Cargo — Bulk liquid cargo — Assessment to be done on basis
of shore tank receipt
Circular No. 96/2002-Cus., dated 27-12-2002
F. No. 494/12A/2000-CUS.VI
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject : Assessment of bulk liquid cargo – Ship ullage
survey report Vs shore tank receipt – Supreme Court’s order dated 20-2-2002 in
Civil Appeal No. 6764/1999 in the case of Commissioner of Customs (Import),
Mumbai v. M/s. National Organic Chemical Industries Ltd.(NOCIL).
I am directed to invite your attention to the above
mentioned subject. Attention is also invited to Board’s Circular No. 46, dated
17-5-2000 [2000 (118) E.L.T. T64] directing the Custom Houses to finalise the
provisional assessments relating to bulk liquid cargo imports on the basis of
ullage survey reports. However, pursuant to the Supreme Court order
dated20-2-2002 referred to above [2002 (142) E.L.T. A280 (S.C.)], the matter has
been re-examined by the Board.
To briefly 2. recapitulate the facts, for quite some time
now, a dispute has been going on between the oil companies and Customs regarding
the quantity that needs to be taken for levy of customs duty on bulk liquid
cargo. The dispute essentially relates to the method of determining the
quantity. The contention of oil companies all along has been that the quantity
of oil should be determined on the basis of ‘shore tank receipt’, i.e., dip
measurement in tanks on shore into which oil is pumped from the tanker. The
Department, on the contrary, has been of the view that the quantity of import
should be determined on the basis of ullage survey report, i.e., the ullage
quantity at the port of discharge determined on the basis of survey carried on
board the vessel by independent surveyors in the presence of customs officers,
master of the vessel and the consignee’s representative. The dispute has since
been set at rest by the Supreme Court judgement dated 20-2-2002 in Civil Appeal
No. 6764/1999 [2002 (142) E.L.T. A280 (S.C.)] in the case of Commissioner of Customs
(Import), Mumbai v. M/s. NOCIL. In this order, the apex court has upheld
the CEGAT orders in the case of M/s. HPCL and NOCIL ruling that customs duty
should be demanded on the quantity that is pumped into the shore tanks.
Following apex 3. court’s decisions in the case of Garden Silk Mills
Ltd. v. UOI,
1999 (113) E.L.T. 358 (S.C.), UOI v. Apar Pvt. Ltd.,
1999 (112) E.L.T. 3 (S.C.) and Kiran Spinning Mills
v. Collector of
Customs, 1999 (113) E.L.T. 753 (S.C.), the CEGAT (WZB), Mumbai in
its order No. 2393/2000-WZB/C-I, dated 7-7-2000 [2000 (121) E.L.T. 109 (Tri.)] in the case of Commissioner of
Customs, Mumbai v. HPCL has held that bulk liquid cargo would be
“considered to have crossed the Customs barrier only when they are pumped into
the shore tanks. That being the taxable event, it is that quantity of goods,
which are liable to duty”. The Tribunal has thus held that the customs duty
should be demanded on the quantity that is pumped into the shore tanks.
The CEGAT order 4. dated 7-7-2000 in the case of HPCL has
been followed subsequently by the Tribunal in other cases as well. In the case
of Collector of
Customs, Visakhapatnam v. HPCL, the CEGAT in its Order No. 483/2000-C, dated
15-9-2000 [2001 (130) E.L.T. 139 (Tri.)] has ordered finalization of
provisional assessments on the basis of ‘dip measurement in the shore tanks’ as
shown in the Cargo Intake Certificates attested by the Central Excise
Authorities and not on the basis of quantity reported in the vessel’s ullage
reports taken prior to actual unloading of goods. In yet another Order (No.
2-4/2002) dated 1-1-2002 [2002 (141) E.L.T. 247 (Tri.)], in the case of M/s. Mangalore Refinery
and Petrochemicals Limited v.. CCE, Bangalore, the CEGAT has held that crude oil
imports are assessable to duty on the quantity determined as ‘shore tank
receipt’ and not on the ‘ship ullage survey report’ since ‘ship ullage survey
report’ would be only for quantities that have crossed the territorial waters
and not the actual quantities imported into India. Now, with the pronouncement
of Supreme Court judgement in the case of M/s. NOCIL referred to above, the
controversy surrounding ‘ullage survey report’ Vs ‘shore tank receipt’ has come
to an end, and the final position which emerges is that the quantification of
bulk liquid cargo for the purposes of assessment should be done on the basis of
shore tank receipt, i.e., dip measurement in tanks on shore into which such
cargo is pumped from the tanker.
A related issue is 5. the liability of the Master/Agent for
penal action for shortages under Section 116 of the Customs Act, 1962. With a
view to minimising disputes and bringing uniformity in dealing with the Steamer
Agent’s liability under the said section, the Bombay High Court in Writ Petition
Nos. 1236 of 1981 and 1354 of 1984 (Shaw Wallace & Co. Ltd. v. Assistant Collector of
Customs & Others) had laid down certain guidelines in July, 1986 [1986
(25) E.L.T. 948 (Bom.)]. As per these guidelines,
the liability of the ship’s Master/Agent is to be determined by comparing the
ship’s ullage quantity at the port of discharge with the ship’s load port ullage
quantity or the Bill of Lading quantity if the former is not made available by
the Master/Agent. As the order of the Bombay High Court is in the nature of a
consent order, this has not been a subject matter of dispute insofar as the
liability of the Master/Agent under Section 116 of the Customs Act, 1962 is
concerned. The Board is, therefore, of the view that the liability of the
Master/Agent for penal action under Section 116 should continue to be determined
by comparing the ship’s ullage quantity at the port of discharge with the ship’s
load port ullage quantity or the Bill of Lading quantity if the former is not
made available by the Master/Agent.
Another issue of 6. 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 case of M/s HPCL 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 to be done as per ship’s ullage survey report.
In the light of 7 above, I am directed to convey 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 finalised
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 white
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 Master/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.
Wide publicity may 8. be given to the above instructions by
issue of a suitable Public Notice/Standing Order in this regard. Difficulties,
if any, faced in the implementation of above instructions may be brought to the
notice of the Board at an early date.
Kindly acknowledge receipt of this Circular.