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CENVAT - If any goods are transported through pipeline, if they are not solid, there is every chance of loss of quantity by way of evaporation - CENVAT credit cannot, therefore, be denied on quantity involved in transit loss: CESTAT

By TIOL News Service

MUMBAI, AUG 28, 2014: THE appellant is a manufacturer of petroleum products. They were receiving Lube Base Oil through pipeline. During the course of transportation of the goods, they have received less quantity varying from 0.01% to 0.72% as per the invoices.

Revenue is of the view that as the appellant has received less quantity as shown in the invoices, therefore, they are not entitled to take CENVAT Credit on the differential quantity.

The authorities below were not impressed by the arguments advanced by the assessee and, therefore, made him fall in line – inasmuch as the demands were confirmed along with interest and penalty.

Before the CESTAT, the appellant submitted that the Lube Base Oil being petroleum product is subject to evaporation or weighment difference due to temperature etc. and the transit loss of 1% is permissible as held by High Court of Bombay in their own case. Therefore, they are entitled for input credit as per the quantity shown in the invoices.

The Revenue representative submitted that in the case decided by the High Court the goods in question were ‘Naphtha' and being highly volatile in nature, transit loss can occur during transportation but in the case on hand, ‘Lube Base Oil' is not a volatile product. And, therefore, the demand is required to be confirmed.

The Bench observed –

"8. There is no doubt that the Lube Base Oil are being transported through pipeline. If any goods are transports through pipeline or by other means of transports, if they are not solid, there is every chance of loss of quantity of the goods by way of evaporation. Therefore, as held by the Hon'ble High Court of Bombay in the appellant's own case (supra) transit loss can be allowed. I also find that in this case the transit loss is varying between 0.01% and 0.72% which is admissible in the facts and circumstances of the case. Therefore, I hold that there may be variation in the transportation of the quantity of the goods accordingly, transit loss is allowable. Hence I hold that the appellant is entitled for input credit as shown in the invoices…."

In fine, the order of the lower authority was set aside and the appeal and stay application were allowed with consequential relief.

(See 2014-TIOL-1616-CESTAT-MUM)


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