Custom, Excise & Service Tax Tribunal
The Commissioner Of Customs & Central ... vs M/S. Nikhil Refineries Ltd on 18 July, 2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench - Larger Bench
Court - I
Date of Hearing: 18.07.2011
Date of decision:
Appeal Nos. C/209 & 223/2006
(Arising out of Orders-in-Appeal No. 02 & 03/2006 (V-II) Cus. dated 17.01.2006 passed by the Commissioner of Customs & Central Excise, Visakhapatnam)
For approval and signature:
Honble Mr. S.S. Kang, Vice-President
Honble Mr. P.G. Chacko, Member (Judicial)
Honble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
Yes
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3. Whether their Lordship wish to see the fair copy of the Order?
Seen
4. Whether Order is to be circulated to the Departmental authorities? Yes
The Commissioner of Customs & Central Excise
Visakhapatnam ..Appellant(s)
Vs.
M/s. Nikhil Refineries Ltd. Respondent(s)
Appearance Mr. R.K. Singla, JCDR, for the Revenue Mr. S. Thirumalai, Advocate, for the respondent Coram:
Honble Mr. S.S. Kang, Vice-President Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. M. Veeraiyan, Member (Technical) FINAL ORDER Nos._______________________2011 Per: M. Veeraiyan, By Miscellaneous Order No. 244/2011 dated 05.04.2011, the issue stands referred to Larger Bench.
2. Heard both sides extensively.
3. The facts, in brief, which are relevant to consider the issue referred are as follows:
a) The appellant imported three consignments of edible oils during March 2003 through Kakinada port. The total quantity of edible oils as per Bills of Lading was 5289.980 MTs. The imported consignments were surveyed by independent surveyors in the presence of representatives of suppliers, importer, master of the vessel and customs and Ullage Survey Reports were prepared. Total quantity of edible oils as per the Ship Ullage survey reports was 5287.829 MTs. The appellants filed into Bond Bills of Entry for the 3 consignments declaring the quantities of edible oils as per the Ullage survey reports and bonded the imported goods.
b) The appellants, thereafter, on different dates during March 2003 to June 2003, filed several Ex-bond Bills of Entry and cleared total quantity of edible oils amounting to 5240.764 MTs declaring the quantities as per Shore-tank receipts.
(c) As the department noticed shortage of quantity of 47.06 MT, a letter was issued to the appellants to pay duty on the short found goods. The appellants claimed that the said quantity of goods was short landed. However they filed three Bills of Entry all dated 24.06.2003 for clearance of 47.065 MTs which were assessed provisionally and the appellants paid the duty under protest.
(d) Original authority vide order No. 12/2005 dated 27.05.2005 held that assessments have to be done on the basis of Ship Ullage Survey reports.
(e) The appeal filed by the party, was allowed by the Commissioner (Appeals) with consequential relief vide Order No. 02/2006 dated 17.01.2006. Hence the department is in appeal. (Appeal No. C/223/2006)
(f) Subsequently they claimed refund of duty paid on short landed goods. The original authority after granting personal hearing rejected the refund claim amounting to Rs. 39,31,952/- vide order RC No. 30/2004 dated 15.06.2005.
(g) On appeal by the party, Commissioner (Appeals) vide Order No. 3/2006 dated 17.01.2006 has set aside the order of the original authority. Hence the department is in appeal. (Appeal No. C/209/2006)
4. The Referral Bench took note of the decision of the Tribunal in the case of CC & CE, Visakhapatnam Vs. Ruchi Infrastructure Ltd. reported in 2008 (224) ELT 477 (Tri.-Bang.) which held that the assessment of bulk liquid cargo has to be done on the basis of shore tank quantity and not as per Ullage report and also the decision of the Tribunal in the case of Mangalore Refinery & Petrochem Ltd. Vs. CC, Mangalore reported in 2006 (205) ELT 753 which held that the duty liability would be for entire quantity as indicated in the Bill of Lading and loss, if any was not to be considered. The Division Bench felt that there seemed to be contradiction in the judgments given by the Co-ordinate Benches as cited above on an identical issue and therefore referred the matter for constitution of larger bench by the Honble President. Accordingly the matter stands referred to the larger bench.
5.1 Learned Joint CDR submitted that there is no provision in the Customs Act for non-charging of customs duty in respect of quantity short found, as ascertained on the basis of removal from shore tank. The respondent has not contested the quantity supplied by the supplier. They have paid for the entire quantity mentioned in the invoices and paid the entire amount as mentioned in the invoices to the supplier. Therefore the transaction value has not been altered. The Ship Ullage reports having been prepared on the basis of dip readings taken by the independent surveyors in the presence of all concerned parties, the same require to be preferred to the shore tank receipts which are prepared by the respondents themselves.
5.2. The Ld. Joint CDR relied on the following decisions in support of his contention:
a) Decision in the case of M/s. MRPL, 2006 (205) ELT 753 (Tri.-Bang.) wherein the Tribunal has held that the customs duty has to be paid on the basis of transaction value. The Tribunal in the said case distinguished their earlier decision in the very same assessees appeal, reported as 2002 (141) ELT 247 (Tri.), wherein it was decided that customs duty was required to be paid on the basis of shore tank receipt on the ground that while deciding the earlier case of M/s. MRPL, it was not brought to the notice of the Bench that the goods during the relevant period were chargeable to on the basis of value and quantity, and therefore the Honble Bench did not have occasion to examine the valuation aspect.
b) Decision in the case of M/s. Exim India Oil Co. Ltd., 2001 (131) ELT 207 (Tri.-Kolkata), wherein the Tribunal has held that Ocean loss on account of spillage or evaporation or any other count was not permissible deduction when full payment has been made for entire quantity inclusive of loss under the provisions of Section 14 of Customs Act, 1962. While deciding the issue, the Tribunal relied on the decision of the Honble Supreme Court in the case of M/s. Surya Roshini, 2000 (122) ELT 3 (S.C). In the Surya Roshini case, the Honble Supreme Court held that Compensation to customers for breakage or losses in goods in transit includible in the value for payment of duty and not available for deduction and same could be treated as insurance or cost of transportation - Section 4 of Central Excise Act, 1944 - Departments appeal allowed.
c) Decision in the case of Liberty Oil Mills Ltd., 2006 (201) ELT 290 (Tri.-Bang.), wherein the Tribunal, following the orders passed in the MRPL, 2006 (205) ELT 753 (Tri.-Bang.) and M/s. Exim India Oil Co. Ltd., 2001 (131) ELT 207 (Tri.-Kolkata), held that ocean loss was not permissible deduction and accordingly rejected the refund claimed by the party.
d) He further submits that the decision in the case of M/s. Ruchi Infrastructure Ltd., 2008 (224) ELT 477 (Tri.-Bang), which has been relied on by the respondent, was given without reference to the decision of the Tribunal in the case MRPL, 2006 (205) ELT 753 (Tri.- Bang) and decision in the case Liberty Oil Mills Ltd., 2006 (201) ELT 290 (Tri.-Bang.).
6.1. Learned advocate for the respondent, referring to decision of the Tribunal in the case of National Organic Chemical Industries Ltd. reported in 2000 (126) ELT 1072 submits that measurement of shore storage tank is the only acceptable method of finding out the unloaded quantity, when there is short landing and goods are unaccounted, under section 116 of the Customs Act, 1962. He also submits that the appeal by the department against the said order stands dismissed by the Honble supreme court as reported in 2002 142 ELT A280 (S.C).
6.2. Relying on the decision of the Tribunal in the case of Collector of Customs, Visakhapatnam Vs. Hindustan Petroleum Corporation reported in 2001 (130) ELT 139 and the decision in the case of Mangalore Refinery & Petrochemicals Ltd. Vs. CCE, Bangalore reported in 2002 (141) ELT 247, he submits that the imported quantity should be taken as the quantity ascertained by dip measurement in the shore tanks and not as per Ullage survey report. He further submits that the appeal of the department against the said decision stands dismissed by the Honble Supreme Court.
6.3. Learned advocate also relied on the following decisions in support of his contentions:
a) Acalmar Oils & Fats Ltd. Vs. CC & C. CX (Appeals), Hyderabad -2007 (215) ELT 110 (Tri.-Bang.)
b) Shaw Wallace & Co. Ltd. Vs. Asst. Collr. of Customs & Others - 1986 (25) ELT 948 (Bom.)
c) Godrej Industries Ltd. Vs. Union of India - 2004 (171) ELT 5 (Bom.)
d) General Goods Ltd. Vs. Commr. Of Cus., Jamnagar - 2008 (232) ELT 750 (Tri.-Ahmd.)
e) Commr. Of cus. & C. Ex., Visakhapatnam Vs. Adani Willmar Ltd. - 2008 (227) ELT 154 (Tri.-Bang.)
7.1. We have carefully considered the submissions from both sides. As already noted, the reference has been made on an understanding that the decision of the Tribunal in the case of Ruchi Infrastructure Ltd. and decision in the case of Mangalore Refinery & Petrochem Ltd. are conflicting in nature. On a careful reading of the decision of the Tribunal in the case of Mangalore Refinery & Petrochem Ltd., reported in 2006 (205) ELT 753 (Tri.-Bang.) we find that the dispute in the said case was basically relating to difference in the quantity mentioned in the Bill of Lading and the quantity received in the shore tank. It also distinguished the decision of the Tribunal in the case of Mangalore Refinery & Petrochemicals Ltd. reported in 2002 (141) ELT 247 which was rendered in the context of goods subjected to specific rate of duty. The decision in the Ruchi Infrastructure Ltd. case related to refund of duty when the initial assessments were provisional and the finalization took place on the basis of quantity mentioned in the shore tank receipts.
7.2. Thus we find the decisions of the Tribunal in the case of Ruchi infrastructure Ltd., and Mangalore Refinery & Petro Chem. Ltd. were rendered in different sets of facts and therefore we do not find any conflict.
7.3. The other decisions cited by the Ld. Advocate are also on the facts of the said cases, as discussed below:
a) In the case of Collr. of Customs, Visakhapatnam Vs. HPCL 2001 (130) ELT 139 assessment of into bond bills of entry were provisional due to specific protest by the importer on the quantity imported.
b) In the case of National Ogranic Chemical Indus. Ltd. 2000 (126) E.L.T. 1072, the dispute related to eligibility of exemption and the Tribunal allowed the exemption for short found goods after appreciating the fact that it was not a case involving allegation of unauthorized diversion. This decision stands upheld by the Honble Supreme Court.
c) Decision of the Honble High Court in the case Shaw Wallace & Co. Ltd. 1986 (25) E.L.T. 948, is regarding the liability to penalty on the ship owners or the Steamer Agent under Section 116 of the Customs Act for difference in quantity in the ullage report and the quantity as per bill of lading in which it was held that the loss was within permissible limt.
d) In the case of Godraj Industries Ltd. 2004 (171) E.L.T. 5 (Bom.), the dispute related to bulk liquid cargo directly discharged into the tank lorries. The Honble High Court held that the Customs authorities are not justified in issuing public notice/circular directing the authority to adopt the ullage report for assessing the bulk liquid cargo.
e) The decision of the Tribunal in the case of General Foods 2008 (232) E.L.T. 750 merely followed the decision in the case Godrej Industries Ltd. cited supra and the detailed facts of the case are not evident from the order.
f) The decision of the Tribunal in the case of Acalmar Oils & Fats Ltd. 2007 (215) E.L.T. 110 has been passed on an admitted position that the impugned goods were discharged into shore tanks in the presence of Customs officers, Owners Surveyors, Receivers Surveyors and the Chief Officer of the Vessel.
8.1. It is to be noted that the quantity mentioned in the bill of lading is what is claimed to have been supplied by the foreign based exporter. Ullage survey conducted by the independent surveyors serve important purposes, as they are conducted in the presence of representative of the supplier, Master of the vessel, importer and the customs. Shortages could be due to various reasons. If there is unexplained shortage between the bill of lading quantity and the quantity as per the survey report, Master of the vessel becomes responsible for the shortage and importer gets protection and relief from the supplier and the Customs. In other words, the importer can pay the price for lesser quantity to the supplier correspondingly lower duties to the Customs and the person in-charge of the vessel is liable to penalty under Section 116 of the Customs Act.
8.2. In the present case we find that the ullage survey report was taken in presence of representatives of importer, foreign supplier, master of the vessel and customs. We find that the respondents filed into Bond Bills of Entry for quantities mentioned in the ullage report and the assessment was made finally. If they have filed bills of entry for clearance for home consumption, duty would have been paid on the entire quantity. They have not contested the quantity bonded which was based on ullage report at the time of assessment for the purpose of bonding. This is a case of shortage of goods found out of undisputed quantity of bonded goods found short at the time of ex-bond clearance. Thus the facts in the present case are different from those in the case of Ruchi Infrastructure where the assessments at the time of bonding was provisional.
8.3. The other decisions also have been rendered in the facts and circumstances of the said cases.
9. Therefore we return the matter to the referral bench for decision on merits of the case as we do not find any conflict in the decisions.
(Operative portion of this order pronounced on conclusion of the hearing) (S.S. Kang) Vice-President ( P.G. Chacko) Member (Judicial) (M. Veeraiyan) Member (Technical) iss