The Tribunal held that duty demands on SKO interface and transit loss (within 0.5% limit) are unsustainable, and dismissed the Revenue's penalty appeal based on the CBIC litigation policy threshold and the failure of the main demand on merits.

FINAL ORDER NO: 85984-85985/2026

PER: S.K. MOHANTY

Heard both sides and examined the records.

2. The period of dispute involved in the present appeals is from April, 2010 to June, 2014. For the period August, 2009 to January 2014, the Department had initiated show cause proceedings against the assesse-appellant, seeking payment of duty on Superior Kerosene Oil (SKO) interfaced with Motor Sprit (MS) and High-Speed Diesel (HSD). The Show Cause Notice (SCN) issued for the period August, 2009 to January, 2014 was adjudicated by the learned Commissioner of Central Excise, Mumbai which was appealed against before the Tribunal. The Tribunal vide Final Order No. A/86107/2025 dated 17.07.2025, has allowed the appeal in favour of the assesse-appellants, holding that the adjudged demands confirmed against the assesse-appellants cannot be legally sustainable. The present SCN dated 28.04.2015 issued to the assessee-appellants has also contain the self-same ground, which was urged in the SCN issued for the period August, 2009 to January 2014. Since the issue has already been decided by this Bench of the Tribunal vide Final Order dated 17.07.2025 (supra), we are of the view that the said issue cannot again be agitated for a decision, contrary to the order dated 17.07.2025 passed by the Tribunal. Therefore, we are of the view that confirmation of the demand on the ground of interface of SKO with MS/HSD cannot be sustained.

3. The other issue alleged in the present SCN dated 28.04.2015 is in context with the transit loss of SKO occurred during the course of movement of goods from the Refinery to various depots and payment of differential duty on such loss in transit. On perusal of the case records, we find that the transit loss during the course of movement of SKO was to the tune of 0.41% of the entire quantity handled. In this regard, the Central Board of Excise & Customs (CBEC) in letter F. No. 26/21/CXM/54, dated 01.06.1956 and F. No. 9/17/57/CX-II dated 02.03.1959 has clarified that the loss upto a maximum ceiling of 0.5% in case of SKO is admissible, if the distance covered is 50 Kilometer or more. In the present case, since the actual transit loss was less than the prescribed parameter, in our considered view confirmation of differential amount of duty on account of transit loss also cannot be sustained.

4. In view of the foregoing discussions, the impugned order confirming the adjudged demands on the assesse-appellants cannot be sustained and accordingly, is set aside and the appeal is allowed in their favour.

5. Revenue has assailed the impugned order dated 27.11.2015 on the ground that learned adjudicating authority has not imposed penalty on the assessee-respondent under Section 11AC of the Central Excise Act, 1944 as proposed in the SCN dated 28.04.2015. On perusal of the case records we find that the quantum of penalty involved in the present appeal of Revenue is to the tune of ₹ 14,64,304/-. Since the said amount is less than the threshold limit of ₹ 60,00,000/- prescribed in the instruction of Central Board of Indirect Taxes and Customs (CBIC) issued under F. No. 160390/20/2024-JC-CBEC dated 6th August 2024, we are of the view that Revenue’s appeal is liable to be dismissed under the Litigation Policy. Further, in view of the fact that the assessee-appellant’s case is decided in their favour on merits, the penalty sought to be imposed by Revenue cannot also be sustained. Therefore, the appeal filed by Revenue is dismissed both under the Litigation Policy as well as on merits.

6. In the result, assessee-appellant’s appeal is allowed and the Revenue’s appeal is dismissed.