ORDER
S.S. Sekhon, Member, T.
1. The appellant is a manufacturer of petroleum products and for that purpose imports crude oil. They have been permitted, by the Customs authorities at Mangalore, to operate bonded warehouses in storage tanks for such imported crude oils decanted into these tanks from ships arriving at Port. Ex-bond Bills of Entry for the warehoused crude oil, cleared from such bonded warehouse storage tanks are being filed for home consumption and duties are being paid under the provisions of the Customs Act, 1962. Provisional Bills of Entry showing quantity of crude oil received in the bonded storage tanks (also called as shore tanks) were being filed, which were not accepted by the Customs authorities who insisted that Bills of Entry showing the quantity of crude oil as per ‘ship’s ullage Survey Report’ should be filed and that quantity should form the basis for assessment of duty. Therefore, due to such non-acceptance of Bills of Entry showing shore-tank quantities, the appellant filed Bills of Entry showing the quantity as per ‘ship’s ullage Survey Report’ under protest. Based on other documents as provided under Section 18(1) of the Customs Act the BE’s were assessed provisionally. The assessing officer, rejected the appellants request regarding assessment of duty on the basis of quantity as per ‘shore-tanks’ and insisted on assessment based on quantity as per ‘ullage reports’. The Commissioner (Appeals) by a common impugned order in these three appeals after hearing the appellant came to the following finding —
“The Original Authority has followed the guidelines laid down in Public Notice No. 3/94, dated 10-3-94 issued by the Mangalore Custom House which in turn is based on the decision of the Hon’ble Bombay High Court in the case of Shaw Wallace Company Limited v. Assistant Commissioner of Customs, 1986 (25) E.L.T. 948.
The appellants have in their defence relied on several decisions which have either been differed with or distinguished, in the decision of the Hon’ble Tribunal in the case of Cochin Refineries Limited v. Commissioner of Customs, Cochin, 1999 (105) E.L.T. 108. In this decision, the Hon’ble Tribunal has discussed extensively about the applicability of various decisions on the question that the determination of quantity for the purpose of action under Section 116 of Customs Act, 1962 and the quantity imported for levy of Customs duty under Section 12 of the said Act cannot be different. They have observed that ‘whatever the manner and methodology to be adopted to ascertain correctly the quantity of goods imported, that method has to be the same for the purposes of Section 116 and Section 12’. Thus having come to the conclusion that the decisions regarding the manner of determining the quantity imported for the purpose of Section 116 would be equally relevant for the levy of duty under Section 12.
In regard to the method of determining the quantity, the Hon’ble Tribunal, have, in particular cited the following decisions wherein it has been held that the ullage survey report is relevant to determine the quantity of goods imported for the purpose of Section 116.
1. 1996 (85) H.L.T. 254
2. 1986 (25) E.L.T. 948.
The Tribunal has also drawn support from the full Bench decision of the Bombay High Court in the case of Apar Private Limited, 1985 (22) E.L.T. 644.
The appellants have however, argued that the Hon’ble Bombay High Court Judgment, on which the aforesaid Hon’ble Tribunal decision has placed considerable reliance has been overruled by the Hon’ble Supreme Court as per the judgment reported in 1999 (112) E.L.T. 3 (S.C.). A perusal of the judgment of the Hon’ble Apex Court cited above shows that the question involved in that case was the determination of the crucial date for rate of duty applicable to any imported goods in terms of the provisions of Customs Act, 1962. The Hon’ble Supreme Court has, after taking into account the provisions of Section 15(1) of the Customs Act come to the conclusion that:
(a) In the case of goods cleared for home consumption, the date of presentation of Bill of Entry under Section 46 ibid or the date of grant of entry inwards to the vessel whichever is later and (b) in the case of goods removed from a bonded warehouse, the date of actual removal of the goods from the warehouse. In other words the actual date when the vessel entered territorial waters of India has been considered to be not relevant for the purpose of customs duty.
The Hon’ble Tribunal in their decision in the case of Cochin Refineries Ltd., 1999 (105) E.L.T. 108 had no doubt relied on the judgment of the Hon’ble Bombay High Court which has not been found to be not laying down the law correctly. Yet the fact remains that the decision does not address the question of determination of quantity and in that context the date is not a relevant issue. The basic question involved in the case before the Hon’ble Supreme Court was the crucial date for application of the rate of duty. It is seen that the ullage survey report is the first report that is available since goods in bulk particularly in liquid form is imported into the country. Though it has been argued that the ullage survey report does not give an accurate account of the quantity that is discharged at the port, the fact remains that the ullage survey report helps in discharging the responsibility enjoined on the ship master with the quantity that is supposed to have been imported and to be discharged at the concerned port. It is also seen that the oil companies make the payment to their suppliers on the strength of the Bill of lading. In fact when this point was raised before the Hon’ble Tribunal in the Cochin Refineries case, the appellants therein did not controvert the same. As already held by the Hon’ble Tribunal and in respectful agreement with the said view I hold that the quantity determined for the purpose of Section 116 and Section 12 cannot be divergent or different. If such divergence is accepted, it would be difficult to explain how the difference in quantity should be accounted for or treated, for where the responsibility of ship’s master ends, the responsibility of the importer should begin. There can be no gap between the two. Hence, I do not agree with the appellant that the judgment of the Hon’ble Apex Court 1999 (112) E.L.T. 3 (S.C.) unsettles the decision of the Hon’ble Tribunal in the Cochin Refineries case.”
and thereafter held that the quantity should be determined vide the ullage Survey Report for the basis of determining customs duty.
2. We have heard the learned Senior Advocate, Shri S. Chandra Kumar along with Shri Rajesh Chandra Kumar and Smt. Radha Arun for the Revenue and considered the submissions and find —
(a) It is an admitted position that the quantity received in the shore tanks which are bonded warehouses, under the Customs Act could be different from the quantity as shown in the ‘ship’s ullage Survey Reports’. The difference is explained by the appellants, to be, because of the instability of a floating ship preventing correct measurement. They have also contended that the quantity in the ‘shore tank’ which is the quantity at their disposal for the purpose of removing on payment of duty. The question to be determined in this case is as to what should be the quantity for the purpose of duty.
(b) From the Bill of entry enclosed in the paper book it is found that these Bill of entries, are ex-bond Bill of Entries required to be filed under Section 68(1)(a) of the Customs Act, 1962. Therefore the question framed in Para 2 of the order-in-appeal which is as follows:
“The issue for determination in all the three appeals is–
(a) whether the customs duty on crude oil imports, is assessable on the quantity determined on the basis of Ship's ullage survey report or on the basis of the quantity as per shore-tank receipts. (b) whether the impugned demands raised under Section 28(2) of the Customs Act, 1962 as short-levy is valid and legally sustainable." And the final order does not appear to be based on the Supreme Court decision on levy of duty and assessment on Ex-Bond Warehouse removals under Section 68(1)(a). In the case of Kiran Spinning Mills, 1999 (113) E.L.T. 753 (S.C.) a full Bench of the Supreme Court has held as under:
“6…..That apart, this Court has held in Sea Customs 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 barriers. 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…..”
(emphasis supplied).
Therefore, in this case, duty shall have to be assessed only on such quantity, which is removed from the warehouse, on the date of physical removal when we see the mandate of Section 68 read with Section 15(1)(b) and the law laid down in the Supreme Court decision herein above. When a Bill of Entry, which is required to be assessed under Section 68 of the Customs Act i.e. an ex-bond bills of entry, the quantities that have to be shown on that Bill of entry, have to be quantities of goods which are being physically removed from the shore-tank receipted crude. Assessing on any other hypothetical quantity viz the quantity determined on the ‘ship’s ullage reports’ as arrived at by Commissioner is therefore not called for.
(c) The learned Advocate took us through the decision of the Hon’ble Supreme Court, in the case of U.O.I. v. Apar – 1999 (112) E.L.T. 3 (S.C.) wherein it was held that for duty to be paid, the relevant date has to be as per Section 15 of the Customs Act and the decision of the Tribunal in the case of Cochin Refineries Ltd. -1999 (105) E.L.T. 108 is therefore not a good law, as held by the Karnataka High Court in the case of the appellant themselves as reported in 2000 (119) E.L.T. 543 wherein para 9 of the reported decision it has been held–
“…..ones Apar has been overruled the binding nature of Cochin Refineries which is based upon Apar disappears.”
If that be so, then we would, following the decisions in case of Collector of Customs, Vishakapatnam v. HPCL – 2001 (130) E.L.T. 139 and Commissioner of Customs, Mumbai v. HPCL – 2000 (121) E.L.T. 109 would determine the question of imported quantities of crude to be as per ‘shore-tanks receipt removals’ and not as per the ‘ship ullage survey reports’ since ‘ship ullage survey reports’ would be only for quantities that have crossed the territorial waters and not the actual quantities imported into India, as held in Garden Silk Mills Ltd. – 1999 (113) E.L.T. 358 (S.C.), import of goods into India would commence when the same crosses into the territorial waters but continues and is completed when goods become part of the mass of goods within the country, the taxable event being reached at the time when the goods reach the customs barrier and the Bill of entry for home consumption is filed. The differential quantity of crude oil is not decanted into the shore-tanks for whatever reasons, cannot be the crude oil imported as having not reached the land mass of India. Levy under Section 12 of the Customs Act is only on goods imported into India. Therefore we find no justification in taxing, quantities as imported by being shown in the ‘ullage reports’, which may be not the quantities whose import would be completed as held by the Supreme Court in the above said decisions. We therefore find no support for the proposition to reckon the ullage survey report quantities for purposes of duty to be shown on Bill of Entries filed under Section 68(1)(a) of the Customs Act.
(d) We have examined the contention of the learned SDR, that the decision in the case of Shah Wallace & Co. – 1986 (25) E.L.T. 948 (Bom.) have to be followed as it specifically prescribes for Liquid Cargo in Bulk, as in this case Crude Oil that in case of any difference between the Bill of Lading quantity or the “Ullage Survey Report” of the Port of Loading quantity and the discharge from Ullage Survey Report quantity, then such different shall be considered as short landed quantity and for which the ship’s owner should be held responsible by action under Section 116 of the Customs Act. (Para 8 of the reported decision) and in the impugned Order No. 120/99 in Appeal C/339/2000 it has been recorded…..
“….It is also seen that the oil companies make the payment to their suppliers on the strength of the Bill of Lading….”
And held that quantity determined for the purpose of Section 116 and Section 12 cannot be divergent or different and the difference if not resolved would result in a conflict between the responsibility of Master of Vessel and importer. Therefore the Orders have to be upheld. We find that the decision of Bombay High Court in the case of Shaw Wallace (supra) was in terms of Section 116 of the Customs Act. Here we are concerned with quantities Ex-Bond under Section 68(1)(a) of the Customs Act. A perusal of the relevant Para 8 of Shah Wallace decision reveals that the guidelines therein are for raising a liability under Section 116 on the Master of the Vessel or his agents and not determining the quantity imported for a taxable event under Section 68(1); Section 116 itself provides that the ‘deficiency’ if any could be explained away without any consequence of the penal clauses by such Master or his agent. In cases of failure of explanations of difference/deficiency in quantity, duty liability shifts on such Master or his agent to be recovered as penalty. If legislation has provided for such duty liability of unexplained deficiency of imported goods under Section 116 on the Master or his agent, that liability, by no interpretation, could be fastened on an importer filing a BE under Section 46 or 68(1)(a). Liability on imported goods, pilfered under Section 13 or under Section 23 on goods lost abandoned, destroyed before home clearance order has been fastened on the custodian of imported goods under Section 45 or a complete remission as permissible under Section 23. Even in these cases of Section 13 or and Section 23, the importer may be liable in terms of their commercial contract’s to the suppliers for payments on the quantity on Bill of Ladings i.e. manifested quantities. That would not lead to a conclusion that the importer, got away with the goods, and he, should pay duty as is being made out by the learned Commissioner. We therefore find no reason to agree with the logic and findings in the order impugned before us, to conclude in the manner the learned Commissioner has concluded. We can not rely on Shah Wallace case (supra) for determining the quantity for assessment of a BE under Section 68(1)(a).
3. In view of our findings, impugned order of the Commissioner (Appeals) is set aside and the appeal allowed with direction that the actual quantity removed from the shore-tank receipted quantities, should be only reckoned for purposes of assessment of duty of crude oil removed from such bonded shore-tanks.