Ullage Report No longer valid for assessment

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Paragraph 7   . . .  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, paragraph 18 of 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. v. CC, 1986 (25) E.L.T. 948. 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. 
 

Customs, Excise and Gold Tribunal – Delhi - Collr. Of Cus. vs Hindustan Petroleum Corporation on 15 September, 2000 - Equivalent citations: 2001 (130) ELT 139 Tri Del - http://indiankanoon.org/doc/483140/

6. By virtue of these judgment it would follow that the taxable event in the case of goods under our consideration would be the date of crossing the customs barrier. Applying this criterian the goods would be considered to have crossed the customs barrier only when they were pumped into the shore tanks. That being the taxable event, it is that quantity of goods, which are liable to duty."

7. The Bench had also taken note of the decision (on identical issue) of the SZB of the Tribunal in the case of Cochin Refineries (supra), but found that it was not good law after the Apex Court's decision in Apar Pvt. Ltd. (supra).

8. On a careful consideration of the Supreme Court's judgments in the aforesaid cases as well as the decisions of the Bombay High Court and the Tribunal relied on by the Revenue, we have found ourselves in full agreement with the conclusion reached by the WZB in Commissioner v. HPCL (supra). The ratio of the WZB's decision is squarely applicable to the instant case, wherein the facts are similar and the issue is identical. We follow that ratio and hold that the "imported quantity" of crude oil was the quantity as determined by dip measurement in the shore tanks and therefore the assessment of duty was liable to be finalised on the basis of such quantity revealed by the CI certificate. The order of the Collector (Appeals) has to be sustained.

9. As rightly observed by the WZB in Commissioner v. HPCL (supra), the view taken by the SZB (that importation of goods was complete as soon as the vessel carrying the goods entered the territorial waters of India and therefore the Ullage Report, as the primary and basic document, provided the actual quantity imported) in the case of Cochin Refineries (supra) is no longer good law. The SZB had taken the view, following the decision (on the question as to when "import" took place) of the Bombay High Court (Full Bench) in Apar Pvt. Ltd. v. Union of India 1985 (22) E.L.T. 644. But the Full Bench decision of the High Court was overruled by the Apex Court in Union of India v. Apar Pvt. Ltd. (supra). The Apex Court's decision came long after the SZB's decision in Cochin Refineries (supra), and so did its judgments in Garden Silk Mills (supra) and Kiran Spinnings Mills (supra). It also appears that the Supreme Court's opinion in the Presidential Reference case (AIR 1965 SC 1760) - which was relied on by the court in Garden Silk Mills to hold that the import of goods into India commenced when the same entered into the territorial water and was completed when the goods became part of the mass of goods within the country and that the taxable event was reached at the time when the goods reached the Customs barriers - was not brought to the notice of the SZB. The Chennai Bench had also relied on the Bombay High Court's decision in Shaw Wallace (supra). But, as rightly observed by the WZB while passing order dated 7-7-2000 in Commissioner v. HPCL (supra), the said decision of the High Court was a decision by consent of parties and did not lay down any legal principle for universal application.

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http://www.indiankanoon.org/doc/765656/

Customs, Excise and Gold Tribunal - Mumbai

Commr. Of Cus. vs Hindustan Petroleum Corporation ... on 7 July, 2000

Equivalent citations: 2000 (121) ELT 109 Tri Mumbai

ORDER

Gowri Shankar, Member (T) 

1. The question for consideration in this appeal is what is the correct method for determining the quantity of liquid cargo - crude petroleum oil in the present case - imported in a tanker and pumped on to shore tanks, for purposes of assessment to duty. In the case before us the quantity of oil declared on the bill of entry by the importer and assessed provisionally pending ullage survey was 64000 MT. The ullage survey carried out in the presence of the carrier, the customs and port trust officials showed the quantity to be 65107.552 MT. Duty on the difference between the two quantities was demanded from the importer. In the reply to the notice, the importer contended that a more correct method of determining the quantity of goods imported would be dip measurement in the tanks on shore into which the oil is pumped from the tanker and by this measurement there is no excess goods imported. The Asstt. Commissioner declined to accept this plea and confirm the demand. 

2. The importer appealed to Commissioner (Appeals) against this order, raising the same contention as were raised before the Asstt. Commissioner. The Commissioner (Appeals) accepted this contention. Hence this appeal by the department. 

3. The Commissioner has advanced reasons for referring the dip measurement to the ullage, as follows. The quantity of the imported goods shown in an ullage survey report is given in the absence of any precise measurement. The specific quantity landed of such liquid cargo is known for the first time only from the out turn report based on the dip measurement in the shore tanks. The judgment of the Bombay High Court in Shaw Wallace & Co. Ltd. v. CCE, 1986 (25) E.L.T. 948 was concerned with ascertaining the quantity of cargo short landed for purpose of penalty under section 116 of the Act, and that judgment would not apply in cases where goods meant for duty. The Tribunal in its decision in South India Corporation (Agencies) Ltd. v. CCE, 1988 (36) E.L.T. 667 and the Bombay High Court in its decision in Varun Shipping Co. Ltd., 1989 (42) E.L.T. 204 has approved of dip measurement in the shore tanks. The oil was discharged from pipeline directly from the ship under custom supervision, and received into shore tanks under the Central Excise provision and receipt of the goods in the shore tanks have been certified by the Central Excise officials. There is no allegation of pilferage after unloading or any allegation that the deficiency on which the duty is demanded is for any risk other than cost during discharge and unloading operation arising in the ordinary course. 

4. The challenge to this finding by the department will now have to be considered. The grounds in the appeal are that, by applying the definition of "import" as in section (2) 23 of the Act, its the quantity of the oil contained in the ship as determined by the ullage survey, which has been imported. This is the quantity that has been brought into the country and hence imported and the quantity liable to duty. The Custom House had issued a Public Notice No. 49/92 prescribing a uniform procedure in all ports for following the ullage measurement based upon the guidelines issued by the Bombay High Court in Shaw Wallace & Co. Ltd. v. CC, 1986 (25) E.L.T. 948. The judgment of the Bombay High Court is binding on this Tribunal. The Public Notice seeks to ascertain the quantity in the case of bulk cargo and by the ship ullage. Reliance by the Commissioner upon the Visak refineries is misplaced and that decision is contrary to the judgment of the Bombay High Court. 

5. In the light of the later judgments of the Supreme Court it does not appear to us to be appropriate and correct to say that import has taken place as soon the goods have entered India. The Supreme Court considered the question as to when the import took place for purpose of assessment of duty in Garden Silk Mills Ltd. & Anr. v. UOI & Ors., JT 1999 (7) SC 522, UOI v. Apar Pvt. Ltd., 1999 (112) E.L.T. 3 and Kiran Spinning Mills v. CC, 1999 (113) E.L.T. 753. In Garden Silk Mills v. UOI the Court held as follows : 

"17. It is further submitted that in the case of Apar's Private Ltd. this Court was concerned with sections 14 and 15 but here we have to construe the word "imported" occurring in section 12 and this can only mean that the moment goods have entered the territorial waters, the import is complete. We do not agree with the submission. This Court in its opinion in Re. The Bill to Amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944,1964 (3) SCR 787 at page 823 observed as follows : 

"Truly speaking, the imposition of an import duty, by and large, results in a condition, which must be fulfilled before the goods can be brought inside the customs barrier i.e. before they form part of the mass of goods within the country" 

18. 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." 

In Kiran Spinning Mills v. CC it said 

"It has now been held by this Court in Hyderabad Inds. Ltd & Anr. v. Union of India and Ors. [1999 (108) E.L.T. 321, JT 1999 (4) SC 95] that for the purpose of levy of additional duty section 3 of the Tariff Act is a charging section. Section 3 Sub-section (6) makes the provisions of the Customs Act applicable. This would bring into play the provisions of Section 15 of the Customs Act which, inter alia, provides that the rate of duty which will be payable would be on the day when the goods are removed from the bonded warehouse. That apart, this Court has held in Sea Custom Act - 1964 (3) SCR 787 at page 803 that in the case of duty of customs the taxable event is the import of goods within the customs barrier. In other words, the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse the customs barrier would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country." 

6. By virtue of these judgments it would follow that the taxable event in the case of goods under our consideration would be the date of crossing the customs barrier. Applying this criterion the goods would be considered to have crossed the customs barrier only when they were pumped into the shore tanks. That being the taxable event, it is that quantity of goods, which are liable to duty. 

7. We shall consider the department's specific grounds of appeal. 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, paragraph 18 of 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. v. CC, 1986 (25) E.L.T. 948. 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. 

8. Further the guidelines do not relate to assessment of duty but only related to imposition of penalty under Section 116 of the Act. The Commissioner (Appeals) we note, makes these valid distinctions in his order. Therefore, apart from the fact the judgment of the High Court is not binding, and therefore the public notice issued by the department is not binding on any one except possibly the departmental authorities. 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. Paragraph 11 of the public notice 49 of 29-9-1992 provides that the quantity found discharged according to the ullage survey report shall be treated as the quantity for home consumption or removed for warehousing and says that the existing practice of taking dips in the shore tanks will be discontinued This is no doubt what the department relies upon. 

9. Our attention however has been drawn to the Public Notice No. 131 of 17-9-1997 of the Mumbai Custom House. By this amendment, paragraph 11A has been added to the public notice which reads as follows : 

"The oil companies shall take the shore tank dip measurement in the presence of PO and give a copy of the same to the PO, who will pass on this document to the Appraising officer/oil unit for enabling him carry out the assessment and determine the duty liability. The importer shall submit a bank attested invoice or certified copy thereof for purpose of assessment. In order to ascertain the actual freight paid to the shipping company, the importer shall submit the copy of the charter party agreement in addition to the documents which are being submitted at present." 

10. This paragraph in effect negates paragraph 11 of the notice in regard to determination of quantity for the purpose of assessment. In the strict sense this public notice does not replace paragraph 11 but merely adds another paragraph. The net result is that the provisions in the public notice relating to assessment in each of them contradicts the other. Paragraph 11 provides that dip measurement in shore tank is not necessary and it is the ullage quantity that has to be considered. Paragraph HA takes the contrary view. The position that would remain is that neither paragraph 11 nor paragraph 11A would apply to the assessment. The question of assessment therefore would not be dealt with by the public notice. 

11. We must also note that while the decision of the Chennai Bench of the Tribunal in Cochin Refineries -1999 (105) E.L.T. 108 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. -1985 (22) E.L.T. 644. 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.

12. For these reasons, 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. 

13. The appeal is accordingly dismissed.

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Right Informer,
31 Dec 2012, 05:56
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Right Informer,
31 Dec 2012, 05:59
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Right Informer,
31 Dec 2012, 05:57
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