2006 (2) TMI 518 - AT - Customs

Tribunal Confirms Duty Based on Bill of Lading Quantity; Orders Recalculation for Accurate Duty Alignment.

The Tribunal dismissed the appeal, affirming that customs duty should be calculated based on the Bill of Lading quantity, reflecting the actual ... Valuation of crude petroleum - demand - Bill of Lading quantity - Whether the actual freight paid to the shipping company or the freight in respect of the quantity received in the shore tank is to be taken for assessment purposes - HELD THAT:- In the present case, the price actually paid or payable is on the basis of the Bill of Lading quantity. On account of the losses, the appellant is not entitled for any reduction in price. In that case, the amount paid or payable on the Bill of Lading quantity is the transaction value for the purposes of Customs duty irrespective of the fact that the quantity received in the shore tank is different from the Bill of Lading quantity. In a product like petroleum crude, due to various causes, losses occur. This is considered natural. That is the reason for not giving any reduction in the price payable. In these circumstances, there is absolutely no provision to reduce the value to that attributable to the quantity received in the shore tank. It was contended by the learned Advocate for the appellants that in certain cases, the quantity received is more and they are paying more duty. We feel that even in those cases where the quantity received is more, it is enough if the appellants discharge duty liability on the actual amount paid on the basis of the Bill of Lading quantity. There is no legal sanction for collecting more duty when the levy is ad valorem. The learned Advocate further contended that if the stand of the Revenue is accepted, Sections 13 & 23 of the Customs Act would be rendered redundant. We do not agree. Section 13 of the Customs Act makes a provision for waiver of duty on goods pilferaged after their unloading and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse. But if the goods are restored to the importer after pilferage he has to discharge the duty liability. In order to emphasis the point that no duty need be paid on goods not received, the learned Advocate has referred to Section 13 & Section 23. We want to make it clear that it is not the question of demanding duty on goods not received. But it is the demand of duty on the transaction value. In spite of the ocean loss, the appellant has to make payment on the basis of the Bill of Lading quantity. Therefore this is the case where the transaction value arrived at based on the Bill of Lading quantity is payable as price for the quantity received in shore tank. The learned Advocate for the appellants and the learned Consultant for the Revenue both pleaded that if their contentions are not accepted, the issue may be referred to a Larger Bench. We hold that this Bench in the appellant’s own case [2002 (1) TMI 114 - CEGAT, BANGALORE] in the Final Order, has decided the issue only in the context of specific rate of duty. In other words, the said decision did not decide the question of transaction value on the basis of levy on ad-valorem basis. We hold the view that so long as the appellants make payment on the basis of Bill of Lading quantity, there is no case for determining the value for assessment purpose on the basis of quantity received in shore tanks. This is in consonance with the decision in the case of Exim India Oil Co. Ltd. [2000 (12) TMI 169 - CEGAT, KOLKATA]. In no way, this decision is contradictory to the decision of the Final Order for the simple reason that the earlier order is applicable only when the duty at specific rate. Therefore, we are inclined to dismiss the appeal of M/s. MRPL. However, the learned Advocate pointed out that lot of mistakes crept in the calculation of duty liability. Therefore while upholding the decision of the adjudicating authority, we remand the matter only for proper computation of duty liability on the basis of the payment made by the appellants to M/s. IOC based on Bill of Lading quantity. We dispose of the appeal in the above terms. Issues Involved:1. Valuation of crude oil for customs duty purposes.2. Basis for calculating customs duty: Bill of Lading quantity vs. shore tank receipt quantity.3. Applicability of Section 14 of the Customs Act and Customs Valuation Rules.4. Treatment of ocean loss in customs valuation.5. Relevance of previous Tribunal decisions and Board Circulars.6. Applicability of Sections 13 and 23 of the Customs Act.7. Correctness of the demand for customs duty and calculation errors.Detailed Analysis:1. Valuation of Crude Oil for Customs Duty Purposes:The core issue revolves around the correct valuation of imported crude oil for customs duty. The appellants argue that duty should be based on the actual quantity received in the shore tanks, while the Revenue contends that duty should be paid on the Bill of Lading quantity, which includes ocean loss.2. Basis for Calculating Customs Duty:The appellants import crude oil through Indian Oil Corporation (IOC) and make payments based on the Bill of Lading quantity. They argue that duty should be paid on the shore tank receipt quantity, citing previous Tribunal decisions and Board Circular No. 96/2002-Cus., dated 27-12-2002, which support their stance. However, the Revenue maintains that the duty should be based on the transaction value, which is the amount paid to IOC for the Bill of Lading quantity, irrespective of the quantity received.3. Applicability of Section 14 of the Customs Act and Customs Valuation Rules:Section 14 of the Customs Act and Rule 4 of the Customs Valuation Rules define the 'transaction value' as the price actually paid or payable for the goods. The Tribunal notes that the appellants make payments based on the Bill of Lading quantity, and there is no reduction in price due to ocean loss. Therefore, the transaction value should be based on the Bill of Lading quantity.4. Treatment of Ocean Loss in Customs Valuation:The Tribunal acknowledges that losses occur during the transit of crude oil due to natural causes. However, since the appellants pay for the Bill of Lading quantity, the transaction value should be based on this quantity. The Tribunal refers to international practices, including a German Court ruling and European Community regulations, which support the valuation based on the full price paid, even if there is a discrepancy between the purchased and received quantities.5. Relevance of Previous Tribunal Decisions and Board Circulars:The appellants cite several Tribunal decisions and Board Circular No. 96/2002-Cus., dated 27-12-2002, which support the assessment of duty based on shore tank receipt quantity. However, the Tribunal clarifies that these decisions and the Circular are relevant only when the duty is specific (based on quantity) and not when it is ad valorem (based on value). The Tribunal emphasizes that when the duty is ad valorem, Section 14 of the Customs Act applies, and the transaction value should be based on the Bill of Lading quantity.6. Applicability of Sections 13 and 23 of the Customs Act:The appellants argue that Sections 13 and 23 of the Customs Act, which provide for remission of duty on lost or destroyed goods, should apply to their case. The Tribunal rejects this argument, stating that the Revenue is not demanding duty on goods not received but on the transaction value. The Tribunal further explains that the loss due to natural causes during transit does not qualify for remission under Sections 13 and 23.7. Correctness of the Demand for Customs Duty and Calculation Errors:The Tribunal upholds the decision of the adjudicating authority, which confirmed a demand of Rs. 4,91,49,959/- under Section 28(1) of the Customs Act. However, the Tribunal acknowledges the appellants' claim of calculation errors in the duty liability. Therefore, while upholding the decision, the Tribunal remands the matter for proper computation of duty liability based on the payment made to IOC for the Bill of Lading quantity.Conclusion:The Tribunal dismisses the appeal, holding that the transaction value for customs duty purposes should be based on the Bill of Lading quantity, as this reflects the actual payment made by the appellants. The Tribunal remands the matter for recalculating the duty liability, ensuring it aligns with the Bill of Lading quantity.