2000 (7) TMI 313 - AT - Customs

Customs duty on imported crude oil: ullage survey versus shore-tank dip quantity for assessment; shore-tank quantity upheld, appeal dismissed

The dominant issue was the correct quantity for customs assessment of imported crude petroleum oil-ullage survey quantity on the vessel or dip-measured ... Correct method for determining the quantity of liquid cargo - crude petroleum oil - Import - Precedent - definition of 'import' as in section (2) 23 - imposition of penalty under section 116 - HELD THAT:- It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of the goods within the country, the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed.” The first ground relates to the definition of “import” in the Customs Act. As we have already noted, it is not possible for purpose of levy of duty on goods, the taxable event has taken place, and is complete as soon as the goods are imported into India. India includes the territorial waters thereof. Therefore, accepting the department’s logic would result in a situation in which the act of import is complete as soon as the ship or aircraft carrying the imported goods enters the territorial waters. This was in fact, the view that has been rejected by the Supreme Court in Garden Silk Mills [1999 (9) TMI 88 - SUPREME COURT], which judgment we have already reproduced above. Reliance is next upon the Public Notice No. 49/92 issued by the Commissioner of Customs, Mumbai. It claimed that this Public Notice was issued to give effect to judgment of the Bombay High Court. This judgment of the High Court is in Shaw Wallace & Co. Ltd. [1986 (7) TMI 106 - HIGH COURT OF JUDICATURE AT BOMBAY]. The judgment of the High Court in fact did not settle any question of law. It records in paragraph 8 that it was agreed by the counsel that it is necessary to set out guidelines by the customs authority and further sets out that the counsel agreed on the guidelines. The decision which is the result of consent between parties does not settle a question of law and therefore is not binding on any one other than the parties to the same. The guidelines cannot in any case be said to give effect to the High Court's order to the parties before the High Court as far as assessment is concerned. It appears that the department does not appear to be aware of the true contents of the Public Notice that it relies upon. We must also note that while the decision of the Chennai Bench of the Tribunal in Cochin Refineries [1998 (11) TMI 217 - CEGAT, MADRAS] takes the view that it is the ullage quantity that is relevant for assessment, its reasoning was based upon the Bombay High Court judgment in Apar Ltd.[1999 (7) TMI 69 - SUPREME COURT]. That judgment as we have noted, is no longer good law. The Bench itself has recognised this and referred to the High Court a question of law as to whether it is the ullage survey quantity or the quantity ascertained by dip measurement in the shore tanks. We must note in passing that with respect to that view of the Bench in its order on the appeal of Cochin Refineries that the Bombay High Court judgment in Shaw Wallace v. UOI is binding is incorrect for the reason that we have already pointed out. In the light of this reference application made, the decision of the Chennai Tribunal does not have any precedential value. Thus, we are of the view that the order of the Commissioner, that it is the quantity that was pumped into the shore tanks at which duty must be demanded is correct and does not call for any interference. Appeal is accordingly dismissed. Issues Involved: Determination of quantity of liquid cargo for duty assessment based on ullage survey vs. dip measurement in shore tanks.Summary:1. The appeal considered the correct method for determining the quantity of liquid cargo, specifically crude petroleum oil, imported in a tanker for duty assessment. The dispute arose when the quantity declared by the importer differed from the quantity determined by an ullage survey. The importer argued for dip measurement in shore tanks as a more accurate method, which was accepted by the Commissioner (Appeals) but challenged by the department. 2. The Commissioner supported dip measurement over ullage survey, citing precedents and emphasizing the importance of precise measurement for duty assessment. The department contended that the quantity determined by the ullage survey upon importation is the quantity liable to duty, as per the Customs Act and relevant guidelines.3. Referring to Supreme Court judgments, it was established that the taxable event for duty assessment occurs when goods cross the customs barrier, in this case, when the oil is pumped into shore tanks. This criterion determines the quantity of goods subject to duty.4. The department's grounds of appeal regarding the definition of 'import' and reliance on Public Notice No. 49/92 were refuted. The Public Notice was found not to be binding for duty assessment and lacked clarity in its provisions, leading to contradictions in determining the quantity for assessment.5. The Tribunal upheld the Commissioner's decision that duty should be demanded based on the quantity of oil pumped into shore tanks, dismissing the department's appeal. The order emphasized the importance of accurate measurement methods for duty assessment.Decision: The appeal is dismissed, affirming that the quantity of liquid cargo pumped into shore tanks is the appropriate basis for duty assessment, as determined by dip measurement.