Circular No. 796/ 29/2004-CX
4^th September, 2004

F.No.261/27/3/2001-CX 8
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs

Sub:  Withdrawal of the warehousing facility for removal of petroleum products without payment of duty from the refineries - regarding. 

            I am directed to say that the Government has decided to withdraw w.e.f. 6.9.2004 the warehousing facility of removal of petroleum products from the refineries to warehouses or from one warehouse to another warehouse without payment of duty.  Accordingly, Notification No. 47/2001-CE (N.T.) dated 26.06.2001, issued under rule 20(1) of Central Excise Rules has been rescinded by Notification No.17/2004-CE (N.T.) dated 4.9.2004.  The implications of withdrawal of warehousing facility are explained below: 

(i)	Consequent on the withdrawal of the facility of removal of petroleum products without payment of duty for warehousing purposes, the excise duty is liable to be paid by the refineries at the time of removal w.e.f. 6th September, 2004.  The refineries are to pay duty on monthly basis.
(ii)	Since no stocks on or after 6th September, 2004 can remain bonded/ warehoused, the excise duty is liable to be paid on the stocks of petroleum products lying in the warehouses on the midnight of 5th/ 6th September, 2004.  The jurisdictional officers should ascertain such stocks of each petroleum product lying in the warehouses and ensure that appropriate duty is paid by the warehouses on such stocks immediately.
(iii)	Since the warehousing provisions stand withdrawn w.e.f. 6.9.2004, the refineries are required to discharge the excise duty on petroleum products in transit immediately.  The jurisdictional officers should ascertain the details of such goods and ensure appropriate duty is paid by the refineries immediately.

2.         The assessable value of petroleum products cleared from the refineries on or after 6.9.2004, is to be determined under section 4 of the Central Excise Act, 1944 read with the Valuation Rules.  For example, if the product is sold at the factory gate (refinery), the assessable value would be the transaction value under section 4(1)(a).  If however, a product is removed by the refinery but sold from the depot, the assessable value is to be determined as per the mode of valuation applicable to the sale of goods through depot. 

3.         At present, the assessable value of Liquified Petroleum Gases (LPG) varies depending upon whether the sale is to the domestic consumers or to industrial consumers.  However, w.e.f. 6.9.2004, the duty on LPG is to be paid by the refineries at the time of clearance of LPG.  Since it may not be ascertainable in all cases whether a particular consignment is to be ultimately sold to domestic consumers or to industrial consumers, the assessment of LPG at the time of removal from the refineries in such cases may have to be done on provisional basis.  Alternatively, the refineries may pay the excise duty at the highest of the assessable values and claim refund later on.   

4.         Certain products are allowed to be cleared without payment of duty to specified categories of end-users subject to the specified conditions. These exemptions continues to be in force.  If such clearances to the end-users are effected directly from the refinery, no difficulty should arise in the implementation of such end-use exemptions.  If any problem is noticed in the administration of end-use exemption, the same may be examined by the Chief Commissioner immediately and the details promptly reported to the Board with suitable suggestions and recommendations including any refund mechanism.   

5.         The Chief Commissioners and Commissioners are requested to ensure that there is no hold-up of clearances of petroleum products or any disruption caused in the movement of petroleum products as a result of the withdrawal of warehousing provisions. No precipitate action should be taken. In case of any difficulty in determining the assessable value or on any other account, refineries/warehouses may be advised to resort to provisional assessment. Difficulties/ problems, if any, that are noticed in the implementation of “switch over” may be examined on an urgent basis by the Chief Commissioner and the same may be brought to notice of Board immediately along with views and suggestions.   

6.         Suitable instructions may be issued to all the officers concerned and the trade and industry may also be suitably informed about the above changes. 

7.         It may, however, be noted that the warehousing facility continues to be extended to specified goods falling under Chapter-29 of First Schedule to Central Excise Tariff Act, 1985 and to specified goods intended for direct supply as stores to a foreign-going vessel or aircraft or to a meal uplift station outside India vide Sl. No. 1 and 2 of the new Notification No.  17/2004 – CE (N.T.) dated 4^th September, 2004.   

8.         Trade and field formations may be informed suitably.    

9.         Receipt of the circular may be acknowledged.

10.       Hindi version shall follow.

Vijay Mohan Jain
Under Secretary to the Government of India