In a recent ruling in favour of Philips Carbon Black Ltd, the Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that payment of customs duty must be based on actual crude oil received into the shore tank in port in India.
The appellant had imported Carbon Black Feed Stock Oil through Cochin Port against Bill of Entry No.5049262 dated 31.10.2011 ( Appeal No. C/22628/2014 ) declaring the total imported quantity as 10000 MTS; and in Bill of Entry No.169492 dated 21.11.2005 as 8364.53 MTS ( Appeal No.C/20548/2016 ). The assessee was issued with a letter for discharging differential duty on the value of the quantity received on which duty was paid and the transaction value of the quantity shown in the respective invoices. Consequently, demand of Rs. 25,077/- and Rs. 66,851/- were confirmed.
The contention of the assessee all along was that there was short-receipt of the imported goods in their shore tank; accordingly, the value has been arrived at on the said quantity and duty was paid. Aggrieved by these orders, assessee preferred appeals before the Commissioner (A), who in turn rejected the Orde-in-Original No.47/2012, hence, assessee is in appeal ( Appeal No. C/22628/2014 ) and the Order-inOriginal No.67/2013 dated 08.05.2013 was rejected by the Commissioner (A); hence, Revenue is in appeal ( Appeal No. C/20548/2016 ).
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Secondly, the taxable event in the case of imported goods, as has been stated earlier, is “import”. The taxable event in the case of a purchase tax is the purchase of goods. The quantity of goods stated in a bill of lading would perhaps reflect the quantity of goods in the purchase transaction between the parties, but would not reflect the quantity of goods at the time and place of importation.
A bill of lading quantity therefore could only be validly looked at in the case of a purchase tax but not in the case of an import duty. Thirdly, Sections 13 and 23 of the Customs Act have been wholly lost sight of. Where goods which are imported are lost, pilfered or destroyed, no import duty is leviable thereon until they are out of customs and come into the hands of the importer. It is clear therefore, that it is only at this stage that the quantity of the goods imported is to be looked at for the purposes of valuation.
Fourthly, the basis of the judgment of the Tribunal is on a complete misreading of Section 14 of the Customs Act. First and foremost, the said Section is a section which affords the measure for the levy of customs duty which is to be found in Section 12 of the said Act. Even when the measure talks of value of imported goods, it does so at the time and place of importation, which again is lost sight of by the Tribunal. And last but not the least, “transaction value” which occurs in the Customs Valuation Rules has to be read under Rules 4 and 9 as reflecting the aforesaid statutory position, namely, that valuation of imported goods is only at the time and place of importation.
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The Tribunal’s reasoning that somehow when customs duty is ad valorem the basis for arriving at the quantity of goods imported changes, is wholly unsustainable. Whether customs duty is at a specific rate or is ad valorem makes not the least difference to the above statutory scheme. Customs duty whether at a specific rate or ad valorem is not leviable on goods that are pilfered, lost or destroyed until a bill of entry for home consumption is made or an order to warehouse the goods is made. This, as has been stated above, is for the reason that the import is not complete until what has been stated above has happened.
The circular dated 12th January, 2006 on which strong reliance is placed by the revenue is contrary to law. When the Tribunal has held that a demand or duty on transaction value would be leviable in spite of “ocean loss”, it flies in the face of Section 23 of the Customs Act in particular, the general statutory scheme and Rules 4 and 9 of the Customs Valuation Rules.
A two member bench of Dr. D.M. Misra, Member (Judicial) and R. Bhagya Devi, Member (Technical) declared that the quantity of crude oil actually received into a shore tank in a port in India should be the basis for payment of customs duty.
While allowing the appeal, the bench set aside the impugned order rejecting the contentions of the appellant by the Commissioner (Appeals).
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