Cus - Assessment on shore tank quantity or Transaction value - Board Circular to be considered retrospective as same is not contradictory to earlier Circular - Rule of unjust enrichment to apply even in provisional assessments: CESTAT
By TIOL News Service
MUMBAI, JAN 29, 2015: THE lower authorities finalised the assessments in respect of bulk oil and other products (Ch. 27) imported by the appellant during the period from 1996 to 2004 and 2004 to 2006 on the basis of the transaction value.
The amounts involved are mind-boggling.The appellant is before the CESTAT.
The following are the gist of the submissions made with the support of a plethora of case laws -
++ The assessment should be done on the basis of the shore tank quantity and not on the basis of the Transaction value. Board Circular 96/2002 dt. 27.12.2002 saying so should be applied and not Circular 06/2006 dt. 12.01.2006 which says otherwise inasmuch it cannot be applied retrospectively.
++ Even if assessments are provisional, the circular cannot be applied to past cases.
++ While finalizing provisional assessment, excess duty paid should be adjusted against the shortage.
++ Refund should be granted suo motu without requirement of filing refund claim.
++ Sub-section (3) to section 18 of the Customs Act enabling levy of interest on differential duty on account of finalisation of assessment came into force only on 13.07.2006 and hence no interest is payable prior to that date.
++ Unjust enrichment is not applicable in respect of refunds arising on finalisation of provisional assessments in respect of imports made prior to 13.07.2006 and finalized after 13.07.2006.
The Special Consultant appearing for the Revenue refuted all the contentions with the assistance of a handful of case laws.
The Bench crystallised the issues and gave its observations as below -
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(1) In the context of an ad valorem tax regime, whether duty liability has to be determined on the basis of transaction value paid or payable for the supply of goods or the duty liability should be determined on the basis of the shore tank receipt quantity?
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++ We answer this question in favour of Revenue and against the appellant. In other words, when the rate of duty is ad valorem and payment is made for the bill of lading quantity without any adjustment in value for the various losses, it is on the transaction value that the duty liability has to be discharged and not on the basis of the quantity of bulk liquid cargo which is actually received. As regards the various case laws relied upon by the appellant, we find that they are not relevant to the facts of the present case before us. However as regards NCCD duty which is levied at specific rates, the above analysis will not apply and they will have to be levied on the actual shore tank receipt quantity and we hold accordingly. [Decision in Mangalore Refinery & Petrochemicals Ltd. - 2006-TIOL-325-CESTAT-BANG relied upon].
++ Board's circular dated 12.01.2006 should be considered as retrospective in view of decision in Apar Industries Ltd. - 2008-TIOL-173-CESTAT-MUM.
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(2) Whether ship demurrage charges are includible in the assessable value of the goods imported?
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++ This matter was referred to the Larger Bench for consideration in view of conflicting decisions in the matter in the case of Grasim Industries Ltd. - 2013-TIOL-1387-CESTAT-AHM-LB. The larger Bench noted that rule 10(2) of the Customs Valuation Rules, 2007, which was pari materia with Rule 9 (2) of CVR, 1988, added an explanation specifically including ship demurrage charges, lighterage or barge charges in the cost of transport of imported goods. Therefore, for the period prior to 2007, the said charges were not includible even if the assessments were made provisionally. This larger bench decision prevails over other decisions of this Tribunal. In the present case, this period involved is prior to 2007. Consequently, it has to be held that ship demurrage charges are not includible in the assessable value of the imported goods prior to CVR, 2007 coming into force and we hold accordingly.
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(3) In the case of provisional assessment of duty which is finalised subsequently, whether short payment of duty made in respect of some bills of entry can be adjusted against excess payments made in respect of some other bills of entry and whether separate refund claims should be filed for refund of excess payments?
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(4) Whether the principles of unjust enrichment would apply when refund arises on account of finalisation of provisional assessements under section 18 of the Customs Act?
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++ This issue was considered by this Tribunal in the case of HPCL vs. CC, Bombay decided on 30-6-2011. After considering the various case laws on the subject, this Tribunal came to the conclusion that any adjustment between the differential amount of duty in relation to the one set of bills of entry where there is a short payment and the excess amount of duty covered by another set of bills of entry is not permissible. It was further held that "what is required to be done by the assessee is to pay the duty short paid and separately claim refund of the duty paid in excess". Since the issue of unjust enrichment has to be considered, it obviously follows that each transaction has to be examined separately and, therefore, there cannot be any clubbing of clearances. Accordingly we answer the question in favour of revenue and against the appellant.
++ We hold that the provisions of unjust enrichment will apply even in respect of provisional assessments which are sought to be finalised under section 18 of the Customs Act and we hold accordingly. [Decision in United Spirits - 2009-TIOL-316-HC-MUM-CUS followed.]
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(5) Whether any interest liability accrues prior to July, 2006 in case of finalisation of provisional assessments?
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++ This issue has been answered in favour of the appellant and against Revenue in the decisions of this Tribunal in the case of Sterlite Industries and Raj Petroleum Products Ltd. where in it was held that prior to 13-7-2006 there was no provision for demand of interest on differential duty on finalisation of provisionally assessed bill of entry. Levy of Interest is substantive in character and, therefore, in the absence of specific provisions, the demand for interest cannot be made and we hold accordingly.
On the further submission made by the appellant that the principle of unjust enrichment is not applicable to oil marketing companies as they sell the goods at prices controlled by the Government, the Bench observed that this contention was never raised or considered by the lower authorities and hence it would be inappropriate to give any finding in this regard; that there is no provision in the Customs Act to support this proposition.
The orders were set aside and the matter was remitted to the adjudicating authority for computation of the differential duty demands and also for consideration of the refund claims in the light of the principles laid down in the order.
The appeals were disposed of in the above terms.
(See 2015-TIOL-211-CESTAT-MUM)
