Custom, Excise & Service Tax Tribunal
M/S. Indian Oil Corporation Ltd vs Commissioner Of Central Excise, ... on 28 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/117/12-MUM [Arising out of Order-in- Original No. 05/Commr/M-II/2011 dtd. 28/10/2011 passed by the Commissioner of Central Excise, Mumbai-II] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
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3. Whether Their Lordships wish to see the fair copy : seen
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M/s. Indian Oil Corporation Ltd.
:
Appellants
VS
Commissioner of Central Excise, Mumbai-II
:
Respondent
Appearance
Shri. T.C. Nair, Advocate for the Appellants
Shri. N.N. Prabhudesai, Superintendent(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 28/4/2015
Date of decision /2015
ORDER NO.
Per : P.K. Jain
Brief facts of the case are that appellant is receiving various Base Oil, which inturn is used in the manufacture of final product. The said base oil is received through vessel, pipeline and tankers by their operation department at Jawahar Island. Appellants are availing the Cenvat Credit on such Base Oil. On verification of input invoices of Base oil, it was noticed that appellants had availed duty on full quantity as shown in the invoices/bills etc. However on scrutiny of the documents viz. AC-13, OUT TURN report vis-a-vis invoices, it was noticed that appellant had received base oil in short quantity. Revenue issued show cause notice F. No. V. Adj.(30) Ch-I/CR-61/IOCL/Commr./M-II/09 dated 5/1/2010 wherein demand of duty of Rs. 1,64,40,644/- was made in respect of short receipt of inputs i.e. base oil during the period December, 2004 to March 2009 invoking extended period of limitation. It was also proposed to recover interest and impose penalty under Rule 15 (1) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The case was adjudicated by the Commissioner vide the impugned order wherein the Commissioner has dropped the demand for the extended period however demand was confirmed from December, 2008 to March, 2009 which was within the normal period of limitation. In the order demand for the said period, interest was confirmed. Penalty equal to duty i.e. Rs. 8,37,482/- was also imposed under Rule 15(1) of Cenvat Credit Rules, 2004. Aggrieved by the said order, the appellant is before us.
2. Ld. Counsel for the appellants contention is that the department has prescribed a limit of 0.1% in respect of lubricated oil base stock vide Board Letter No. 11-A/6/70/CX.8 dated 30/4/1971. He further submits that these limits were prescribed when the warehousing provisions were applicable to the petroleum product and goods were moved from refinery to warehouse or from one warehouse to the other i.e. goods were non-duty paid. Ld. Counsel submits that these limits will not be applicable in relation to availment of Cenvat Credit, as Cenvat credit is availed on duty paid goods. Ld. Counsel submits that Honble Bombay High Court in the case of Hindustan Petroleum Corporation Ltd. Vs. Union of India[2012(286) E.L.T. 505(Bom)] has allowed 1 % transit loss and considered the same within the permissible limit. Ld. Counsel submits that in view of this 1% transit loss may be allowed. Ld. Counsel further submits that the Larger Bench of this Tribunal in the case of Commissioner of C. Ex., Chennai Vs. Bhuwalka Steel Industries Ltd. [2010(249)E.L.T. 218(Tri- LB)] has discussed the matter in detail with reference to the Cenvat Credit Rules and in para 12 have laid down criterion. It was further submitted that the Commissioner has taken note of the said decision of the Tribunal and has discussed the same in detail in his order and has observed that the permissible limit in case of lubricated base oil stock is 0.1% and therefore benefit of 0.1% can be given. It was further submitted that in the order internal page 19 in the last paragraph, Commissioner has observed that the demand raised for the period December, 2008 to March 2009 is sustainable and liable to be confirmed as Cenvat Credit is availed in case of their receipt of inputs as is in excess of permissible limit of 0.1% which work out to Rs. 837482. Ld. Counsel further submitted that on internal page 16 of order-in-original while discussing test laid down by the Larger Bench of this Tribunal, Ld. Commissioner has held that Cenvat credit availed and utilized on short receipt of base oil in excess of 0.1% is not permissible and hence the same is recoverable from them. It was further submitted that though the Ld. Commissioner has held that Cenvat Credit availed and utilized on short receipt in excess of 0.1% is sustainable but has confirmed the demand without extending the benefit of 0.1%.
3. On the other hand, Learned A.R. submitted that loss in case of base oil is far less compared to product like Naptha and can not be permitted to the extent of 1%. He further submitted that Honble Bombay high Court was dealing with Naphta and not base oil and has spoken about permissible limit and permissible limit in the case of the base oil is 0.1% as per the Board Circular Board Letter No. 11-A/6/70/CX.8 dated 30/4/1971. Ld. A.R. further submitted that the appellants contention that limits are applicable only to the goods cleared without payment of duty is without any basis. Evaporation, transit loss or handling loses are not depended upon the fact that the goods are duty paid or non duty paid and would be same in both the situations.
4. We have considered rival submissions.
5. At the out set we note that demand confirmed is only for the normal period of limitation. The goods involved in the present case are lubricating base oil. Ld. Counsel for the appellant has produced copy of supplement to the manual of departmental instruction on excisable manufacture product. In the said manual different limit has been prescribed for different goods and different method of transfer etc. In the case of lubricating base oil the permissible limit is 0.1 %. We also note that Larger Bench of this Tribunal in the case of Bhuwalka Steel Industries Ltd(supra) has gone into details of various factors to be considered while permitting various losses on their receipt of the goods for purpose of availment of Cenvat credit under Rule 3(1) of Cenvat Credit Rules. We also note that the Commissioner in the impugned order has taken note of such factors and discussed in detail the relevance or irrelevance of each of the five factors enumerated in the larger bench decision. In nutshell, the conclusion is that Cenvat credit availed and utilized on short receipt of base oil in excess of 0.1% is not permissible. We do not find any thing wrong in the said findings. In our view the said limit is in accordance with the instruction issued by the Central Board of Excise and Customs on the subject. We also agree with the Ld. A.R. that the limits will not be different in case of movement of goods which are duty paid or movement of goods which are non duty paid. Such losses will not depend upon duty paid or non duty paid nature of goods but will upon the inherent nature of the goods. We therefore reject the contention of the Counsel of the appellant that the limits prescribed are applicable only for non duty paid goods. Another contention of the Ld. Counsel was that even though the Commissioner has held that the duty is recoverable for the quantity in excess of 0.1 % permissible limit. However the Commissioner has not extended benefit and confirmed total amount. We find that basic excise duty without benefit is Rs. 9,39,250/- + ES+ SHES. Amount confirmed is less than this amount. However, computation details are not given. Appellant may compute after taking benefit of 0.1% permissible limit and pay the differential amount and interest. If the said amount is less than amount confirmed they may inform Commissioner, who would accept the details or provide the computation details. We also note that equal amount of penalty has been imposed under Rule 15(1) of Cenvat Credit Rules, 2004. Keeping in view the nature of the dispute and the fact that earlier department has allowed such losses; we do not consider it a fit case for imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004, penalty imposed is therefore set aside. The appeal is disposed of in above terms.
(Order pronounced in court on ______________) Ramesh Nair Member (Judicial) P.K. Jain Member (Technical) sk 2