2026-VIL-1548-CESTAT-MUM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Liability to pay differential Central Excise duty on intermingled Superior Kerosene Oil (SKO) with High-Speed Diesel (HSD) or Motor Sprit (MS) – Appellant manufactures petroleum products by refining crude petroleum and transporting excisable goods via pipelines to distribution depots through sequential product-to-product pumping method. During pipeline transfers, when shifting from one product to another, an interface or transmix occurs at the inter-junction of each batch of product comprising a mixture of two products. The Appellant used SKO as an interface between MS and HSD to prevent contamination. The Department demanded differential Central Excise duty on the intermingled SKO-MS/HSD mixture quantified at higher values on the ground that the duty payable on gain/surge shall be the duty payable on MS/HSD rather than on SKO - Whether the differential Central Excise duty demand on interface quantity of SKO is legally sustainable – HELD – The differential duty demand on interface quantity of SKO is clearly not sustainable. The issue arising out of the present dispute for earlier periods has already been decided favourably in the case of the Appellant vide multiple Final Orders of the Tribunal. The Co-ordinate Bench of the Tribunal in the case of Indian Oil Corporation has examined similar issue and concluded that central excise duty demand on intermix products of SKO is not sustainable. The Hon'ble Supreme Court has upheld this position in Civil Appeal dated 14.09.2023 holding that the Board can only clarify existing law but cannot create law by itself and therefore the Board Circular having without support of any Act or Rule is not binding on the assessee. The activity of intermixing of SKO with MS/HSD does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 as the products are not specified under the Third Schedule and the adjudication order travelled beyond the scope of the Show Cause Notice which is not permissible in law. The issue arising out of the present dispute is no more res integra – The impugned order passed by the Commissioner of Central Excise (Appeals) is set aside and the appeal filed by the Appellant is allowed in their favour with consequential benefits, if any
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