Custom, Excise & Service Tax Tribunal
M/S. Hindustan Petroleum Corporation ... vs Commissioner Of Customs (Import), ... on 30 June, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. 1
APPEAL NO.C/1104/07-Mum
(Arising out of Order-in- Appeal No.473/2007/MCH/AC/Oil Unit/07 dtd. 1/10/07 passed by the Commissioner of Customs(A), Mumbai )
For approval and signature:
Honble Mr P.G.Chacko, Member(Judicial)
Honble Mr. Sahab Singh, Member(Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Hindustan Petroleum Corporation Ltd.
:
Appellant
VS
Commissioner of Customs (Import), Mumbai
Respondent
Appearance
Shri T. Viswanathan, advocate for Appellant
Shri A. K. Prasad, Jt.CDR for Respondent
CORAM:
Mr. P. G. Chacko, Member(Judicial)
Mr. Sahab Singh, Member(Technical)
Date of hearing: 30/06/2011
Date of decision 30/06/2011
ORDER NO.
Per : P.G.Chacko
M/s. Hindustan Petroleum Corporation Ltd. ( HPCL for short) imported crude petroleum during April, 2005 to August, 2006 and cleared the goods on payment of duty provisionally assessed under Sec.18 of the Customs Act. In the Provisional Duty Bonds (PD Bonds) executed by them at the time of clearing the goods, they undertook to pay any difference between the duty finally assessed and the duty provisionally assessed. Later on, in a show-cause notice dated 19.10.2006, the Deputy Commissioner concerned called upon HPCL to show cause why the provisional assessment should not be finalized on the basis of transaction value inclusive of lighterage/barging charges and demurrage charges. Total differential duty of Rs. 258,07,87,156/- was sought to be recovered on the goods covered by 164 Bills of Entry. Proposal to include barging charges and demurrage charges in the assessable value of the goods was made under Rule 9(2) of the Customs Valuation Rules, 1988. The proposals in the show-cause notice were contested by HPCL in a detailed reply, wherein it was mainly contended that the assessment required to be finalized on the basis of the quantity ascertained by shore tank measurement and not on the quantity reflected on the ullage survey report. They submitted that they were paying duty in the past on the quantity received in their storage tank (shore tank) and that the assessment should be finalized on the same basis as per Circular No. 96/2002-Cus dated 27.12.2002. They submitted that the proposal in the show-cause notice was not supported by CBEC Circulars or judicial decisions. With regard to inclusion of demurrage charges in the assessable value of the goods, they challenged the correctness of the quantification thereof proposed in the show-cause notice. It was further submitted that some of the imports had been made under advance licences and, therefore, the goods covered under the relevant Bills of Entry were liable to be excluded from payment of duty. In some cases, HPCL pointed out that, the assessable value adopted in the show-cause notice was higher than the assessable value as per the invoices and, hence, excess amount of duty than what was due based on the invoice value was demanded. Without prejudice to these contentions, HPCL claimed that they were entitled to refund of Rs. 5.51 crores even on the basis of the invoice price of the goods. In any case, the main point raised in their reply to the show-cause notice was that the quantity received ashore was the quantity actually imported and duty was payable only for such quantity.
2. After giving them an opportunity of being heard, the Asstt.Commissioner of Customs ordered final assessment based on invoice value ( transaction value) and demanded differential duty of Rs. 43,27,64,592/- after adding the actual demurrage charges also to the invoice value to get the assessable value. Demand of differential duty of over Rs. 214.8 crores was dropped for various reasons. Obviously, the proposal to add barging/lighterage charges to the transaction value was dropped.
3. Aggrieved by the above finalization of provisional assessment, the assessee preferred an appeal before the Commissioner(Appeals) but the same came to be dismissed on merits. Hence the present appeal.
4. Upon examination of the records, we find that the grounds of appeal are limited. The main ground raised by the appellant is that excess payment of Rs. 9.85 crores as duty on the excess quantity of crude oil based on shore tank measurement vis-`-vis invoice value was not taken into account by the lower authorities while quantifying the demand of differential duty. The ld.counsel has endeavoured to elaborate this ground by submitting that, where all the provisional assessments were taken up for joint finalization by the original authority, it was incumbent on that authority to adjust the short payment against excess payment of duty. It is submitted that, out of 85 Bills of Entry considered by the original authority for the purpose of redetermination of assessable value, the demand of differential duty has been raised in respect of 42 Bills of Entry. As regards the remaining 43 Bills of Entry, duty had actually been paid in excess of the duty payable on the redetermined assessable value. The Ld. Counsel submits that these excess payments of duty totalling to Rs. 9.85 crores were not adjusted against the demand of duty worked out on the aforesaid 42 Bills of Entry. In this connection, ld. counsel has relied on the Tribunals decision in the case of M/s. Apar Industries Ltd. vs Commissioner of Customs (Import), Mumbai [ 2008-TIOL-173-CESTAT-MUM ] wherein this Bench held that, where all the Bills of Entry has been finalized by a common order, refunds due to the assessee should have been adjusted against the demand of duty. It is, contextually, pointed out that this decision of the Tribunal has been followed by the Commissioner (Appeals) in HPCLs own case and the benefit of adjustment of short- payment of duty against excess payment of duty was allowed in respect of a large number of Bills of Entry covering imports of crude oil for a subsequent period. A copy of Order-in-Appeal No.199 &200/2009/MCH/AC/Oil Unit/09-10 dated 29.07.2009 passed by the Commissioner of Customs (Appeals), Mumbai-I has also been produced by the counsel. The ld. counsel submits that, to the best of his knowledge, no appeal was filed by the department against the Tribunals decision in M/s. Apar Industries Ltd.s case (supra) or Order-in-Appeal dated 29.7.2009 ibid .
5. Per contra, ld. Jt.CDR submits that the law does not contemplate adjustment of the aforesaid kind. It is submitted that the concept of transaction value does not accommodate such adjustments inasmuch as, otherwise, it will not be feasible for the Revenue to levy and collect interest on duty in terms of the relevant provisions of law. On the central excise side, each clearance of excisable goods needs to be assessed independently both at the stage of provisional assessment and at that of final assessment. On the customs side, each Bill of Entry needs to be independently assessed at both the stages under Sec.18 of the Customs Act. In either case, where, upon finalization of the assessment, short- payment of duty is found, the differential amount of duty is to be paid by the assessee and where excess payment of duty is found, the differential amount of duty has to be claimed as refund. According to the JCDR, any adjustment of short -payment of duty on one Bill of Entry against excess payment of duty on another is not permissible. In support of this legal proposition, reference has been made to the Tribunals Larger Bench decision in the case of Excel Rubber Ltd. vs Commissioner of Central Excise, Hyderabad [2011 (268) E.L.T. 419 (Tri-LB.)] ( para 24, 27, 28 & 50). Ld.JCDR has also relied on the decision in the case of Bombay Burmah Trading Corpn.Ltd vs Commr. of Central Excise, Pune.I [2010(261) E.L.T. 689 (Tri-Mumbai)]. Claiming support from the above decisions, ld.JCDR submits that, before asking for adjustment of short -payment of duty against excess payment of duty, the assessee should have filed proper claim for refund of the excess duty paid, under Sec.27 of the Customs Act. In the absence of such refund claim, the assessee cannot insist on adjustment between duty short- paid and duty paid in excess. It is contended that filing of refund claim under Sec.27 of the Customs Act is mandatory where excess payment of duty by the assessee has been found upon adjustment of the amount of duty paid on the basis of provisional assessment and the amount of duty payable on final assessment. This basic requirement cannot be done away with in a case where excess payment of duty has been found on finalization of provisional assessment of a Bill of Entry and short- payment of duty found on finalization of provisional assessment of another Bill of Entry. It is pointed out that, in the present case, HPCL did not file any refund claim, and therefore, the question of adjustment between short- payment of duty on one set of Bills of Entry and excess payment of duty on another set of Bills of Entry does not arise.
6. In the above context, the ld.JCDR has referred to the provisions of Sec.27 of the Customs Act. He has particularly referred to Explanation II which deals with the period of limitation for a claim for refund of duty arising out of finalization of provisional assessment. According to ld.JCDR, this provision would also indicate that any claim for refund of duty arising out of finalization of provisional assessment of a Bill of Entry should be duly claimed under Sec.27 of the Act. In this connection, he has also relied on the Honble High Courts judgment in United Spirits Ltd vs Commissioner of Customs (Import), Mumbai [ 2009(240)E.L.T. 513 (Bom)] wherein it was held by the court, after examining the provisions of Sec.18 and Sec.27 of the Customs Act, that any refund of duty arising out of finalization of provisional assessment under Sec.18 would always be subject to provisions of Sec.27(3) which required the claimant to adduce evidence against the bar of unjust enrichment. With reference to the Tribunals decision in the case of M/s. Apar Industries Ltd (supra) and the appellate Commissioners order dated 29.7.2009, relied on by the ld.counsel, the ld.JCDR points out that both the orders are presently under challenge. It is pointed out that Appeal Nos. C/1059/09 and C/978/10 pending with this bench are directed against Order-in-Appeal dated 29.7.2009 ibid . It is also pointed out that Customs Appeal Nos. 19 & 20 of 2010 against the Tribunals order in M/s. Apar Industries case are pending before the Honble High Court. Both the appeals are said to have been admitted by the High Court.
7. In his rejoinder, ld.counsel submits that, though no formal refund claim was filed by HPCL, they did claim refund of the excess duty paid by them, through their reply to the show-cause notice. According to him, this claim should have been considered by the original authority. It is submitted that the refund claim was not considered by that authority and that the grievance raised against that authority was not heeded by the Commissioner(Appeals). Without prejudice to this submission, the ld.counsel also contends that the original authority ought to have suo motu granted the refund of the excess duty paid by HPCL, without insisting on filing of formal claim.
8. After considering the provisions of law and decisions cited before us, we are of the view that the issue at hand calls for a decision against the appellant in view of the Tribunals Larger Bench decision in the case of Excel Rubber Ltd (supra). In the context of considering the question whether different clearances of excisable goods could be clubbed together for the purpose of finalization of provisional assessments, the Larger Bench held against the clubbing. It held that clubbing of excess payment of duty claimed as refund on the one hand and demand of differential duty by the department on the other, by adopting the method of adjustment, would certainly result in nullifying the provisions of Rule 7(4) of the Central Excise Rules, 2002. The Larger Bench found that, if such adjustment was allowed, it would result in unjust enrichment to the assessee in regard to interest on duty. The Larger Bench further held that, where excess payment of duty paid by the assessee was found upon finalization of provisional assessment under Rule 7(3), the assessee had no option but to apply to the excise officer for refund of such duty in accordance with the relevant provisions of law and within the time prescribed. Once such claim was made, the principle of unjust enrichment would get attracted. This decision of the Larger Bench is equally applicable to a case where, upon finalization of provisional assessment, excess payment of duty by the assessee is found in respect of one set of Bills of Entry and short- payment of duty found in respect of another set. On the reasoning adopted by the Larger Bench, any adjustment between the excess payment of duty and the short-payment of duty is not permissible and, on the other hand, what is required to be done by the assessee is to pay the duty short- paid and separately claim refund of the duty paid in excess. Needless to say that the refund claim should be filed under Sec.27 of the Customs Act and that the provisions of time-bar and unjust enrichment embodied in that section would be applicable. Ld. counsel has claimed support from para 50 of the Tribunals Larger Bench decision, wherein the Bench referred to adjustment between the duty claimed as refund on the one hand and duty demanded by the Revenue on the other. To our mind, this is a reference to adjustment envisaged under Sec.11 of the Central Excise Act and not to any such adjustment as has been debated in the present case. In any case, the ratio of the decision of the Larger Bench has to be discerned from the full text of its judgment, particularly para 27, 28 and 50. The ratio so discerned goes to support the Revenue in the present case.
9. Ld. Counsel has asserted that refund was claimed through their reply to the show-cause notice. This assertion would not improve the case of the appellant inasmuch as the legal requirement for the assessee was to claim refund under Sec.27 of the Customs Act. It is also noticed that there is no definite claim of refund even in the reply to the show-cause notice, nor is there any attempt to substantiate the claim. Obviously, the original authority was not called upon to examine any refund claim under Sec.27 of the Customs Act and, for that matter, it was not liable to consider the plea of adjustment between the amount of duty short- paid and the amount of duty paid in excess.
10. The Tribunals decision in M/s. Apar Industries case is contrary to the ratio of the decision of the Larger Bench in the case of Excel Rubber Ltd (supra) and hence cannot be followed as a precedent. Moreover, M/s. Apar Industries decision (supra) is presently under challenge before the High Court. The reliance placed by the ld.counsel on Order-in-Appeal dated 29.7.2009 is also of no avail to the appellant inasmuch as the view taken therein by the ld. Commissioner (Appeals) by following the Tribunals decision in M/s. Apar Industriess case does not hold good in view of the Tribunals Larger Bench decision. The said Order-in-Appeal is also under challenge by the department before this Tribunal.
11. The present issue stands decided against the appellant. Accordingly, their claim for adjustment between the differential amount of duty demanded by the lower authorities in relation to the first set of 42 Bills of Entry and the excess amount of duty relating to the second set of 43 Bills of Entry is not tenable and the same is rejected.
12. Another issue raised by the ld. counsel is whether the assessment should be based on invoice value or on shore tank quantity. In this connection, the ld.counsel has relied on certain Circulars issued by the CBEC. He has also relied on case law. Ld.JCDR points out that the issue does not arise from the Memo of Appeal. We have perused the grounds of this appeal and have not found any grievance having been raised regarding the basis of assessment. Therefore, the plea made by the ld.counsel at the bar cannot be accepted.
13. A few minor grievances of the appellant are found in grounds 2, 3 & 4 of this appeal, which are reproduced below:-
2. Bill of Entry No.661291 dated 24.3.2006 amounting to Rs. 11.30 Crores does not pertain to the appellant though it has been included in the calculation of duty demand of Rs. 43.27 Crores.
3. The respondent, in his order, considered the entire quantity of crude though part of the crude was sent to other ports for which no duty is payable. This amount which should not have been considered for inclusion in the demand is Rs. 14.38 Crores.
4. Some of the Bill of Entries amounting to Rs. 11.67 Cores have been cleared under DEEC. In case above amounts are considered, it results in net refund of Rs. 3.94 Crores as against the demand of Rs. 43.27 Crores. (Refer Annexure B).
14. The ld.counsel has, however, submitted that the Bill of Entry No. 661291 ibid was filed by the appellant. It is submitted that the amount of duty in relation to this Bill of Entry was quantified by the original authority on the basis of the invoice value reflected in the original invoice raised by the supplier on BPCL (original consignee). The crude oil covered by that invoice was purchased by HPCL from BPCL under a high-sea sale agreement. The goods covered by the aforesaid Bill of Entry filed by HPCL was warehoused and, out of the warehoused-stock, a lower quantity of lower value was cleared under ex-bond Bill of Entry. The ld.counsel submits that this lower value declared in the ex-bond Bill of Entry should have been adopted by the original authority for quantification of differential duty. In this connection, he has referred to sl.no. 54 of the Annexure to the Order-in-Original, which indicates the invoice value of the goods covered by the above Bill of Entry as US$ 5,31,31,252. 41, which is said to be the price paid by BPCL to the supplier. We have also perused the relevant invoice raised by the foreign supplier on BPCL which indicates the same value. Though the relevant ground of this appeal does not survive today in view of the ld.counsels submission that as the above Bill of Entry was filed by HPCL, the grievance raised by him needs to be addressed by the original authority as it is based on an error of quantification of duty. The subject-matter of grounds 3 & 4 of the appeal can also be examined by the original authority.
15. As regards the demurrage charges, the ld.counsel has submitted that there is a binding decision of the Tribunals Larger Bench in the case of Indian Oil Corporation vs Commissioner of Cus., Calcutta [ 2000 (122) E.L.T. 615( Tribunal LB)] (para 15). The Larger Bench held that demurrage was an extraordinary expenditure which did not require to be added to the transaction value inasmuch as Rule 9 of the Customs Valuation Rules did not contemplate inclusion of extraordinary expenses like demurrage in the assessable value of the goods. The above decision of the Tribunals Larger Bench was affirmed by the Supreme Court in Commissioner of Customs, Calcutta vs. Indian Oil Corporation Ltd. [ 2004 (165) E.L.T.257 (S.C.)]. According to the ld.counsel the ratio decidendi of the Larger Bench decision in the case of Indian Oil Corporation Ltd. is also supported by the Honble Supreme Courts judgment in the case of Ispat Industries Ltd. vs Commissioner of Customs, Mumbai [ 2006(202) E.L.T. 561 (S.C.)] wherein barging charges were considered to be extraordinary expenses and hence not includible in the assessable value of the imported goods.
16. Jt.CDR referred to certain decisions of the Tribunal to the effect that demurrage charges could be included in the assessable value of the imported goods, like Tata Power Co.Ltd. vs. Commissioner of Customs, Mangalore [ 2009(240) E.L.T. 742 (Tri-Bang.) He has also claimed support from the Boards Circular No. 26/2006-Cus.dated 26.9.2006 wherein it was instructed that all pending provisional assessments in respect of importation on or after 2.3.2001 be finalized by including ship demurrage charges in the assessable value of the imported goods.
17. In view of the Tribunals Larger Bench decision in Indian Oil Corporation Ltds case as affirmed by the Honble Supreme Court, the case law and circulars cited by the JCDR cannot be relied upon in the present case. Though, in the grounds of appeal, there is no reference to demurrage charges, there is a plea made by the appellant through written submissions that such charges were not includible in the assessable value of the goods in question. In the peculiar nature of this case, we are of the view that this plea needs to be entertained. Considering the decision of the Tribunals Larger Bench as affirmed by the apex court in the case of Indian Oil Corporation Ltd., we hold that demurrage charges cannot be included in the assessable value of the subject-goods.
18. In the result, it is ordered as follows:-
(a) Finalization of provisional assessment has to be on the basis of invoice value ;
(b) Assessable value shall not include demurrage charges ;
(c) Any adjustment between the differential amount of duty in relation to the first set of 42 Bills of Entry and the excess amount of duty covered by the second set of 43 Bills of Entry is not permissible ;
(d) The issues arising out of grounds 2, 3 & 4 in the Memo of Appeal have to be considered by the original authority and to be decided upon in accordance with law and the principles of natural justice.
19. The impugned order is sustained subject to the aforesaid modifications. The appeal is disposed of accordingly.
(Pronounced in court) Sahab Singh Member(Technical) P.G.Chacko Member(Judicial) pv 17