Parcel-wise assessment of oil cargo shortage barred penalty under Customs law where wastage stayed within the permitted allowance.

Where oil cargo is discharged continuously and grades may mix during discharge, shortage for penalty under Section 116 of the Customs Act must be assessed on a reasonable parcel-wise basis rather than by aggregating all grades together. On that method, the loss remained within the permitted 1% wastage allowance, so penalty could not be sustained. The penalty orders were set aside and refund of the penalty amount was directed.

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Issues: Whether, for the purpose of penalty under Section 116 of the Customs Act, the shortage in discharged oil cargo was to be assessed parcel-wise or on the total quantity manifested, and whether the appellant was entitled to the benefit of 1% wastage allowance.

Analysis: The discharge of oil from the tanker to the shore was continuous and the grades of oil were liable to get mixed during the process. The survey report, prepared in the presence of Customs officers, showed excesses in some parcels and shortages in others. In these circumstances, accounting on the basis of each grade of oil, rather than aggregating all the grades together, was held to be the proper method. On such parcel-wise accounting, the loss remained within the 1% allowance granted by the Customs authorities, leaving no basis for penalty.

Conclusion: The appellant was entitled to parcel-wise accounting and the shortage did not justify levy of penalty under Section 116 of the Customs Act.

Final Conclusion: The penalty orders were set aside and refund of the penalty amount was directed, resulting in success for the appellant.

Ratio Decidendi: Where cargo is discharged continuously and mixing of grades occurs in the process, liability for shortage under Section 116 of the Customs Act must be determined on a reasonable parcel-wise basis, and penalty cannot be sustained if the shortage falls within the permissible wastage allowance.

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