2025 (9) TMI 1005 - AT - Customs

Shore-tank actual receipt quantity, not bill-of-lading, governs customs assessment for bulk liquid cargo subject to tolerance verification

CESTAT-Ahmedabad set aside the impugned order and remanded the matters to the adjudicating authority. The Tribunal held that shore-tank (actual receipt) ... Rectification of mistake - error apparent from the record or not - law of Mangalore Refinery and Petrochemicals Ltd. Vs CCE [2015 (9) TMI 245 - SUPREME COURT] has been duly applied and considered along with CBEC Circular in the order directed to be rectified or not - finalization of bills of entry - applicability of res-judicata - HELD THAT:- It is found that the department’s reliance on the decision of Mangalore Refinery and Petrochemicals Ltd. vs CCE is with objective to indicate that it is the actual quantity imported into India and not the bill of lading quantity which shall be the decisive factor for assessment. For ease, the quantity actually received in tanks has been termed as shore tank quantity. It is also found that the Circular No. 6/2006 dated 12.01.2006 which was relied upon by the party was held contrary to law. Circular No. 06/2006-Cus dated 12.01.2006 refers to shore tank quantity only for the purpose of assessment at the specific rate, while maintaining that for assessment on ad-valorem basis transaction value to be considered and custom duty will be leviable on invoice. The Circular thus clearly relied upon shore tank measurement method only when specific rate of duty was in operation. The decision in the case of CC vs Hindustan Petroleum Corporation Limited [2000 (7) TMI 313 - CEGAT, MUMBAI] decided that it is the quantity which has come into shore tanks that makes the import as a taxable event. This decision was holding the field till decision of Mangalore Refinery and Petrochemicals Ltd. (cited supra) ][came and held that irrespective of whether duty is ad-valorem or on specific rate it makes no difference for the instance of importation. It thus clearly rejects bill of lading quantity as the imported quantity and notes that when the goods are destroyed, pilfered or lost enroute, no duty is leviable. It is found that in case of bulk liquid cargo, some tolerance as has been pointed out by various case law cited by the appellant is required to be considered as to prescription of such a limit for this type of commodity before coming to final conclusion for charging import duty. The claim of the party that it is within the tolerance limits needs to be examined by the learned Adjudicating Authority on the basis of records as made available by the appellant. Since the matter is already remanded to lower authority on the point of delay, we remand this issue as well. On the second issue regarding 13 bills of entry which were separately assessed out of 52 bills of entries, initially provisionally assessed as certain documents were required from the party and sample testing was required to be done and final pricing was to be done, it is found that the separate show cause notices for including demurrage charges in the assessable value were also issued to the party which were eventually dropped in view of decision in the case of Mangalore Refinery and ordering that the assessment may be finalized. The department is not in appeal against this order. It is also not ascertainable from the available records as to whether consequent upon the above order(s) these provisional assessments were finally assessed or not as the direction as per the order was to finalize assessment, accordingly. Plea of delayed finalization as raised by the party to be considered in the backdrop of the fact whether the same is or not considerably attributed to the party - Relevant laws and Circulars including those applicable to assessments on ad-valorem as on date of import to be applied, considering that in the instant case shore tank quantity is not available and decision of Mangalore Refinery is silent about ship ullage quantity - Alternate plea of benefit of 13 bills of entries to be allowed if on verification, it is found that these 13 bills of entries were separately assessed finally in compliance of orders of Deputy Commissioner issued in 2018. Appeals allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether reliance upon a Tribunal order that was earlier recalled constitutes a mistake apparent on the face of the record warranting rectification. 2. Whether the quantity for levy of customs duty in bulk liquid imports is to be determined by ship ullage report, bill of lading, or shore-tank (dip) measurement, having regard to applicable statutory scheme, Board circulars in force at the time of importation, and Supreme Court precedent. 3. Whether later Board circulars and later Supreme Court decisions can be applied retrospectively to imports made earlier, or the law/ circular in force at the time of import (lex rei sitae tempore importationis / lex importationis) governs assessment. 4. Whether provisional assessments which were directed to be finalized earlier (13 bills of entry) were in fact finally adjudicated such that principles of res judicata (civil or constructive) bar re-opening by the department, having regard to the sui generis provisions of the Customs Act governing finalisation of provisional assessments and applicable authorities. 5. Whether tolerance limits for quantity variance recognised in precedent and manuals should be applied in adjudication of weight/quantity discrepancies in bulk liquid imports. ISSUE-WISE DETAILED ANALYSIS Issue 1: Reliance on a recalled Tribunal order - rectification of mistake apparent on the face of the record Legal framework: Rules governing rectification of mistakes apparent on the face of the record permit recall/rectification where a court/tribunal has placed reliance on an earlier order that has been recalled. Precedent Treatment: Authorities recognising non-consideration or erroneous reliance on recalled/overruled orders as a ground for rectification were invoked by the applicant. Interpretation and reasoning: The Tribunal accepted that placing reliance on its own order which had been recalled amounted to an error apparent on the face of the record. The Bench reconsidered reliance on the recalled order and partly allowed the rectification application to the extent of recalling the earlier final order for correction of that reliance. Ratio vs. Obiter: Ratio - Reliance on an order previously recalled by the Tribunal is a mistake apparent on the face of record and justifies rectification/recall. Conclusions: Rectification/recall granted to remove reliance on the recalled Tribunal order; the matter was re-opened to the extent necessary to correct that mistake. Issue 2: Proper basis for quantity on which customs duty is leviable for bulk liquid imports - ship ullage vs. shore-tank dip vs. bill of lading Legal framework: Customs Act provisions on chargeability of import duty (import as taxable event), Customs Valuation Rules, and Board circulars governing measurement practice for bulk liquid cargo; concept that levy occurs at time/place of importation. Precedent Treatment: The Supreme Court decision holding that quantity actually received into shore tanks is the basis for levy was followed as authoritative. Earlier Tribunal/High Court decisions favouring ship-ullage or bill of lading were considered and distinguished where applicable. Subsequent (post-import) circular rescinding earlier circular was noted but its retrospective application was questioned. Interpretation and reasoning: The Tribunal analysed statutory scheme and Supreme Court dicta emphasizing that import (taxable event) completes when goods form part of mass of goods within country (shore tank receipt). It held that the Shore-tank quantity (quantity pumped into shore tanks) is the quantity constituting import for customs levy. The Tribunal also observed that the 2006 circular restricted shore-tank measurement to specific-rate assessments, but later Supreme Court authority and the 2016 circular adopted the shore-tank rule irrespective of rate type. The Tribunal concluded that quantity received in shore tank is the correct measure of imported quantity and that ship-ullage reflects onboard quantity at discharge and does not itself establish importation on landmass. Ratio vs. Obiter: Ratio - Quantity that is pumped into shore tanks (shore-tank dip measurement) is the proper basis for demand of customs duty; ship-ullage or bill of lading cannot substitute where shore-tank measurement governs the import event. Obiter - Comments on marginal differences between bill of lading and ship-ullage quantities and their treatment as tolerance may be factual/applicable guidance but require adjudication on record. Conclusions: Assessment should be governed by shore-tank quantity as per controlling Supreme Court exposition; where shore-tank data unavailable, further factual enquiry required. The adjudicating authority must examine records and apply the correct measure when finalising assessment. Issue 3: Temporal application of Board circulars and Supreme Court decisions - lex rei sitae tempore importationis Legal framework: Principle that law applicable is the law in force at time of importation (lex importationis); limits to retrospective application of administrative circulars and judicial decisions; finality and res judicata principles tempered by sui generis Customs Act provisions. Precedent Treatment: Decisions were cited holding that later overruled/overriding judgments cannot be used to reopen finalized cases and that law at time of transaction governs. The Tribunal relied on authorities emphasising finality and the need to apply law existing at time of the taxable event. Interpretation and reasoning: The Tribunal held that lex rei sitae tempore importationis applies - i.e., laws/circulars and judicial decisions operative at time of import govern assessment. Where an import predates a later circular or decision, that later instrument cannot be applied retrospectively to change the legal basis of assessment unless statutory provisions permit. Ratio vs. Obiter: Ratio - The law and circulars in force at time of importation govern assessment; subsequent circulars/decisions cannot be applied retrospectively to alter that position. Obiter - Observations on interplay of later rescissions and their administrative effect were made for guidance but require case-specific application. Conclusions: The adjudicating authority must apply the law and circulars applicable at the time of each import; where shore-tank rule was not in force for ad-valorem cases at import, that must be considered, subject to controlling judicial precedent. Issue 4: Effect of prior directions to finalise provisional assessments (13 bills) - res judicata / constructive finality vis-à-vis sui generis Customs regime Legal framework: Provisions of the Customs Act concerning provisional assessment and finalisation; civil law res judicata principles; administrative/constructive finality where provisional assessments are duly finalised; limitation and reasonableness doctrines for delay in finalisation. Precedent Treatment: Authorities cited establish that non-consideration of submissions is a ground for rectification; High Court decisions referred to for limitation on delayed finalisation and for distinction between common law res judicata and customs statutory finality. Interpretation and reasoning: The Tribunal recognised the unique statutory scheme under the Customs Act for provisional assessments and held that whether the 13 bills were finally adjudicated must be ascertained factually. If those provisional assessments were in fact finalized in compliance with earlier directions, constructive finality may prevent re-opening; if they were not finally assessed, the department may be entitled to re-adjudicate subject to statutory limits and reasonableness. The Tribunal remanded to enable the appellate authority to verify records and determine whether the 13 bills had been finally assessed and whether re-opening is barred. Ratio vs. Obiter: Ratio - Finality under customs law depends on statutory compliance with provisions for finalising provisional assessments; civil res judicata cannot be mechanically imported into customs domain without factual and statutory examination. Obiter - References to limitation periods and normative six-month guidance (CBIC manual) are explanatory pending factual determination. Conclusions: Remand directed for fact-finding whether the 13 bills were finally assessed; if finalized in accordance with directions, benefits may attach; otherwise, re-adjudication may proceed subject to statutory safeguards and delay considerations. Issue 5: Applicability of tolerance limits for quantity variance in bulk liquid imports Legal framework: Customs Appraising Manual and judicial decisions recognizing tolerance thresholds for variance in weight/quantity in bulk cargo imports; relevance of commodity nature to tolerance magnitude. Precedent Treatment: Tribunal acknowledged precedents permitting tolerance (including higher percentages for certain commodities) and the Appraising Manual reference to up to 1% in some contexts; other case law indicates tolerance up to 3%-5% or more depending on commodity. Interpretation and reasoning: The Tribunal found prima facie substance in the submission that small variances (claimed .005% to 0.86%) may fall within accepted tolerance limits and directed that the learned Adjudicating Authority examine tolerance applicability on record. Determination of tolerance is fact-sensitive and requires consideration of commodity nature, measurement evidence, and applicable authority/manuals at relevant time. Ratio vs. Obiter: Ratio - Tolerance limits are relevant and must be applied where supported by records and precedents; assessment on variance must consider accepted tolerance thresholds. Obiter - Specific percentage to be allowed is contingent on evidence and commodity specifics and thus left for adjudication. Conclusions: Remand to adjudicating authority to examine tolerance limits and variance evidence; if variance falls within acceptable tolerance, demand should be adjusted accordingly. Overall Disposition and Directions (Interrelated points) 1. The matter is remanded for re-adjudication on the limited issues: (a) application of law and circulars in force at time of importation; (b) factual determination of shore-tank vs ship-ullage quantities and tolerance limits; (c) verification whether 13 bills were finally assessed such that re-opening is barred; and (d) consideration of delay in finalisation and whether attributable to the importer. 2. The Tribunal confirmed that shore-tank quantity is the proper measure of importation as per controlling Supreme Court authority, but factual application requires record-level enquiry where shore-tank data is absent and issues of tolerance and temporal applicability of circulars arise. 3. Appeals allowed by way of remand with specific directions to apply the law in force at importation, to consider tolerance and valuation principles, and to examine finality of the 13 provisional assessments before re-opening them.