2017 (10) TMI 302 - AT - Customs

Tribunal overturns duty demand, penalties, and fines in favor of BPCL

The Tribunal set aside the duty demand on demurrage charges, the penalty imposed on M/s. BPCL, and the redemption fine. The appeal filed by M/s. BPCL was ... Valuation - includibility - demurrage charges - High Sea Sales Commission (HSSC) - Whether demurrage charges are to be included in the assessable value or not? - Held that: - the issue of inclusion of demurrage charges in the assessable value has been decided by the Hon’ble Supreme Court in the case of CCE, Mangalore vs. M/s Mangalore Refinery Petrochemicals Ltd. (MRPL) [2016 (1) TMI 325 - SUPREME COURT] wherein it has been held that demurrage charges are incurred after the goods reach Indian Ports and hence, this is a post importation event, and cannot form part of transaction value. Whether the penalty on the appellant M/s. BPCL is imposable and if so, how much it is to be? - Held that: - goods were initially assessed provisionally and later assessed finally under Section 18 of the Customs Act, and the fact that when the mistake of non-declaration of payment of 1.5% HSSC to M/s. IOCL was noticed, the appellant, BPCL paid the differential duty along with interest on 6.9.2004, the penalty under Section 114A of the Customs Act, 1962 is not liable to be imposed - penalty set aside. Whether Redemption Fine is imposable? - Held that: - the matter of imposition of redemption fine has been discussed by the Larger Bench of the Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. CCE [2009 (1) TMI 124 - CESTAT MUMBAI], wherein it has been held that where the goods had been cleared without execution of any bond /undertaking, no redemption fine could be imposed under Section 125 in lieu of confiscation - the impugned order imposing redemption fine of ₹ 5,00,000/- is hereby set aside. Appeal allowed - decided in favor of appellant. Issues Involved:1. Inclusion of demurrage charges in the assessable value.2. Imposition of penalty on M/s. BPCL.3. Imposition of Redemption Fine.Detailed Analysis:Issue 1: Inclusion of Demurrage Charges in the Assessable ValueThe primary issue was whether demurrage charges should be included in the assessable value of imported goods. The Tribunal referred to the Supreme Court's decision in CCE, Mangalore vs. M/s Mangalore Refinery Petrochemicals Ltd. (MRPL), 2015 (325) ELT 214 (SC), which clarified that demurrage charges incurred after goods reach Indian ports are post-importation events and cannot form part of the transaction value. The Supreme Court stated, 'The demurrage charges are admittedly incurred after the goods reached at Indian ports and, therefore, it is a post-importation event. Such charges, therefore, cannot form part of the transaction value.' Consequently, the duty demand on demurrage charges was set aside.Issue 2: Imposition of Penalty on M/s. BPCLThe second issue was whether a penalty should be imposed on M/s. BPCL for not declaring the actual High Sea Sales Commission (HSSC) paid. M/s. BPCL argued that there were divergent practices at different ports regarding the inclusion of HSSC, and they followed the practice of adding 1% of C&F value as HSSC in good faith. They also pointed out that upon learning about the investigation, they promptly paid the differential duty before the show-cause notice was issued. The Tribunal noted that the goods were initially assessed provisionally and later finalized under Section 18 of the Customs Act, 1962. Since the demand was not raised under Section 28 of the Customs Act, 1962, the penalty under Section 114A was not applicable. The Tribunal cited the Supreme Court's endorsement of this view in Commissioner vs. IOCL: 2015 (321) ELT A50 (SC) and Commissioner vs. Escorts Heart Institute & Research Centre: 2017 (348) ELT A131 (SC). Therefore, the penalty imposed was not sustainable.Issue 3: Imposition of Redemption FineThe final issue was whether a redemption fine could be imposed when the goods were not physically available for confiscation. The Tribunal referred to the Larger Bench decision in Shiv Kripa Ispat Pvt. Ltd. CCE: 2009 (235) ELT 623 (Tri.-LB), which held that no redemption fine could be imposed under Section 125 of the Customs Act if the goods were cleared without executing any bond/undertaking. The Tribunal also noted the Bombay High Court's affirmation of this decision in Commissioner vs. Shiv Kripa Ispat Pvt. Ltd.: 2015 (318) ELT A259 (Bom.). Consequently, the redemption fine of Rs. 5,00,000 imposed was set aside.Conclusion:The Tribunal modified the impugned order by setting aside the duty demand on demurrage charges, the penalty imposed on M/s. BPCL, and the redemption fine. The appeal filed by M/s. BPCL was allowed, and the cross-appeal filed by the Revenue was dismissed.