2004-TIOL-07-HC-MUM-CUS
IN THE HIGH COURT OF JUDICATURE AT
BOMBAY
Writ Petition No 1977 OF 1992
1. GODREJ INDUSTEIES
LTD
2. Mr. A.B. Godrej, residing at Military Road, Juhu, Bombai-400046
Vs
1. UNION OF INDIA
2. COLLECTOR OF CUSTOMS, BOMBAY
WRIT PETITION NO. 2029 OF 1992
1. THE VEGETABLE
VITAMIN FOODS CO LTD
2. Mr. Pallaythusaril Abraham Chandy of Bombay, residing at
14 Vikram, 224/41 Lal Bahadur Shastri Marg, Kurla, Bombay-400070
Vs
1. UNION OF INDIA,
2. COLLECTOR OF CUSTOMS, BOMBAY
Mr. R.A. Dada, Senior Advocate with Mr. Millind
Vasudeo i/b. R. Ravindran for petitioners.
Mr. Pradeep Jetley with A.S. Rao i/b. T.C. Kaushik for respondents.
CORAM: R.M. LODHA AND J.P. DEVADHAR, JJ
Dated: March 22, 2004
JUDGEMENT
Per: J.P. Devadhar. J:
1. Validity of the public notices dated 30th March, 1992 and
17th September, 1997 issued by the Collector of Customs, Mumbai as well as
the validity of the Circular dated 27th December, 2002 issued by the Central
Board of Excise of customs are challenged in these petitions. Under the said
public notice/circular, the assessing authorities under the Customs Act are
required to assess the imported bulk liquid cargo discharged from the vessel
into the tank lorries as per the quantity determined under the ullage survey
report irrespective of the quantity actually received by the importer.
2. Since the
issue raised in these two petitions are common, both these petitions are heard
together and disposed of by this common Judgment.
3. Although,
detailed facts are not necessary for deciding the issues raised in these
petitioners, to appreciate the contentions of the parties, few facts enumerated
in Writ Petition No. 1977 of 1992 (Godrej Industries Ltd.) are set out herein below.
4. Godrej
Industries Limited manufactures soaps, toiletries detergents, chemicals, etc.
In the normal course of business they import different kinds of oils, fats, etc
in bulk (bulk liquid cargo) as raw materials. For decades the petitioners have
been obtaining delivery of liquid cargo directly from the vessel into the tank
lorries and the respondents have been granting remission of duty if the
quantity received as per the B.P.T. Weighbridge report is less than the
quantity set out in the Bill of Lading. According to the petitioners, the
quantity determined on the basis of the B.P.T. Weighbridge certificate
represents the correct quantity delivered. Some time in August/September, 1992
when the petitioners were about to file the bill of entry in respect of the
bulk liquid cargo imported by them from Indonesia/Malaysia, the petitioners
were informed that in view of the public notice No. 49 dated 30th March 1992
issued by the Collector of Customs, Mumbai, the customs duty will not be levied
on the basis of the B.P.T. Weighbridge report but on the basis of the quantity
determined as per the ullage survey report at the port of discharge i.e. at
Bombay. On a representation made by the petitioners, the Assistant Collector of
Customs by his letter dated 19.8.1992 informed the petitioners that their
request fort actual weighment cannot be acceded to in view of the public notice
No. 49 dated 30th March, 1992. This petition was failed by the petitioners
challenging the above public notice dated 30th March, 1992. During the pendency
of the petition, another public notice dated 17th September, 1997 has been
issued by the Commissioner of Customs (Imports), Mumbai and subsequently, a
Circular bearing No. 96/02 dated 27th December, 2002 has been issued by the
Central Board of Excise & Customs (C.B.E.C.), New Delhi to the same effect.
The petition has been amended to Challenge the said notice dated 17th
September, 1997 and the Circular dated 27th December, 2002.
5. Mr. R.A.
Dada, learned Senior advocate appearing on behalf of the petitioners submitted
that it is now well established by various judicial pronouncements that the
quantity determined by "Ullaging" is only approximation and not
accurate determination and, therefore, the importers of bulk liquid cargo
cannot be subjected to customs duty on the basis of ullage reports. Mr. Data
referred to a consignment of bulk liquid cargo imported by Godrej Industries
Limited. the particulars of which are as follows :
Quantity
i.
As per the Bill of
lading - 649.651 MT
ii.
As per the ullage report
at the port of Loading - 65.787 MT (Excess 3.136 MT)
iii.
As per the ullage
report at the port of destination (i.e. at Bombay) - 649.612 MT (indicating
Shortage of 0.039 MT)
iv.
Actually received as
per B.P.T. Weighbridge report - 642.600 MT
Mr. Dada submitted that from the
aforesaid facts, it is clear that the ullage report gives only the estimated
quantity and not the exact quantity. from the aforesaid facts, it is seen that
the quantity determined as per ullage report at the Port of loading is more
than the quantity set out in the Bill of Lading. It was submitted that no
supplier would despatch goods more than what he has agreed to sell. Thus,it is
clear that the quantity determined by ullage report is on estimate basis.
However, in view of public notice dated 30.3.1992, the petitioners are required
to pay the customs duty on 649.612 MT being the quantity determined under
ullage report even though quantity actually received is only 642.600 MT.
Accordingly, it was submitted that the quantity determined under the ullage
report cannot be made the basis for levy of customs duty.
6. Mr. Dada
further submitted that all these years, the bulk liquid cargo discharged
directly from the ship into the tanker lorries were weighed on the B.P.T.
Weighbridge and the certificate issued by the B.P.T. Weighbridge was taken into
account for remission of duty in case any quantity is lost or destroyed. Mr.
Dada submitted that in view of the impugned public notices/circular the
petitioners would be deprived of remission of duty and the duty assessed as per
the ullage report would be final.
7. Mr. Dada
further submitted that the CBEC Circular No. 96/02 dated 27th December, 2002
has been issued by misreading the orders of the CEGAT. In the case of
Commissioner of Customs, Mumbai Vs. Hindustan Petroleum Corpn. Ltd. reported in
(1999 (113) ELT 680 (Tri) = (2002-TIOL-94-CESTAT-MUM),
CEGAT Noted that ullage report is made in the absence of any precise
measurements.
The Tribunal in that case,
referring to several decisions of the Apex Court held that the taxable event in
the case of bulk liquid cargo would commence from the date of which the ship
crosses the customs barrier and will continue till the cargo is pumped into the
shore tanks and the Bills of Entry for home consumption is filed. It was held
that in cases where the cargo is discharged from the ship through the pipeline,
the quantity determined in the shore tank through dipmeasurement should be the
basis for assessment of customs duty. Similar view was taken by the CEGAT in
the case of National Organic Chemicals Industries Ltd. Vs. Commissioner of
Customs Appeals No. C/820/98-Bom. dated 18.5.1999. Civil Appeal filed by the
Commissioner of Customs against the decision of the Tribunal in the case NUCIL
(Supra) was dismissed by the Apex Court on 20th February 2002. Thus, the
dispute regarding the quantity discharged directly from the ship to the shore
tank through regular pipeline is now settled. Mr. data submitted that when it
is held by the Tribunal and approved by the Apex Court that the ullage
measurement does not represent the correct quantity, it is not open to the
C.B.E.C. to issue a circular directing that in cases where the bulk liquid
cargo is not discharged through regular pipeline and is cleared directly on
payment of duty under the while Bill of Lading i.e. without the cargo being
warehoused in a shore tank, the assessment has to be done as per the ship &
Ullage survey report. He submitted that the customs duty should be levied on
the quantity actually delivered and not on hypothetical basis. Accordingly, Mr.
Dada submitted that the directions contained in the public public notices/circular
regarding assessment on the basis of ullage method be quashed and set aside.
8. Mr. P.S.
Jetley, learned advocate appearing on behalf of respondents, on the other hand
submitted that the decisions of the Tribunal relied upon by the petitioners are
not applicable to the case of the petitioners. He submitted that unlike in the
case of delivery through pipeline into the shore tank, in the present case, the
cargo discharged from the vessel into the tank lorries are transported to the
petitioner's factories by road. He submitted that after the delivery of the
cargo from the vessel into the tank lorries the Customs do not have control
over the tank lorry and the physical weighment is done by the importers at the
B.P.T. Weighbridge from their own safety against theft or pilferage. Therefore,
B.P.T. Weighbridge report is not relevant for the purpose of assessment of duty
of bulk liquid cargo cleared from the vessel directly into tank lorries.
9. Mr. Jetley
further submitted that the impugned circular NO. 96/02 dated 27/12/2002 has
been issued by the C.B.E.C. after examining the matter in the light of the
decision of the Apex Court in the case of NOCIL (Supra).
10. Mr. Jetley
further submitted that in the case of palm acid oil on arrival of the ship
immediately after the ullage survey the oil is discharged into the tank lorries
and once all the tank lorries are loaded, another Ullage Survey termed as
"after discharge" is carried out. The difference between the before
discharge ullage survey report and after the discharge ullage survey report is
taken to ascertain the oil actually discharged into the tanker lorries. These
tanker lorries are taken to B.P.T. Weighbridge after obtaining out of charge
from the proper officer. Since there is not time gap left between the pre-discharge
ullage survey and after discharge ullage survey, if any loss in the quantity
occurs during physical weighment of lorries, it is due to adhesive properties
of fatty oil, pilferage of the oil from the pipes during discharge, leakage
from the tank lorries, mechanical error in the Weighbridge, error in reading
the weight, etc. Accordingly, it was submitted that where there is no facility
for discharge of cargo through regular pipeline, quantity as per the ullage
survey report has to be the basis for the purpose of assessing the discharged
cargo.
11. Mr. Jetley
further submitted that the cargo discharged through the regular pipeline e.g.
petroleum products are volatile in nature; whereas cargo such as palm acid oil
are not volatile. In view of the volatile nature of the cargo and there being
no chance of diverting the goods transported through the pipeline, the Tribunal
held that tin the case of cargo discharged through regular pipeline into the
shore tank, the measurement taken therein should be adopted for assessment. Mr.
Jetley submitted that the cargo imported by the petitioners is not volatile in
nature and after the cargo is loaded into lorries, the same is out of the
charge of the customs authorities and merely because the goods are weighed on
the Weighbridge for the safety of importers, it cannot be said that the
quantity for the levy of customs duty should be as per the Weighbridge report.
He submitted that the ullage measurement is carried out in the presence of the
consignee. Accordingly, it was submitted that there is not merit in the
contention of the petitioners and the above petitions be dismissed.
12. We have
heard the counsel on both sides. The basis issue raised in these petitions is
regarding the validity of the public notices/circular wherein it is declared
that the bulk liquid cargo cleared directly on payment of duty under a white
Bill of Entry should be assessed at a quantity determined as per ships ullage
survey report. As per the said public notice/circular, for assessment, only the
quantity as per the ullage report is relevant not the quantity determined by
any other method.
13. Before
dealing with the validity of the circular, we may refer to the decisions, which
led to the issuance of the impugned circular. In the case of Shaw Wallace &
Co. Ltd. V/s. Assistant Collector of Customs & Others reported in 1986 (25
ELT 948 (Bombay), the issue before this Court was whether the Customs
authorities would levy penalty on he person in charge of the conveyance and
their agents under Section 116 of the Customs Act, 1962 solely based on the
outturn report given by the Bombay Port Trust. It was held that the ship owner
has no control after the goods left its permanent hose connection and,
therefore, the ship owner cannot be made liable for the short landing of goods
based on the outturn report prepared by the port Trust authorities. While
disposing of the said petitioner, in the public interest and by consent of the
appearing Counsel for the parties, guidelines were laid down by this court for
determining the quantity discharged from ship/vessel. The guidelines laid down
by this Court in respect of bulk liquid cargo are as follows:
(A) Liquid
Cargo in bulk: -
(1) The
quantity shown in the Bill of lading reflected in the Import General Manifest
should be prima facie accepted as the cargo on board the vessel brought for
unloading at the Port of Bombay.
(2) In
case, the person-in-charge of the ship or his Agent produces the ullage survey
report prepared at the Port of loading and certified by an independent Surveyor,
then the quantity mentioned in the ullage survey report should be accepted as
the correct quantity brought by the vessel for unloading.
(3) The
vessel should be permitted to discharge liquid cargo after a ullage survey is
carried out under the supervision of the Customs Officer and such survey report
is signed by the Customs officer, by the ship owner and the consignee.
(4) After
the discharge of the liquid cargo from the vessel a fresh survey should be
carried out in the presence of the Customs officer and this discharge
completion survey report should be signed by the Customs Officer, the
Ship-owner, and the consignee.
(5) In case of any difference between the bill of lading, quantity or the
ullage survey report of the Pot of loading quantity and the discharge port
ullage survey report quantity, then such difference shall be considered as
short landed quantity and for which the ship owner should be held responsible.
It is pertinent to note that the
aforesaid guidelines were laid down in the context of determining the short
landing of goods and penalty leviable on the ship owners under Section 116 of
the customs Act, 1962.
14. In the
case of NOCIL (supra) the issue before the CEGAT Was, where the cargo is
discharged into the shore tank through the regular pipeline, what should be the
quantity for levy of customs duty. Taking into account the losses that occur
during the storage and transit on account of natural causes, evaporation, etc.,
it was held that the quantity determined at the shore tank by dip measurement
should be the basis for levy of customs duty in respect of the cargo discharged
into the shore tank through the regular pipeline. The said decision of the
Tribunal has been upheld by the Apex Court. Thus, it is now settled that in
respect of cargo discharged into the shore tank through the regular pipeline,
the customs duty has to be levied on the quantity determined as per the shore
tank dip measurement and not on the basis of the quantity determined as per the
ullage report.
15. It is in
the light of the aforesaid judicial decisions, the impugned public
notices/circular have been issued. Para 6 & 7 of Circular No. 96/02 dated
27.12.2002 is relevant fro the purpose of herein and the same is reproduced
herein below: -
"6. Another issue of
relevance pertains to assessment of bulk liquid cargo which is not discharged
through regular pipelines and cleared directly on payment of duty under a white
Bill of Entry, i.e. without the cargo being warehoused in a shore tank. The
point raised is how to determine the quantity in such cases. It needs to be
mentioned here that though the CEGAT order in cases of M/s. HPCL (supra)
relates to a situation of bonded tanks in a warehousing scenario, it would
nevertheless be applicable in a situation of home consumption shore tank
discharge which is under custodial/customs control. In such situations, the
port/custodian would be issuing reports for quantity actually received. In the
light of the guidelines of CEGAT orders referred to above, it has been felt
that it is this quantity which should be taken into account for the purposes of
levy of duty. However, in a situation where there is no facility of measurement
at the port, i.e., bulk liquid cargo, which is not discharged through regular
pipelines and cleared directly on payment of duty under a white Bill of Entry,
i.e. without the cargo being warehoused in a shore tank, assessment may
continue in a shore tank, assessment may continue to be done as per ship a
ullage survey report.
7. In the light of above, I am
directed to covey that in case of all bulk liquid cargo imports, whether for
home consumption or for warehousing, the shore tank receipt quantity should be
taken as the basis for levy of customs duty. Pending provisional assessments
may be finalized accordingly. In the case of bulk liquid cargo imports which
are not discharged through regular pipelines and cleared directly on payment of
duty under a while Bill of Entry i.e., without the cargo being warehoused in a
shore tank, assessment may continue to be done as per ship's ullage survey
report. As for liability of the Mater/Agent for penal action for shortages u/s
116 of the Customs Act, 1962, the same may continue to be fixed in terms of the
guidelines laid down by the Bombay High Court in the case of M/s. Shaw Wallace.
The liability should be evaluated by comparing ship's ullage quantity at the
port of discharge with the ship's load port ullage quantity or Bill of Lading
quantity if the former is not made available by the Master/Agent”.
16. In our
opinion, the inference drawn by the C.B.E.C. from the decisions set out in the
circular is not correct. In the case of NOCIL (Supra), it was held that where
the cargo is discharged directly into the shore tank through the regular
pipeline, in view of the losses that occur during the storage and transit on
account of natural causes, evaporation, etc. the quantity determined at the
shore tank by dip measurement basis must be taken into account for levy of
customs duty. From the said decisions, it cannot be inferred that in cases
where the cargo is discharged from the vessel directly into the tanker lorries,
the assessment of customs duty has to be done as per the quantity determined on
the basis of ullage report. If by any method the actual quantity received by
the importer can be determined, then it is not necessary to assess the cargo on
the basis of the ullage reports. In other words, it cannot be said that the
ullage report is the only basis for assessing the bulk liquid cargo discharged
directly into the tank lorries.
17. It is true
that the quantity determined on the basis of ullage report may not be totally
accurate. However, if there is not other established method available then the
recourse to ullage report will have to be taken. Wherever, it is possible to
ascertain the quantity actually delivered, then such method can be adopted for
the purpose of assessment. Therefore, the Customs authorities are not justified
in issuing public notice/circular directing the assessing authorities to adopt
the ullage report for assessing the bulk liquid cargo discharged directly into
tank lorries.
18. In the
case of M/s. Varun Shipping Co. Ltd. Vs. Govinddas S. Thampi & Ors. (Writ
Petition No. 602 of 1980 decided on 16.1.1984), this Court has held that the
measurement by ullages is a recognised method. The said decision has been
consistently followed by this Court in large number of cases. It is true that
in all those cases the issue pertained to the levy of penalty under Section 116
of the Customs Act, 1962. Even the CEGAT in the case of NOCIL (supra) or in the
case of Hindustan Petroleum Corporation Ltd. has not held that the quantity
determined on the ullage method should be totally discarded. It may be that the
ullage report is made in the absence of any precise measurement. But
nonetheless it is a recognized method and in the absence of any other
recognised method which gives more accurate results, the quantity determined as
per the ullage can be taken into account for the purpose of assessment.
19. In these
circumstances, we hold that the public notices and the circular dated
27/12/2002 have to be read to the effect that wherever it is possible to
determine the quantity actually delivered from the vessel into the tank lorry,
then such method is to be adopted for the purpose of assessment of customs duty
of bulk liquid cargo and it is not proper to direct the assessing authorities
to assess only on the basis of ullage report. If there is any other recognised
method that gives more accurate results, such method may be taken into account
for the purpose of assessment. In the absence of any such method, the quantity
determined as per the ullage can be taken into account for the purpose of
assessment by ensuring that such ullage survey prior to discharge of liquid
cargo is carried out under the supervision of the customs officer and signed by
the consignee and the customs officer and after discharge of liquid cargo also
survey is carried out in the presence of customs officer and the consignee and
report is signed by both of them.
20. The
petitions are allowed in the part as indicated above. However, there will be no
order as to costs.