Shore Tank Receipt Quantity Of IOCL, BPCL, HPCL As Per Ex-Bond Bills Of Entry Are Basis For Calculation Of Customs Duty: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the shore tank receipt quantity of Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) as shown in ex-bond bills of entry is to be taken for calculation of the customs duty.

The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that there are various reasons for the bill of lading quantity alone to be looked at for the purpose of determining the value of goods imported. The first reason that it gives is that duty has to be on the total payment made by the assessee, irrespective of the quantity received. The second reason given is that an ad valorem duty would necessarily lead to this result, but a duty levied at the specific rate would not, the quantity of goods in the latter case being only on the basis of the quantity of crude oil received in the shore tank. The third reason that it gives is that Section 14 kicks in when the duty is on an ad valorem basis, and Sections 13 and 23 do not stand in the way because it is not a question of demanding duty on goods not received but of demanding duty on the transaction value.

The appellant/assessee, IOCL, had imported 98 consignments of HSD and SKO during the period from May 1994 to December 1998 as a canalising agency on behalf of himself as well as for BPCL and HPCL for short. The respective oil companies filed ex-bond bills of entry, which were provisionally assessed. The quantity meant for IOCL was warehoused in the warehouse of IOCL, and the quantity meant for BPCL and HPCL was warehoused in their respective warehouses or shore tanks, for which each one of them held a proper Customs Warehouse License. IOCL, BPCL, and HPCL paid duty provisionally at the time of clearance from the warehouse by filing ex-bond bills of entry proportionately depending upon the quantity of HSD and SKO cleared by them.

On scrutiny of documents, cause notices were issued. The issue raised was whether the shore tank receipt quantity of M/s. IOCL, BPCL, and HPCL as shown in ex-bond bills of entry is to be taken for calculation of the duty or the quantity that has been indicated on the invoices and the bills of lading is to be considered for charging customs duty.

The adjudicating authority held that the differential duty amounts already paid by IOCL, BPCL, and HPCL over a period of time till date stand to be adjusted against the above duty liability. The three companies, IOCL, BPCL, and HPCL, only have to pay the balance differential duty. The interest shall be charged under Section 18(3) read with Section 28aa of the Customs Act, 1962.

The order-in-original was also challenged by IOCL, BPCL, and HPCL before the Commissioner (Appeals), contesting the levy of interest in terms of Section 18(3) of the Customs Act, 1962.

The appellant contended that Section 18(3) was inserted into the Customs Act, 1962, only with effect from July 13, 2006, and therefore, the Adjudicating Authority has wrongly invoked the provision, as in their case, the period of import pertains to May 1994 to December 1998.

The tribunal 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. Consequential action, in accordance with this declaration of law, is carried out by the customs authorities in accordance with law.

Case Title: Indian Oil Corporation Limited Versus Commissioner of Customs, Kandla

Case No.: Customs Appeal No. 14189 of 2013-DB

Date: 12.09.2023

Counsel For Appellant: Sachin Chitnis

Counsel For Respondent: Prabhat K. Rameshwaram

Click Here To Read The Order