Order Date: 1 September 2022

Facts-

• The Appellant, Hindustan Petroleum Corporation Ltd., is a Government of India Undertaking which refines crude petroleum and manufactures various finished petroleum products.
• As per the instructions of the CBEC, losses of petroleum products in storage, pipeline deliveries and transit losses etc. are permissible up to some limits. A cumulative loss/gain statement consisting of storage losses, gains and LMI transit losses and gain for each month for all the petroleum products at 15 Degree Centigrade has to be submitted by the assesses on a monthly basis
• Up to September 2003 the monthly excise ER-I returns filed by the appellant were reflecting the opening and closing balance thereafter it had not provided details of the losses. Consequently, a show cause notice was taken up for adjudication. 
• During the hearing, the appellant submitted that it had switched over to a new ERP system which resulted in teething troubles and consequential delays in submitting statements of loss of the products during transit. 
• Nevertheless, it submitted the details of the losses to the Commissioner during hearing which were considered by the Commissioner to some extent and duty has been remitted by the Commissioner under Rule 21 of the Central Excise Rules. The Commissioner has not remitted duty on some portion of the losses which resulted in confirmation of demand in the impugned order.
• Being aggrieved the petitioner filed this appeal.

Issue-

• Whether the claim of remission on account of losses has been rejected by the Commissioner is sustainable?

 Order-

• The Tribunal observed that this is not a decision on application for remission of duty by the appellant but is a case of demand of duty on the goods which were not received in the LMIs as required under Rule 20 of the Central Excise Rules.
• The appellant had not provided the required data despite being repeatedly asked by the Range officer, the appellant cannot now take shelter on the ground that the demand is time barred. 
• The appellant’s contention is that it was switching over to a new system which caused teething troubles because of which it was unable to provide the data within time. Even if it be so, the fact remains that appellant has not provided the data and is now trying to profit from its own inaction to claim that the demand is time-barred. Therefore, the appellant had actually suppressed the information from the Department and now cannot benefit by claiming that the demand is time-barred.
• The Tribunal further observed Circular issued of the Board in 1981 clarifies that losses of up to 1% can be allowed without detailed scrutiny and loss above 1% can be condoned after scrutiny. There is no allegation, let alone evidence, that the losses were not genuine or that the products were suspected to have been diverted or pilfered. With respect to motor spirit, for the month of April 2004, learned Counsel submits that during the calculation error which resulted in an apparent loss of 3443% whereas it only 0.348%
• The Tribunal held that the appellant is entitled to remission of the losses as claimed and consequently the demand of duty on the appellant cannot be sustained. The appeal is allowed and the impugned order is set aside with consequential relief.