Tide Water Oil Co. (India) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. this is an appeal against order-in-original no. 59/97(m), dated 9-4-1997 passed by the commissioner (appeals). the appellant filed an application to govt. of india against the said order and on consideration thereof the govt. of india vide its order dated 31-12-1997 held that the issue raised in the said application pertained to processing the loss in a factory and was therefore beyond the purview of the revisionary powers of the govt. under section 35b of the central excise act.2. the appeal before the tribunal was barred by limitation of time and therefore, the delay in submitting the same was condoned by miscellaneous order no. 110/98, dated 11-3-1998.3. the appeal on being posted for hearing is now taken up. briefly, the facts of the case are that the appellants manufacture lubricating oil out of base oil. after the completion of various process of manufacture, the lubricating oil is stored in bulk in the storage tank.the quantity of the product manufactured is ascertained from this tank by the process of dip-measurement. and this quantity which the appellant claims to be an approximate quantity is entered in the rg 1 register prescribed under the central excise law and procedures.4. thereafter, from time to time, the said lubricating oil is again pumped into storage kettles and thereafter from the storage kettles the lubricating oil is packed in individual container of the required quantity. over a period of time certain discrepancies have been noticed between the quantity entered in the rg 1 register at the bulk storage stage and the quantity ultimately totalled of the product packed in such unit containers. this difference entailed a duty amount of rs. 1,14,775/- as ascertained during stock taking and having paid the same the appellants then filed a refund claim on 14-12-1995. ultimately in due process of law their claim was rejected by the assistant commissioner vide order-in-original no. 58/96, dated 6-5-1996. further appeal with commissioner (appeals) was also dismissed.5. heard the ld. advocate shri t. ramesh. he stressed that no clandestine removal, etc. was alleged and that the issue was related to the difference in quantity as ascertained by dip-measurement in the storage tank and the quantity entered in the rg 1 register and that subsequently ascertained after packing into unit containers. he submitted that loss up to 0.25% in similar case was being allowed to castrol india ltd. by the bangalore commissionerate. he also submitted a photo-copy of the letter dated 11th september, 1996 from the dy.chief chemist, central excise, mumbai to the commissioner, central excise, mumbai-iii wherein he had given his considered technical opinion on such losses incurred by units like castrol india ltd., m/s pennzol ltd. and m/s. tide water oil company ltd. 6. ld. advocate submitted that it was the considered technical opinion of the said dy. chief chemist that up to a maximum of 0.9% losses arising due to error in dip-reading, absence of temperature volume correction, spillage loss, etc. should be considered as justified for condonation.7. heard ld. jdr shri ravinder saroop who submitted that the issue was connected with rule 49 of the c.e. rules, 1944 wherein the issue had to be decided to the satisfaction of the proper officer and while the govt. of india had laid down certain norms of evaporation loss of volatile petroleum products in transit, etc., no norms had been laid for lubricating oils found short within the factory premises. he further submitted that under this rule, loss is condonable when it occurs either due to natural causes or unavoidable accidents. thus the cause of the loss is the moot point to be considered. in this connection he cited case law of hindustan insecticides - 1988 (33) e.l.t. 575 wherein it was pronounced that the agency by which loss is incurred is important. ld. jdr stressed that in this case it was a loss by human agency and not by unavoidable accident namely fire, etc. or other natural causes where the agency was divine. ld. jdr further says that no evidence has been given to show the practice of condonation claimed to have been followed in bangalore commissionerate and that the aforesaid letter of the dy. chief chemist, mumbai is only an opinion but cannot supersede the provisions of rule 49 in this case. ld.advocate re-emphasised that this was a case of error in measurement and loss due to inefficient packing technology and this is needed to be considered.8. i have considered the arguments on both the sides. i have also perused the order of the govt. of india mentioned above wherein the revision application was considered and it was held that these losses were in the nature of processing loss in a factory and therefore, were beyond the purview of the revisionary powers of the govt. i find that as per the said order of the govt. of india, the ld. advocate representing the applicants was heard on 24-12-1997 wherein he had explained to the govt. that the loss has occured on account of processing of the products. i have also perused the order-in-original issued by the assistant commissioner involved in this case. in his findings it had been clearly stated that the loss is not due to evaporation and that it is basically a storage loss and is, therefore, not condonable.9. from the facts of the case therefore the following emerge as indisputable facts :- (a) the manufacturing process of lubricant oils having been completed, the final product is transferred into storage tanks. thereafter the quantity produced is measured through the mechanism of dip-reading and that quantity so ascertained is entered into the statutory rg 1 register, and (b) no further processing is carried out on the said lubricating oil as the product has already become fully marketable and therefore, attained the rg 1 stage. the product is only transferred into smaller storage kettles and thereafter packed in suitable individual unit containers.10. i find that since the rg 1 stage has already been obtained before ascertaining of the quantity produced through dip-measurement, therefore, the goods had already become marketable and excisable. it is also nobody's case that any further processing is done on these goods.if this was the case, they would not have attained the rg 1 stage as a finished product. the only way in which these goods are handled is for storage in different manner from stage-to-stage i.e. first they are stored in a bulk tank and thereafter they are transferred for storage in kettles and finally they are transferred into unit containers in which they are stored pending their clearance from the factory on payment of duty as per law. with due respect to the order of the hon'ble govt. of india cited above, it is our considered humble opinion that the losses in question are not processing loss but merely storage losses in a registered factory under central excise law. this is because, firstly, the product has already become excisable and is "goods" and secondly, no evidence is available to show that any further process has been done thereon and thirdly, the loss occurred only due to storage operations either in bulk or ultimately in unit containers pending removal of the goods on payment of duty etc. from the registered factory.11. since storage loss in a factory is excluded from the jurisdiction of this tribunal vide clause (a) of first proviso to section 35b(1) of the central excise act, 1944 -therefore, the appeal requires to be dismissed for lack of jurisdiction. the appeal is accordingly dismissed for lack of jurisdiction.

Judgment:
1. This is an appeal against Order-in-Original No. 59/97(M), dated 9-4-1997 passed by the Commissioner (Appeals). The appellant filed an application to Govt. of India against the said order and on consideration thereof the Govt. of India vide its Order dated 31-12-1997 held that the issue raised in the said application pertained to processing the loss in a factory and was therefore beyond the purview of the revisionary powers of the Govt. under Section 35B of the Central Excise Act.

2. The appeal before the Tribunal was barred by limitation of time and therefore, the delay in submitting the same was condoned by Miscellaneous Order No. 110/98, dated 11-3-1998.

3. The appeal on being posted for hearing is now taken up. Briefly, the facts of the case are that the appellants manufacture lubricating oil out of base oil. After the completion of various process of manufacture, the lubricating oil is stored in bulk in the storage tank.

The quantity of the product manufactured is ascertained from this tank by the process of dip-measurement. And this quantity which the appellant claims to be an approximate quantity is entered in the RG 1 register prescribed under the Central Excise law and procedures.

4. Thereafter, from time to time, the said lubricating oil is again pumped into storage kettles and thereafter from the storage kettles the lubricating oil is packed in individual container of the required quantity. Over a period of time certain discrepancies have been noticed between the quantity entered in the RG 1 register at the bulk storage stage and the quantity ultimately totalled of the product packed in such unit containers. This difference entailed a duty amount of Rs. 1,14,775/- as ascertained during stock taking and having paid the same the appellants then filed a refund claim on 14-12-1995. Ultimately in due process of law their claim was rejected by the Assistant Commissioner vide Order-in-Original No. 58/96, dated 6-5-1996. Further appeal with Commissioner (Appeals) was also dismissed.

5. Heard the ld. Advocate Shri T. Ramesh. He stressed that no clandestine removal, etc. was alleged and that the issue was related to the difference in quantity as ascertained by dip-measurement in the storage tank and the quantity entered in the RG 1 register and that subsequently ascertained after packing into unit containers. He submitted that loss up to 0.25% in similar case was being allowed to Castrol India Ltd. by the Bangalore Commissionerate. He also submitted a photo-copy of the letter dated 11th September, 1996 from the Dy.

Chief Chemist, Central Excise, Mumbai to the Commissioner, Central Excise, Mumbai-III wherein he had given his considered technical opinion on such losses incurred by units like Castrol India Ltd., M/s Pennzol Ltd. and M/s. Tide Water Oil Company Ltd. 6. Ld. Advocate submitted that it was the considered technical opinion of the said Dy. Chief Chemist that up to a maximum of 0.9% losses arising due to error in dip-reading, absence of temperature volume correction, spillage loss, etc. should be considered as justified for condonation.

7. Heard ld. JDR Shri Ravinder Saroop who submitted that the issue was connected with Rule 49 of the C.E. Rules, 1944 wherein the issue had to be decided to the satisfaction of the proper officer and while the Govt. of India had laid down certain norms of evaporation loss of volatile petroleum products in transit, etc., no norms had been laid for lubricating oils found short within the factory premises. He further submitted that under this rule, loss is condonable when it occurs either due to natural causes or unavoidable accidents. Thus the cause of the loss is the moot point to be considered. In this connection he cited case law of Hindustan Insecticides - 1988 (33) E.L.T. 575 wherein it was pronounced that the agency by which loss is incurred is important. Ld. JDR stressed that in this case it was a loss by human agency and not by unavoidable accident namely fire, etc. or other natural causes where the agency was divine. Ld. JDR further says that no evidence has been given to show the practice of condonation claimed to have been followed in Bangalore Commissionerate and that the aforesaid letter of the Dy. Chief Chemist, Mumbai is only an opinion but cannot supersede the provisions of Rule 49 in this case. Ld.

Advocate re-emphasised that this was a case of error in measurement and loss due to inefficient packing technology and this is needed to be considered.

8. I have considered the arguments on both the sides. I have also perused the order of the Govt. of India mentioned above wherein the Revision application was considered and it was held that these losses were in the nature of processing loss in a factory and therefore, were beyond the purview of the Revisionary powers of the Govt. I find that as per the said order of the Govt. of India, the ld. Advocate representing the applicants was heard on 24-12-1997 wherein he had explained to the Govt. that the loss has occured on account of processing of the products. I have also perused the Order-in-Original issued by the Assistant Commissioner involved in this case. In his findings it had been clearly stated that the loss is not due to evaporation and that it is basically a storage loss and is, therefore, not condonable.

9. From the facts of the case therefore the following emerge as indisputable facts :- (a) The manufacturing process of lubricant oils having been completed, the final product is transferred into storage tanks.

Thereafter the quantity produced is measured through the mechanism of dip-reading and that quantity so ascertained is entered into the statutory RG 1 register, and (b) No further processing is carried out on the said lubricating oil as the product has already become fully marketable and therefore, attained the RG 1 stage. The product is only transferred into smaller storage kettles and thereafter packed in suitable individual unit containers.

10. I find that since the RG 1 stage has already been obtained before ascertaining of the quantity produced through dip-measurement, therefore, the goods had already become marketable and excisable. It is also nobody's case that any further processing is done on these goods.

If this was the case, they would not have attained the RG 1 stage as a finished product. The only way in which these goods are handled is for storage in different manner from stage-to-stage i.e. first they are stored in a bulk tank and thereafter they are transferred for storage in kettles and finally they are transferred into unit containers in which they are stored pending their clearance from the factory on payment of duty as per law. With due respect to the order of the Hon'ble Govt. of India cited above, it is our considered humble opinion that the losses in question are not processing loss but merely storage losses in a registered factory under Central Excise Law. This is because, firstly, the product has already become excisable and is "goods" and secondly, no evidence is available to show that any further process has been done thereon and thirdly, the loss occurred only due to storage operations either in bulk or ultimately in unit containers pending removal of the goods on payment of duty etc. from the registered factory.

11. Since storage loss in a factory is excluded from the jurisdiction of this Tribunal vide Clause (a) of First Proviso to Section 35B(1) of the Central Excise Act, 1944 -therefore, the appeal requires to be dismissed for lack of jurisdiction. The appeal is accordingly dismissed for lack of jurisdiction.