Custom, Excise & Service Tax Tribunal
Bharat Petrolieum Corporation Ltd. vs Cc Pune on 26 April, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO.501
Custom Appeal No. 380 of 2010
(Arising out of Order-in-Appeal No. GOA/CUS/VSK/1/2010 dated 22.01.2010 passed
by the Commissioner of Central Excise & Customs (Appeals), Goa.)
M/s Bharat Petroleum Corporation Ltd ........Appellant
Ratnagiri LPG Terminal,
Ratnagiri-415 616
VERSUS
Commissioner of Customs, Pune ........Respondent
41-A, Ice House, 'D' Wing, 4 th Floor, Sassoon Road, Pune 411 001 WITH Custom Appeal No. 85434 of 2018 (Arising out of Order-in-Appeal No. PUN-CT-APPII-000-272-17-18 dated 17.11.2017 passed by the Commissioner of Central Tax (Appeals), Pune-II.) M/s Bharat Petroleum Corporation Ltd. ........Appellant Bharat Bhavan-II, 3rd Floor, Taxation Dept. 4 & 6, Currimbhoy Road, Ballard Estate, Mumbai-400 001 VERSUS Commissioner of Central Excise & ........Respondent Service Tax, Pune-I ICEHouse, 41-A, D' Wing, 4 th Floor, Sasoon Road, Pune-411 001 APPERANCE:
Shri M.H. Patil, Advocate for the Appellant Ms. P. Printed Vinithaby Shekar, BoltPDF (c)Addl.
NCH Software. Free for non-commercial
Commissioner Authorised useRepresentative
only. for
2
HON'BLE MR. S.K. MONHANTY, MEMBER (JUDICIAL)
HON'BLE P. ANJANI KUMAR, MEMBER ( TECHNICAL )
FINAL ORDER NO. A/85793 - 85794/2019
Date of Hearing: 31/01/ 2019
Date of Decision: ...........2019
P. ANJANI KUMAR:
Heard both sides and perused the records of the case.
2. Briefly stated the facts of the case are that M/s BPCL, t he Appellants, a Government of India Undertaking, are engaged, inter alia , in the import and distribution of LPG; they were purchasing LPG from M/s IOCL on High Seas basis and importing at Finolex Jetty at Ranpar, Ranpar, Ratnagiri ; after import they were storing the LPG in tanks taken on lease from M/s. Finolex Industries . Durin g the period , 01.04.2000 to 31.03.2005 , appellants imported LPG and filed various Bills of Entry for home consumption, which were provisionally assessed .
2.1. Prior to 31 - 03 - 2002, IOCL were not charging any canalization charges to the OMCs . However, w .e. f. 01.04.2002, IOCL had imported LPG on behalf of OMCs and had effected high - seas - sales to BPCL (Appellants). The Appellants had declared the Assessable Value in the Bills of Entry on the basis of FOB value & freight charges billed by Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 3
Department. Appellants filed documents , for finaliz ation of provisional assessment, such as:
(i) . IOCL Invoices for FOB value;
(II) . Insurance contract notes for freight charges;
(iii) . Receipts for Port dues;
(iv) . Contracts among OMCs for imports of LPG (effective 1.4.2002).
(v) . Contracts with M/s. Finolex for payment of handling charges.
(vi) . Contracts with Natavar Parekh, for providing additional Tug Revenue raised issues relating to addition of certain expenses on charges, expenses commissions incurred by the appellants and have finalised provisional assessments with or without issue of SCN.
3. Learned Counsel for the appellants has traced the histo ry in respect of Appeal No. C/85434/2008 (Period 1.04.2000 to 31.03.2003) and submitted that Adjudicating Authority had passed an ex - parte Order on 30.12.2003 finalizing the provisional assessment, without issuing any Show Cause Notice and/or affording personal hearing, raising a demand of Rs.1, 40, 99,583, by arbitrarily including certain costs & expenses while determining the assessable val ue for the LPG imported. Aggrieved by said final assessment Order, appellants had filed an appeal before the Commissioner (Appeals), inter alia, Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 4 Order - in - Appeal dated 21.07.2005, upheld the original order. On an appeal filed, Tribunal, vide its Final Order No. A/259/2012/WZB/C -1 dated 29.03.2012, remande d the matter back to the Adjudicating Authority for de novo adjudication.
In the meantime, DRI - Mumbai conducted investigations in to the non - inclu sion of Canalizing charges paid to IOCL and issued an SCN dated 16.03.2006 to the appellants, demanding diff erential duty on goods imported vide 8 Bills of Entry, which were also part of the aforesaid 18 Bills of Entry pending for finalization. The Commissioner of Customs, Pune, vide Order dated 12.09.2006, confirmed the duty and imposed penalty and fine, t houg h finalization of provisional assessment was pending. On an appeal filed (C/1296/06) , Tribunal, v ide its Final Order dated 12.06.2017, set aside the Order holding that when the provisional assessment was not finalized, confirmation of demand on piece - meal b asis is correct and unsustainable. In de - novo proceeding, the L earned DCC/ACC , withou t issuance of Show Cause Notice but after affording a personal hearing, ordered addition of la nding charges @ 1% of CIF value. However, Superintendent, vide Order dated 08 .03.2013 ,f inali sed the assessment and quantifi ed the duty payable , without any jurisdiction. Aggrieved by those Orders dated 31.01.2013 and 08.03.2013, BPCL preferred two separate appeals before the Commissioner (Appeals), contending inter alia that the Order of finalization passed Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 5 the impugned Orders were bad in la w, for want of jurisdiction, and remanded the matter back to the Adjudicating Authority with a direction to finalize the provisional assessment. In remand, before the L earned DCC/ACC , appellants appeared for personal hearings on 30.10.2014 & 25.01.2016 , at his insistence, though they pleaded that since the matter was pending before the Hon'ble Tribunal, the de novo adjudication may be kept in abeyance , and made various oral and written submissions in support of the contention that no demand wo uld sustain on finalization of the disputed 18 Bills of Entry. The Assistant Commissioner vide Order - in - Original No.10/2015 - 16 dated 31.03.2016, held that the canalization charges are to be added, landing charges are to be calculate d at the rate of 1% of t he CIF and Bills of Lading quantity to be taken into account for assessment, irrespective of the quantity received in the shore tank.
On an appeal filed by the appellants, L earned Commissioner (Appeals), vide Order - in - Appeals No.PUN - CT - APPII - 000 - 272 - 17 - 18 dated 17.11.2017, has upheld the Order - in - Original dated 31.3.2016 and rejected the appeal filed by the Appellants. Hence appeal No. C/ 85434/2018 filed.
3.1. In respect of Appeal No. C/380/2010 , Learned Counsel for the appellants that the issues though remaining the same, the sequence of events are as under:
Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 6 dated 26.04.2007, the same was remanded by Commissio ner (Appeals).
In remand in first round , Order - in - Original dated 28.02.200 was passed, which was remanded again vide, Order - in - Appeal dated 20.11.2008.
In the second round, order - in - Original dated 30.04.2009 was passed. On an appeal, o rder - in - Appeal date d 22.01.2010 was passed holding that 1% landing charges is to be loaded and Cana lizing charges not includable.
3.2. Learned Counsel for the appellants submitted further, that canalizing charges paid to IOCL are not to be loaded, as held by Commissioner (Appeals) and the issue was not agitated by department. It was similarly also held in the cases of (i). Gupta Chemicals Ltd - 2002 (148) ELT 535 (T) m aintained by Supreme Court
- 2003 (154) ELT A - 266 (SC) and (ii). Apollo Tyres - 1997 (89) ELT 7 (SC) .
He also submitted that in terms of Rule 9(2 ), Proviso - ii of Customs Valuation Determination of Price of Imported Goods) Rules, 1988, 1% landing charges has to be considered as held by Commissioner as the same was not challenged by the Department.
He also submitted t hat shore tank quantity of LPG to be taken for the purpose of computation of duty and not the invoice quantity/value, based on the following judgments and CBEC instructions.
Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 7
(iii) CBEC Circular No.34/2016 - Cus d ated 26.7.2016 . He further submitted that excess duty paid to be refunded suo moto on finalization of provisional assessment under Section 18 of C ustoms Act, 1962; unjust enrichment not applicable on refunds/interest on demand not payable, on finalization of provisional assessment for the period prior to 13.7.2006, based on the following judgments.
(i) Hindustan Zinc Ltd. - 2009 (235) ELT 629 (T.LB)
(ii) Chemsilk Commerce - 2009 (233) ELT 113 (T)
(iii) Hindalco Industries - 2008 (231) ELT 36 (Guj) He further submitted that since major portion of the amounts paid to Finolex Industries Ltd. (FIL) were towards various heads of expense s relate d to post c lea rance of LPG on payment of duty; actual s are not available and therefore, 1% landing charges has to be considered under proviso - ii to Rule 9(2) of Customs Valuation Rules, 1988.
4. Learned Counsel for the appellants, submitted, in respect of Appeal No. C/85434/2008 (Period 1.04.2000 to 31.03.2003 ), that canalization charges w ere no t includable; shore tank quantity has to be taken for computation of duty, based on Hon'ble Supreme Court judgment in the case of Mangalore Refinery & Petroleum 2015 (323) ELT 433 (SC) ; the Appellants have paid excess duty to the tune of Rs.55,30,051 , if the canalization charges are excluded and duty is computedPrinted as per by BoltPDF shore tank (c) NCH Software. Free for non-commercial quantity ; t he working use only.was given to 8 be eligible for refund of Rs.17,26,173 and that BPCL are entitled to suo mot o refund on finalization of the assessment. He submitted that Hon'ble Tribunal to all ow their appeal and set aside the impugned Orders, with consequential relief .
5. Learned Authorised Representative has reiterated the findings of OIO and submitted as follows 5.1. Landing Charges : C lause 4.4 of the agreement between BPCL and M/s. Finolex Industries Ltd. is re levant (page 106 of the Appeal N o. C/380/10 - Mum) clearly mentions the nature of the charges ; the import handling charges are handling fees, berthing fees and tug attendance fees and all these fees comes within the ambit of pre - importation charges as per Rule 9 (2) (b) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988; though the appellants contended that 1 % of the CIF value needs to be taken instead of the actuals, Hon'ble Supreme Court in the case of Wipro Ltd vs. Assistant Collector of Customs reported in 2015 (319) ELT. 177 (SC) held that only in the absence of actual costs , fictionalized costs are to be adopted; As actual costs are available as de tailed above, the same would constitute the actual landing charges instead of the notional 1% of the CIF value.
5.2. Canalising Charges: the issue stands settled by the Hon'ble Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 9 5.3. The Appellants have also contended that department had not appealed against the dropping of demand on canalizing charges in one order in appeal and confirming of landing charges on notional charges in another order in appeal. In this regard it is submitted that Res - judicata or Estoppel is not applicable in taxation matters. Reliance is placed on the judgment of Hon' ble Supreme Court in the case of Swaraj Mazda Ltd. vs. Commissioner of Central Excise, Chandigarh reported in 1995 (77) ELT. 505 (SC) and the judgment of Hon'ble Tribunal in the case of A.B. Mauri India Pvt. Ltd. Vs. Commissioner of C. Ex., Pune - II reporte d in 2011 (271) ELT. A35 (SC). Further, the unjust enrichment not applicable on the refunds/interest on demand on finalization of provisional assessment was never taken up before the adjudicating or appellate authority.
6. Heard both sides and perused the re cords of the case. Brief issues involved for discussion in the case are as to w hether
(i). the landing charges ha ve to be computed at actual, or 1% prescribed under the proviso (ii) of the Rule 9(2)(b) of the Customs Valuation (Determination of Price of I mported Goods) Rules, 1988; Whether amounts paid to Finolex Industries Ltd (FIL) towards lease of LPG storage tanks, situated away from point of importation and associated equipments; landing fees, receiving facilities, berthing fees, tug charges, pipe lin e for transportation of LPG from Wharf to storage tanks, unloading from vessel to jetty through unloading arms into pipe Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 10
(ii). Whether the Canalization charges paid to M/s. Indian Oil Corporation Ltd. (canalizing agent), are to be added to the price to arrive at the assessable value;
(iii). whether shore quantity or invoice quantity of the liquid cargo has to be conside red for valuation and computation of import duties.
(iv). Whether suo motu refund has to be granted in terms of Section 18(2) of Customs Act, 1962 on finalization of assessment, since t he period is prior to 13.7.2006;
(v). Whether interest can be levied pr ior to insertion of sub - section (3) of Section 18 of Customs Act, 1962, with effect from 13.07.2006, on duty payable on finalization of assessment or when duty is paid before finalization.
6.1. Regarding which quantity, shore tank quantity or ullage quantity, is required to be taken for the purposes of assessment of petroleum products , we find that this is squarely settled in favour of the appellants by Hon'ble Supreme Court in the case of Mangalore Refinery & Petroleum (2015 (323) ELT 433 (SC) . There fore, the issue is no longer Res Integra . We hold that all the assessments are to be done on the basis of shore tank quantity only.
6.2. Coming to the issue of addition, of 1% of the assessable value or the actual cost, to arrive at the landed cost, we f ind that the appellants have submitted that Commissioner Appeal vide order in Appeal No PUN - CT - APPII - ooo - 272 - 17 - 18 dated 17.11.2007 had taken Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 11 Court in the case of Wipro Ltd Vs ACC 2015(319) ELT 177(SC), where actuals are available actuals need to be taken and not a fictitious value. Hon'ble Supreme Court in the case of Sw araj Majda Ltd Vs CCE, Chandigarh 1995 (77) ELT. 505 (SC) held that even though department has accepted one particular order, can change stand provided new evidence has come to light. Ongoing through the agreement between the appellants and M/s. Finolex In dustries Ltd, it is seen that M/s. FIL shall make, two FIL LPG tanks and associated equipment described in attachment 1, available to BPCL on license on so and exclusive dedicated basis and provide agreed services to BPCL in terms of the agreement. In term s of para 4.1 it is seen that M/s. BPCL will pay M/s FIL in advance of Indian rupees 11, 33, 76,356/ - or such amount as mentioned in para 2.3, shall be paid for the above said license. This amount apparently is constructions, maintenance of the LPG tanks a nd for making them available for the appellants. However, in terms of para 4.4 the appellants shall, in addition to license fee, pays FIL LPG imports handling charges @ Rs. 2.5 Crores per annum to cover landing fees, birthing fees and tag attended charges payable to port authority by importer and for maintenance of receiving facilities for safe berthing and un - berthing of LPG tankers. It is also mentioned that this handling charges do not however, cover the ships port entry charges which are payable by ship s agents directly to port authority on arrival at Finolex Jetty; charges for hire of private Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 12 within two months, from BPCL. Further, it provides that these import handling charges are based on the following rates:
Landing fees @ Rs. 5 per MT on certified alleged quantity.
Berthing fees @ Rs. 0.40 per MT of ship's NRT
Tug attendance charges of Rs. 2000/ - (for one incoming and
outgoing trip
Ongoing through the attachment 1 to the agreement, it is seen that the license fees is paid for various facilities like Jetty, unloading arms, LPG tanks, tank lorry system, utilities and safety/ fire protection facilities. All these charges are not in the nature of pre - importation charges, therefore, all of them are not includable in the assessable value in terms of Rule 9(2)(b) of Customs Valuation Rules,1988. Each of these expenses are to be separated and those items of expenses which pertain to import ha ndling charges, handling fee, berthing fee and tug attendance fee which are in the nature of pre - importation cost only need to be included. Items of cost or expenditure with regards to the constructions and maintenance of shore tanks for storage of LPG, T ransportation of LPG etc. which are in the nature of expenditure post importation need not be included. For the purposes of identifying the elements of pre - import charges or expenditure, the issue needs to go back to the original adjudicating authority. Th e appellants shall submit such data as may be required by adjudicating authority. If such Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 13 @ one per cent can be taken for the purposes of assessment as held by the Hon'ble Supreme Court in the case of M/s. Wipro Ltd. (supra) and as arrived at by the Learned Commissioner, Appeals.
6.3. In respect of the canalization charges paid by the appellants to M/s. IOCL we find that the issue is squarely settled by the Hon'ble Supreme Court in the case of M/s. Hyderabad Industries Ltd. (supra). We hold that such charges are includable in the assess able value.
6.4. Coming to the issue of automatic grant of refund on finalization of assessments; the issue of non - applicability of unjust enrichment and the non - applicability of interest in the case of provisional assessments, Learned AR for the departm ent has submitted that the issue was not taken up by the appellant before the original or appellate authority. We find that this being a question of law the appellants have in their right to raise the issue at this level. However, for a proper appreciation of the facts and for computation of the refund view to the appellants the matter needs to go back to the original authority. The original authority would consider the issues as discussed above and finalise the assessment accordingly while assessing the im ports on the basis of shore tank quantity instead of ullage quantity.
Printed by BoltPDF (c) NCH Software. Free for non-commercial use only. 14 We hold that the canalization charges paid by the appellants to M/s IOCL, shall be included in the assessable value. Regarding the landing charges the original authority shall arrive at the actual landing charges, on the basis of the data to be suppl ied by the appellants, and add them to the assessable value accordingly. In case the original authority finds that actual landing charges are not available, he shall proceed with the addition of one per cent of FOB as landing charges. The provisional asses sment shall be finalised in terms of Section 18 of Customs Act, 1962, within 3 months of receipt of this order, in the above terms. The appeals are disposed as above.
(Order pronounced in the court on ....................) ( S.K. Mohanty ) Member (Judicial) ( P. Anjani Kumar ) Member ( Technical ) *SB Printed by BoltPDF (c) NCH Software. Free for non-commercial use only.