The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed duty demand, penalty and interest against Bharat Petroleum Corporation Ltd. (BPCL) as the department failed to prove excise duty evasion.
The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that there is no evidence that there was any clandestine removal of the goods by any of the authorities. There was no end-use condition required for availment of exemption. We note that intermixing was inevitable. Revenue also did not draw samples and obtain a report from Central Revenue Laboratory as to the content of SKO in intermix.
The appellant/assessee, BPCL is manufacturer of petroleum products viz. High Speed Diesel (HSD), Motor Spirit (MS), Special Kerosene Oil (SKO) and few other products falling under Chapter 27 and Chapter 25 of Schedule to Central Excise Tariff Act, 1985.
Appellant was clearing the different products through both road transport and through pipeline. The refinery belonging to the appellant is at Mahul which is called Mahul Refinery and goods manufactured by Mahul Refinery stated above are transported to their various depots situated at places like Manmad, Manglia, Mathura, Kota and Bijwasan through pipeline called Mumbai Manmad Bijwasan Pipeline (MMBPL).
During the transportation of HSD, MS and SKO through pipeline to their depots, SKO comes into contact with HSD and MS. When the goods were continuously transported through pipeline, one product in the pipeline pushes the other product without any gap in between. Due to technical reasons SKO is positioned in between MS and HSD.
Since one product pushes the other product in the pipeline, small quantity of SKO either gets mixed up with MS or gets mixed up with HSD. Such mixed goods are called as intermixed goods.
The goods such as MS, HSD and SKO are pumped through pipeline after they are cleared from the refinery on payment of duty. In respect of SKO if the same is for ultimate sale through public distribution system, the same is exempted from central excise duty under serial No.20 of Notification No. 04/2006-CE dated 01.03.2006 and subsequently under serial No.72 of Notification No.12/2012-CE dated 17.03.2012.
The wording in the notification is “kerosene for ultimate sale through public distribution system”. It appeared to Revenue that in the intermixed quantity of goods SKO cleared at nil rate of duty after availing above stated exemptions loses its identity and gets mixed up in the intermixed product which is either cleared as HSD or as MS by the appellant.
It was not ultimately consumed by public under public distribution system and, therefore, such quantity of SKO that got mixed in intermixed product should not enjoy the benefit of nil rate of duty and, therefore, for demanding central excise duty on such quantity of SKO which got mixed into intermix, three show cause notices were issued to the appellant.
The assessee contended that intermixed SKO has never reached the public distribution system and, therefore, the said quantity of SKO was not eligible for full exemption of central excise duty. He has further submitted that the word “ultimate” used in the expression for exemption is that it should be ultimately consumed by public distribution system to be eligible to avail exemption from payment of central excise duty.
The tribunal held that there was no case for recovery of central excise duty on SKO after SKO was cleared for the intention of use in public distribution system by availing exemption allowing full exemption of duty.
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Case Details
Case Title: Bharat Petroleum Corporation Ltd. Versus Commissioner of CGST, Mumbai East
Case No.: Excise Appeal No. 87430 of 2015
Date: 11/12/2024
Counsel For Appellant: Gopal Mundra
Counsel For Respondent: A.K. Singh
