Customs, Excise and Gold Tribunal - Mumbai
Bharat Petroleum Corporation Ltd., ... vs Commissioner Of Customs on 8 July, 2003
ORDER Jyoti Balasundaram, Member (J)
1. After hearing both sides for some time on the applications for waiver of predeposit of duty confirmed by the common order of the Commissioner of Customs (Import) Mumbai, we found that it was possible to hear and decide the appeals themselves at this stage; hence after waiving the predeposit, we proceed to dispose of the appeals themselves with the consent of both sides.
2. The facts of the case are that M/s. I.O.C.L., is a public sector company, acts as canalizing agency for the oil industry for import of petroleum products. Various consignments of petroleum products on imports were bonded on arrival. I.O.C.L. were filing Into Bond Bills of Entry of warehousing on arrival of the imported goods and Ex-Bond Bills of Entry were being filed from time to time for removal of goods on payment of Customs Duty leviable thereon, the bills of entry were assessed provisionally. Show cause notices proposing recovery of differential duty arising on account of alleged difference between the quantity determined on the basis of Ullage Survey Report and that determined on the basis of Shore Tank Dip Measurement and proposing finalisation of the Bills of Entry on the above basis, were issued; they were adjudicated by the Assistant Commissioner vide 10 separate Orders-in-Original, finalising the assessment and confirming the demands; the Commissioner of Customs (Appeals) Mumbai, passed orders on the application filed in terms of Section 129E of the Customs Act, directing predeposit of Rs. 80.00 Crores as a precondition for hearing of the appeal against the orders of the Assistant Commissioner; the importers filed Writ Petition No. 724/2001 before the Hon'ble Bombay High Court which vide its order dt. 17.4.2001 set aside the stay order and directed the appellate authority to hear the appeals without insisting on predeposit, and these cases are pending decision by the Commissioner (Appeals).
3. In the meanwhile, a meeting was held on 6.1.2000 between the Customs authorities, officers of M/s. I.O.C.L. and the Shipping Corporation of India for finalising provisional assessment of various pending Bills of Entry. During the course of the meeting the Director of Shipping SCI stated that prior to 1.4.1998, shipments of Petroleum products were based on Cost Plus Formula and the freight bills issued by SCI were for the actual freight incurred for importation. It was also stated that prior to 1.4.2000, a portion of the freight was being paid by the Oil Co-ordination Committee (OCC) from the Oil Pool Account. Based on the above statements the Commissioner of Customs (Import), Mumbai addressed a letter dt. 10.1.2000 to the Additional Secretary (Petroleum), New Delhi to furnish the information relating to year-wise data from 1994 to March, 1998 regarding payments made by the OCC to SCI towards freight. Vide letter dt. 21.2.2002, M/s. I.O.C. Ltd., were also called upon to provide similar information and this letter was followed by another letter dt. 25.2.2000, to which they replied, requesting the Customs authorities to obtain such information from SCI/OCC. By letter dt. 20.7.2000, M/s. IOC were informed that the details of cost of freight incurred as declared by them was incomplete and there were other elements like portion of freight paid by OCC for the imports covered by the consignments forming the subject matter of Orders-in-Original, and directing IOC Ltd. to furnish the details, failing which, the provisions of Rule 9(2) proviso (i) of the Customs Valuation Rules, 1988 would be invoked against them. Show cause notice dt. 27.10.2000 was issued to M/s. IOC proposing recovery of differential duty of Rs. 31,20,31,022.67 along with interest. The notice also proposed imposition of penalty and confiscation of import goods. The notice also proposed recovery of differential duty of Rs. 79,56,76,605.04 from M/s. HPCL, Rs. 8,13,43,412.86 from M/s BPCL and Rs. 2,60,47,271.27 from M/s. IPB and similar penal action against them. The Commissioner of Customs (I) Mumbai, who adjudicated the notice, confirmed a duty demand of Rs. 9,85,59,497/- against M/s. IOCL, Rs. 4,45,55,252/- against M/s. BPCL. Rs. 9,70,34,377/- against M/s. HPCL and Rs. 96,82,322/- against M/s. IBP. Penal action proposed was dropped on the ground that the goods were assessed provisionally. Hence these appeals.
4. We have heard both sides.
5. The dispute raised in the show cause notice and the Order-in-Original relates to valuation of finished petroleum products such as SKO, (Superior Kerosene Oil) straight kerosene oil and furnace oil. The only issue raised in the show cause notice and the order relates to the amount of freight which should form part of the assessable value of the imported consignments and the ground raised in the show cause notice is that, apart from the freight paid to Shipping Corporation of India (the only shipping company involved in the present import), certain additional amount has been paid by oil co-ordination committee as subsidy towards freight to Shipping Corporation of India. According to the show cause notice, since the details of the subsidy were not being furnished, freight is estimated at 20% in terms of Proviso (1) of Rule 9(2) of Customs Valuation Rules, 1988.
6. The appellants had produced before the Commissioner a letter dated 9.11.2000 of OCC (page No. 51) of paper book filed by IOC. The letter is reproduced herein below:-
Oil Coordination Committee
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FAX File No. 4020 November 09, 2000
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For: Shri R. Ganapathisubramanian, GM-Tax, HPCL, Mumbai For: Shri R.K. Puri DGM (F), IOC, Mumbai.
For: Shri Nilmoni Bhakta, DGM-Corporate Finance, BPCL, Mumbai.
From: Addl. Director in-charge (Finance), OCC, New Delhi.
-------------------------------------------------------------------------------- Sub: Custom duty demand in respect of petroleum products.
This has reference to messages from HPCL, BPCL and IOC seeking confirmations from OCC that no payments have been made from OCC to SCI directly towards freight for the Petroleum product imports made by oil companies during period form April 1994 to April 1998.
During the period from April 1994 to April 1998 there was no practice in vogue in OCC to release any payment to SCI directly towards freight for the Petroleum product imports made by oil companies.
7. Since this letter was not categorical and was not unambiguous, a further letter dated 14.11.2000 was obtained from OCC (page 54 of the paper book) and produced before the Commissioner. Letter is reproduced below:-
Oil Coordination Committee
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FAX File No. 4020 November 14, 2000
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For: Shri R. Ganapathisubramanian, GM-Taz, HPCL, Mumbai.
For: Shri Gautam Datta, DGM (F), IOC, Mumbai For: Shri Nilmoni Bhakta, DGM-Corporate Finance, BPCL, Mumbai.
From: Addl. Director in-charge (Finance), OCC, New Delhi
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Sub: Custom duty demand in respect of petroleum products
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This has reference to messages from HPCL and IOC seeking confirmation from OCC that OCC has not made any payments to SCI towards freight for the petroleum product imports made by oil companies during the period from April 1994 to April 1998.
It is reiterated that during the period from April 1994 to April 1998 there was no practice in vogue in OCC to release payments to SCI towards freight for the petroleum product imports made by oil companies. It may please be explained to Customs that all payments towards freight for the Petroleum products imported by oil companies are made by oil companies themselves.
8. Shipping Corporation of India vide letter dt. 15.11.2000 (Page No. 53) (also produced before the Commissioner by the appellants) has also confirmed the above position.
9. It is clear from the above that no subsidy whatsoever has been paid by OCC or received by Shipping Corporation of India relating to import of finished petroleum products, viz. SKO, FO, etc. Subsidy, if any, is related to import of crude oil and to import of finished petroleum products. There is nothing in the impugned order to rebut this assertion of OCC and Shipping Corporation of India. Consequently, the one and only ground raised in the show cause notice for estimating the freight at 20% in terms of proviso (i) to Rule 9(2) of the Customs Valuation Rules, 1988 is not valid. In the impugned order at internal page 8 the Commissioner has sought to finalise the assessment relating to 35 bills of entry where the import was on FOB basis. The Commissioner has observed that the details of exact amount of freight paid for these consignments are not available. The freight certificate given by IOC was not acceptable to him. Therefore he ought to have given an opportunity to the appellants on this aspect to produce further materials, if any, needed by him. This is particularly, so since the only ground raised in the show cause notice related to alleged receipt of subsidy by Shipping Corporation of India from OCC. Therefore, if the Commissioner takes up any other aspect, full and complete opportunity should have been given to the importers. Therefore, this part of the order relating to 35 bills of entry dealing with FOB imports is set aside, and the issue remanded to the Commissioner for re-examination in the light of the material to be produced before him by the appellants. He shall pass fresh orders after hearing them.
10. The balance consignment dealt with in the impugned order are of C & F consignments. In respect of this, the Commissioner has given up his proposal to add freight of 20% as proposed in the show cause notice based on subsidy thereon. However, based on one other consignment imported by IOC, Commissioner has estimated the freight to be 14% of C & F value and added it to the declared C & F value. Once the shipments are on C & F basis, the only addition required to be made is towards insurance. No addition, whatsoever, towards freight is warranted, particularly when the C & F price charged by the supplier is not otherwise disputed. Therefore, this part of the order is unsustainable and is set aside in its entirety.
11. The appeals are disposed of in the above terms.
(Pronounced in Court)