Customs duty refund recovery and proportional penalty depend on disclosure of material survey records and survey timing.

Refund of customs duty based on a later ullage survey may be recovered where an earlier pre-discharge survey showed no short landing and was not disclosed with the refund claim. Under the prescribed survey procedure, short landing is to be determined only after the final survey following full discharge, so reliance on an incomplete record can render the refund unsustainable. A penalty for such a claim may still be reduced where the circumstances do not justify an amount equal to the demand, as proportionality remains relevant to the quantum of penalty.

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Issues: (i) Whether the refund of customs duty granted on the basis of the later ullage survey was liable to be recovered on the ground that the earlier survey showed no short landing and had been suppressed. (ii) Whether the equal penalty imposed for claiming the refund was justified.

Issue (i): Whether the refund of customs duty granted on the basis of the later ullage survey was liable to be recovered on the ground that the earlier survey showed no short landing and had been suppressed.

Analysis: The earlier ullage survey conducted before discharge showed a higher quantity on board and indicated that there was no short landing. The later survey, relied upon for refund, was done after part discharge had already taken place. Under the procedure prescribed by the public notice, short landing could be determined only after the final survey following full discharge. Since the earlier survey was not disclosed when the refund claim was made, the Department was justified in treating the refund as having been granted on an incorrect basis.

Conclusion: The demand for recovery of the refund was sustainable and was decided against the assessee.

Issue (ii): Whether the equal penalty imposed for claiming the refund was justified.

Analysis: Although the claim for refund was not accepted, the circumstances did not justify a penalty equal to the amount demanded. The imposition was considered excessive in the facts of the case.

Conclusion: The penalty was reduced to Rs. 1 lakh and the issue was decided partly in favour of the assessee.

Final Conclusion: The demand of duty refund was upheld, but the penalty was substantially reduced, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where refund of duty is claimed on the basis of an incomplete or misleading survey record, suppression of a material survey report justifies recovery of the refund, but penalty must still be proportionate to the facts and circumstances.

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