Custom, Excise & Service Tax Tribunal
The Commissioner vs M/S Bharat Petroleum Corpn. Ltd on 19 May, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Division Bench Court I Appeal No.E/1065/2006 (Arising out of Order-in-Original No.26/2005, dated 23-11-2005 passed by Commissioner of C&CE, Hyderabad-III) For approval and signature: Honble Ms. Sulekha Beevi,C.S, Member(Judicial) Honble Mr.Madhu Mohan Damodhar, Member(Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? The Commissioner. C&C.E, Hyderabad-III ..Appellant(s) Vs. M/s Bharat Petroleum Corpn. Ltd. Hyderabad ..Respondent(s)
Appearance Shri H.M.Dixit, AR for the Appellant Shri J.Shankarraman,Advocate for the Respondent Coram:
Honble Ms. Sulekha Beevi,C.S, Member(Judicial) Honble Mr.Madhu Mohan Damodhar, Member(Technical) Date of Hearing : 19/05/2016 Date of decision: 19/05/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.]
1. The Revenue is in appeal against the order passed by Commissioner by which duty demand, interest and penalty proposed in the show cause notice, was dropped.
2. The respondent, M/s Bharat Petroleum Corporation, a Government of India Undertaking is engaged in the business of refining and marketing of Petroleum products. The respondent has warehouse storage tanks where the products are stored. The petroleum products by nature having low boiling points are prone to evaporation while in storage, in transit and while handling. Hence the difference between physical stock and the book sock is called operational loss. Taking into consideration these factors, the CBEC by its circular No.6/36/70-CX, dated 08-12-1970 has fixed the permissible storage loss as 0.5%.
3. During the course of verification of daily stock account and ER-1 return, the department noticed physical stock less than book stock which was more than the permissible 0.5% separate show cause notice were issued raising the above allegations for the periods July, 1997 to December, 2001, January, 2002 to November, 2002 and December, 2002 to November, 2003. After adjudication the Commissioner dropped the proceedings initiated upon the three show cause notices on the ground that as per the show cause notice itself, the respondent, BPCL is seen to have filed RT-12 returns every month and therefore raising the demand subsequently alleging suppression of facts invoking extended period is not sustainable beyond one year.
4. The contention of Revenue in this appeal is that the respondent though file RT-12 returns did not indicate the storage losses tank wise in the monthly returns and is guilty of suppression of facts. That therefore the extended period is invokable. That the period from July, 2001 to November, 2003 would therefore be within normal period. That the Commissioner has failed to take note of this aspect.
5. The respondent has filed cross objections. It is submitted by them that they had filed RT-12 returns in which the operational losses were correctly disclosed. That this fact was well within the knowledge of the department.
6. At this juncture, the observation made by Commissioner in para 18 of the Order-in-Original is noteworthy:
The petroleum products by their very nature are volatile and losses occur in storage as well as while handling. The 0.5% or 1% whatever may be the admissible loss is only a guiding factor. Since there is no evidence of clandestine removal or pilferage, the losses exceeding even the permissible limit can be condoned treating them as genuine storage losses. Even Board in their circular referred to above have clarified that when the remission of duty on storage or other losses claimed by the assessee exceeds 1%, the department has to closely scrutinise the case and satisfy themselves. In the present case, there is no dispute that the losses are only on account of natural causes but not on account of any suspected activities of the assessee and the alleged storage loss is genuine in nature even though it is more than 0.5% or 1% as the case may be.
7. Thus it can be seen that there is no upper limit fixed for operational losses. In case it is higher that 0.5% or 1% the Board has to closely scrutinize the case and satisfy themselves. The department has not conducted any such scrutiny with regard to the operational losses. Again, they have no case that products were removed clandestinely. The operational losses incurred having been disclosed in RT-12 returns the department ought to have conducted periodical verification and satisfied themselves before raising a demand. This apart, the show cause notice dated 23-01-2003 shows that it is issued basing upon the Tank wise storage losses statements form 1/2002 to 6/2002 enclosed to ER-1 returns filed by respondent, and Tank wise storage losses shown in ER-1 from 7/2002 to 11/2002.
8. It is revealed that respondents were disclosing their operational losses in RT-12 returns. In such circumstances, it cannot be said that respondent is guilty of commission of any deliberate act/omission to evade payment of duty. The respondent being a Government of India undertaking, there cannot be any malafide intention to evade payment of duty. The fact that loss in storage is bound to take place for petroleum products is well accepted. There is no case for department that apart from natural causes, there was any wilful act on the part of respondents by which the loss became in excess of 0.5%. The department has failed to establish that the operational loss claimed by respondent is not due to natural causes. Taking note of the facts on record, we find no infirmity in the impugned order. The appeal is dismissed.
(Pronounced in open court)
( MADHU MOHAN DAMODHAR)
MEMBER(TECHNICAL)
( SULEKHA BEEVI, C.S,)
MEMBER(JUDICIAL)
dks
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