessel without payment of duty pursuant to permission granted by the Commissioner. The said HSD was returned to appellant’s factory premises however, the quantity received back in the storage tanks was 77087.208 K15/78247.414 KL/64029.721 MT was found. The appellant’s explanation to the said difference was that this is on account of reduction in temperature between the months of October, 2018 and November, 2018 which resulted in contraction in the volume of HSD, the same was not on account of any actual or real loss. 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 the amount of Rs. 49,26,453/- erroneously paid on the ground that there was no actual loss of quantity of goods. The appellant was issued a show cause notice dated 05.02.2019 proposing rejection of refund claim on the ground that as per para 2(v) of the Commissioner’s letter dated 03.10.2018, no remission of duty was permitted. 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 natural/scientific phenomenon. Aggrieved by the Order-In- Original passed by the Assistant Commissioner, the appellant have filed an appeal before the Commissioner (Appeals) who supporting the order of the original authority upheld the same and dismissed the appeal of the appellant therefore, the appellant filed the present appeal.
- Dimple Gohil, learned counsel appearing on behalf of the appellant submits 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 normal phenomenon of the petroleum product which gets support from the Board Circular No. 367/83/97 dated 19.12.1997. She also invited the reference to Board Circular No. 778/11/2004-CX dated 11.03.2004. She submits that there is no violation of para 2(v) of the Commissioner’s order for the reason that firstly, there is no reduction in the quantity therefore, there is no difference in the quantity hence para 2(v) is not violated. Both the lower authorities have misinterpreted para 2(v) of the Commissioner’s order therefore, the dutywas not payable on the quantity which was construed as the difference between loading and unloading quantity. As a result, the appellant is entitle for the refund. She placed reliance on the following judgments:-
- SHUKLABROTHERS- 2011 (22) STR 105 (S.C.)
- RIJHUMALJIVANDAS- 2010-TIOL-30-SC-CT
- AMOLINDUSTRIES- 2010 (260) ELT 499 (SC)
- SHRIKUMARAGENCY- 2008 (230) ELT 577 (SC)
- NATIONALFERTILISERS – 2009 (239) ELT 501 (COMMR. APPL.)
- Shri Vijay G. Iyengar, learned Assistant Commissioner (AR) appearing on behalf of revenue reiterates the finding of the impugned order. He submitsthat there is shortage of quantity between loaded and unloaded HSD therefore, in view of para 2(v) of the Commissioner’s order, the appellant is not entitle for the remission of duty in respect such shortage.
- I have carefully considered the submissions made by both the sides and perused the records. I find that the plea of the appellant is that there is no difference in the overall quantity difference which was pointed out by the department is not of the physical shortage but due to contraction in the goods which occurs due to difference in the temperature. Considering the nature of the petroleum goods, which is admitted position that the HSD gets contracted due to low temperature, this has been endorsed by the board in the following circulars:-
- Circular778/11/2004-CX dated 11.03.2004
- Circular 367/83/97-CX dated 19.12.1997
From the reading of the above circular, though it is not directly on the fact in the present case but it establishes that due to temperature variation, the petroleum product gets contracted and due to which there is variation in the quantity of the same quantum of the goods between one temperature and other temperature therefore, the fact that the petroleum product gets contracted is not under dispute. In the present case, it is admitted fact the weight of the product remains unchanged or very minor difference as compared to the difference shown in K15 and KL of a liquid product which obviously varies at a time of a particular temperature and at different time at a different temperature, the appellant have also shown that the temperature at the time of loading and unloading where different which is as under:-
| Particulars | Qty. in KL | Qty. in MT | Qty. in K15 |
| Loaded in Vessel | 78603.629 | 64030.568 | 77061.703 |
| Unloaded in Tanks | 78247.414 | 64029.721 | 77087.028 |
| Difference between loaded quantity and the quantity
unloaded |
-356.215 | 0.847 | +25.325 |
From the above table, it can be seen that there is shortage of quantity in KL whereas, quantity in MT is almost same except the variation in 0.847 MT as against the total weight of 64030.568 MT which is negligible. As per the above table, it can be seen that when the total quantity of goods in weight is same and the quantity in KL varies at different time due to different temperature, there is absolutely no case of shortage or loss of the goods. Para 2(v) of Commissioner’s letter dated 03.10.2018 reads as under:-
- No remission of duty shall be permitted against loss of HSD & MS during handling/transit/storage or in case of accident or natural calamity or whatsoever.
From the above para, it is clear that if there is physical loss due to handling, transit, storage or in case of accident or natural calamity or whatsoever, no remission shall be permitted. In the present case, as discussed above the quantity of goods in weight stand intact therefore, in fact there is no loss of the goods, para 2(v) shall apply only in a case where there is actual loss in the quantity. In the present case, the quantity remains the same, the variation in KL is only due to density of the goods that due to different temperature at the time of loading and unloading therefore, it cannot be said that there is any loss of quantity of the goods consequently, there is no violation of para 2(v) of the Commissioner’s letter dated 03.10.2018.
- Asregard remission of duty that will come into picture only when there is actual loss and appellant seeks remission of duty. In the present case since there is no loss at all, there is no question of seeking remission therefore, the process of remission of duty is not relevant in the present
- As per my above discussion and finding, I find that since there is no lossof the goods at loading and unloading as stage, no duty demand is
sustainable accordingly, the duty so paid by the appellant is required to be refunded to the appellant.
- As regard unjust enrichment, the appellant have accepted that the amount of refund shown as received in their books of accounts therefore, they have satisfied that the incidence of refund amount has not been passed on to any other person. Accordingly, the impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 17.03.2023)
(RAMESH NAIR) MEMBER (JUDICIAL)
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