CIR NO.804/01/2005-CX, DT. 04/01/2005

Post-withdrawal of warehousing facility to petroleum products - issues regarding

I am directed to say that as you are aware the facility of removal of specified petroleum products without payment of duty from the factory of production to a warehouse or from one warehouse to another warehouse was withdrawn w.e.f. 6th September, 2004 vide notification No. 17/2004-CE (N.T.) dated 4th September, 2004. The facility of removal of petroleum products without payment of duty for export warehousing continues to be available vide notification No. 46/2001-CE (N.T.) dated 26th June, 2001. Board vide Circular No. 581/18/2001-CX dated 29th June, 2001 as interalia, specified conditions, procedures, class of exporters and places of warehouses under sub-rule (2) of rule 20 of Central Excise Rules, 2002 for warehousing of excisable goods for the purpose of export.

2. Following the withdrawal of warehousing facility, certain issues have been raised by field formations and the oil companies stating the difficulties being experienced. The issued have been examined by Board. The various issues and the decisions on these are being communicated as below :

(i) Issue : The Oil Companies, due to logistical reasons, cannot supply the petroleum products under end-use based exemptions (including the supplies of petroleum products to vessels of Indian Navy or Coast Guard), directly to the actual users without routing the goods through the installations created under the previous arrangement. In some cases, the oil installation are dedicated for a particular end user through which supply of petroleum products takes place whereas in other cases, the oil installation may cater to more than one end-users. In such situations, at the time of removal from refinery, the refinery may not know as to which particular consignment under clearance will eventually be supplied under end-use based exemption.

Decision : In case at the time of removal of petroleum products, the refinery its unable to identify the consignment which would ultimately be received by an eligible ed user, they can opt for Provisional Assessment indicating appropriate reasons before the Deputy/Assistant Commissioner. While applying for provisional assessment, the refinery may be required to undertake the following :

(i) The consignment reaching the prescribed end-user shall be deemed to be relatable to the earliest clearance under Provisional Assessment under an end-use based exemption.

(ii) The refinery shall supply the complete and relevant information latest within a fortnight of delivery of the goods to a prescribed end user.

(iii) The refinery shall be liable to discharge the duty on the quantity cleared from the refinery itself. Hence, there will be no question of any abatement with regard to any losses subsequent to removal from refinery. Accordingly, the duty shall be paid on any differential quantity between the quantity cleared and actually received by the eligible end user.

However, while allowing such procedure, the following aspects should be adequately taken care of :

(i) The quantities of Petroleum products for which such Provisional Assessment are applied, should be reasonable and supported by some collateral evidence of the requirement of the end user and their decision to acquire the same from a particular oil company.

(ii) The instructions contained in the CBEC"s Excise Manual for Provisional Assessment and for execution of Bond as applicable, should be followed.

(iii) The jurisdictional Commissioner shall closely monitor the Provisional Assessments are finalised within the time limit envisaged under Rule 7 of the Central Excise Rules, 2002.

(ii) Issue : Oil companies have represented to say that Indian International airports normally cater to domestic as well as international flights and the supplies of ATF (Aviation Turbine Fuel) to foreign-going aircrafts cannot be made directly from the refinery. Further, they have reported difficulties in installing multiple storage tanks (separate for domestic and export clearances) at the site of the airport due to space constraints. Similar problem has also been reported for supply of Bunker Fuel (FO/LDO/HSD) to foreign-going vessels and coastal vessels.

Decision : In such cases, ATF cleared for export warehouse may be allowed to be stored in the intermediate storage tanks subject to condition that such intermediate storage tanks are used exclusively for storing export goods. The details of such intermediate storage tanks including their physical location in the concerned installation should be intimated to jurisdictional Central Excise officer. Accordingly, para 6.1 in Circular No. 581/18/2001-CX dated 29th June, 2001 issued for export warehousing is modified as below :

"6.1 receipt of goods will be governed by the procedure specified under Circular No. 579/16/2001-CX dated 29th June, 2001 issued under rule 20 with the modification that in case of Aviation Turbine Fuel intended for supply for foreign going aircrafts and other petroleum products i.e. FO/LDO/HSD intended for supply as Bunker Fuel to foreign going vessels the goods may also be received through dedicated tanks in intermediate storage of goods cleared for export warehouse. For the removal of doubts, it is clarified that mixed bonding of duty paid goods with non-duty paid goods is not permitted at such intermediate storage installation."

Further, in view of difficulties in installing separate tanks at the airports, mixed storage of duty paid and non-duty paid goods at Aviation Fuel Station (AFS) at airports may be allowed subject to the condition that a tank-wise regular account shall be maintained about the receipt and discharge of duty paid and non-duty paid stocks of ATF. Accordingly, the following sub-para is added in para 6 of said circular.

"6.3 The Commissioner of Central Excise having jurisdiction over the warehouse may permit the registered person of the warehouse to store duty paid excisable goods or duty paid imported goods along with non duty paid excisable goods in the warehouse subject to conditions, procedure and manner of payment of duty prescribed by him"

It is hereby, made clear that no storage losses are permitted in the export warehouses/tanks whether intermediate or at AFS including those with such mixed storage. Further, the export warehousing under Notification No. 46/2001-CE (NT) dated 26.6.2001 does not cover removal of goods from one export warehouse to another.

For Bunker Fuel supply, as long as the intermediate storage tanks are dedicated for supplied to foreign-going vessels, the same relaxation/procedure as stated above for ATF including those of mixed bonding for foreign-going aircrafts may be adopted.

3. Your attention is invited to para 1(ii) in Circular No. 796/29/2004-CX dated 4.9.2004 which stated at as on or after 6.9.2004, no stocks could remain bonded/warehoused, the excise duty on the stocks of petroleum products lying in the warehouses on the midnight of 5th/6th September 2004 should be paid immediately. The mater has been re-examined in the light of the representations received in this behalf. Accordingly, para 1(ii) in the Board"s Circular dated 4.9.2004 is clarified to the effect that duty on bonded/warehoused goods (treated as cleared immediately after 5th/6th September, 2004) could be dicharged in terms of provisions of Rule 8 of Central Excise Rules, 2002 i.e. by 5th October, 2004.

4. Trade and field formations may please be informed suitably.

5. receipt of the Circular may be acknowledge.

6. Hindi version will follow.

(Neerav Kumar Mallick)
Under Secretary to the Govt. of India

F.No. 261/27/3/2001-CX-8

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