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Judgment
P.C.: Rule, returnable forthwith. By consent writ petition is taken up for final hearing.
The petitioner is aggrieved by the order dated 20-12-2010 passed by the Joint Secretary to the Government of India, whereby the revision application filed by the petitioner has been dismissed.
The petitioner assessee is engaged in the manufacture of various petroleum products which are cleared under the Warehousing Regulations to its terminals situated at various places in India.
Petroleum products being volatile, transit loss from the place of loading to the place of discharge is allowed to the extent permitted under the notifications issued from time to time.
In the present case we are concerned with transportation of Naphta 15�C through Coastal Tanker MT JAG PRABHAT from Mumbai to Vasco, Mangalore and Tuticorin in the month of April-May 1997 as per the table shown below:
From the chart annexed to the order-in-original dated 22-4-2007 it is seen that the quantity intended for discharge and quantity actually discharged at the 3 destinations were as follows:
Thus, out of the total quantity of 25,530.223 KL of naphta loaded on the tanker on 4-4-1997 and 29-4-1997 (12112.013 + 13418.209) at Mumbai, 10635.293 KL of naphta were to be discharged at Vasco, but the quantity actually discharged was 11498.038 KL of naphta. Similarly the quantity to be discharged at Mangalore terminal was 11498.038 KL of naphta but quantity actually discharged at Mangalore terminal was 10528.843 KL. As a result, the quantity discharged at Vasco was in excess by 862.745 KL and the quantity discharged at Mangalore was less by 854.177 KL.
According to the Revenue offsetting of gain observed in one product against loss observed in another product is permissible only in cases where unloading of two compatible type/same type of products are effected through one set of pipeline at one location where the possibility of inter mixing of the product exists. In the present case, since the product unloaded at all the three terminals being same, according to the Revenue offsetting the gain occurred at Vasco to the loss occurred at Mangalore could not be acceded to. Accordingly, by an order-in-original dated 22-3-2007 duty demand of Rs. 6,12,864/- was confirmed with interest payable thereon and penalty was also imposed.
On appeal filed by the assessee, the Commissioner of Customs (Appeals) by his order dated 29-1-2009 upheld the order-in-original and dismissed the appeal. The revision application filed by the assessee was partially allowed by the Revisional Authority in so far as imposition of penalty is concerned, Challenging the aforesaid order of the revisional authority in sustaining the duty demand with interest, the present writ petition is filed.
The fact that the quantity discharged at Vasco is more than the quantity intended to be discharged at Vasco and the quantity discharged at Mangalore is less than the quantity intended to be discharged at Mangalore, it cannot be said that the excess quantity discharged at Vasco constitute transit gain and the less quantity discharged at Mangalore constitute transit loss because the transit loss/gain is to be determined after the entire quantity loaded is discharged at the various terminals of the petitioner-company. In the present case, out of 25530.222 KL of naphta loaded from Mumbai, admittedly 25423.773 KL of naphta has been unloaded at the three destinations, thereby resulting the transit loss amounting to 106.449 KL naphta which is well within the permissible limit. It is not in dispute that the transit loss in case of naphta is permitted to the extent of 1% and transit loss amounting to 106.449 KL out of 25530.222KL of naptha constitutes transit loss which is less than 1%.
As per Circular No. 55 of 1989, dated 15-12-1989 the storage loss and handling loss should be taken up for condonation on accumulative basis month wise as per the guideline dated 1-6-1956 and 2-3-1959. If one calculates the loss/gain month wise, then out of 12112.013 KL of naphta loaded on 4-4-1997, the quantity discharged by 17-5-1997 at three places namely Vasco, Mangalore and Tuticorin, being 12061.512 KL the storage loss comes to 50.501 KL which is less than 1% condonable as per Circular No. 55/89. Similarly, 13418.209 KL of naphta loaded on 29-4-1997, 13362.261 KL naphta has been unloaded by 14-5-1997 at three places thereby resulting in the transit loss amounting to 55.948 KL which again is less than 1%, and hence within the permissible limits. Thus, viewed from any angle, it is seen that the transit loss is less than 1%.
All the authorities below committed error in holding that if a part of the quantity liable to be discharged at Mangalore is discharged at Vasco then there would be transit loss at Mangalore and transit gain at Vasco. As noted earlier, transit loss can be computed only after the entire quantity is discharged and with reference to the total discharge at each of the destination. In the present case, the difference between the quantity loaded and the quantity unloaded at all the three places taken together results into the transit loss amounting to 106.449 KL which is within the permissible limits. In this view of the matter the decision of the authorities below in holding that there is transit loss/transit gain and that the transit loss exceeds 1% and therefore the assessee is liable to pay duty with interest cannot be sustained. In the result, the orders passed by the authorities below are quashed and set aside and the respondents are directed to refund to the petitioner the amount of duty with interest collected from the petitioner within a period of six weeks from today. Rule is made absolute in above terms with no order as to costs.