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

M/s. Bharat Petroleum Corporation Limited Versus The Commissioner of Customs And Vice-Versa

M/s. Bharat Petroleum Corporation Limited Versus The Commissioner of Customs And Vice-Versa - TMI 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 Value
The 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. BPCL
The 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 Fine
The 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.