2013 (12) TMI 1464 - CGOVT - Customs

Penalty u/s 116 - short landing quantity - Held that - Section 30 stipulates delivery of import manifest or import report with true declaration therein. Further Import Manifest (Vessel) Regulations 1971 provides the nature condition and position (including status) to be truly declared as per respective declaration form. It is therefore quite clear that Manifest is to be considered a basic legal document and the declarations made therein are to be taken as statutory declarations for the purpose of further action under the relevant provisions of Customs Act 1962. Similarly Chapter V of the Act provides for levy and assessment of Customs duties and Section 13 thereof when read with provisions of Bill of Entry (Form) Regulations 1976 the legality of the duty levied in this case can be clearly understood. Further for levy/calculation of impugned penalty the provisions of Section 116 of the Customs Act 1962 unambiguously stipulates the levy of penalty not exceeding twice the amount of duty. Vessel sailed from Port of Ruwais Abudhabhi on 3-6-2012 after loading cargo of 36749.322 MT of BYCS in bulk for deliver at Chennai and Vizag Ports. 22000 MT cargo was discharged at Chennai Port in respect of BL No. 1 & 2. The said vessel arrived at Vizag on 24-6-2012 and discharged cargo of 14539 MT in respect of BL No. 3 4 5 against the quantity of 14749.322 MT. Applicant has claimed that 0.5% tolerance limit should be worked out on total quantity of 36749.322 MT as 183.75 MT which should be taken into account for arriving at the actual shortlanded quantity. In this regard it is noted that the vessel has discharged 20000 MT cargo at Chennai port and balance cargo of 14539 MT at Vizag port. This fact is not rebutted by the department. The tolerance limit has to be applied with reference to total bulk cargo of BYCS which was loaded in the vessel. The losses occurred with reference to quantity of 20000 MT discharged at Chennai cannot be attributed only to the quantity of cargo discharged at Vizag. Losses of 0.5% of total cargo loaded in the vessel i.e. 36749.322 MT equal to 183.75 MT is to be considered as genuine losses due to natural causes and as per general practice the said quantity of 183.75 MT is not to be taken as shortlanded quantity. As such actual shortlanded quantity is 210.322 MT - 183.75 MT 26.572 MT of BYCS on which proportionate custom duty involved is Rs. 66, 094 - applicant is liable to penal action under Section 116 of Customs Act 1962 as held by lower authorities. Keeping in view the overall circumstances of the case the penalty imposed is quite harsh and should be reduced - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Determination of short landing quantity and permissible tolerance limit.
2. Application of Section 116 of the Customs Act, 1962 regarding penalty imposition.
3. Consideration of natural losses and handling losses during transit.

Issue-wise Detailed Analysis:

1. Determination of Short Landing Quantity and Permissible Tolerance Limit:
The applicant, a steamer agent, filed IGM No. 0698/12 under Section 30 of the Customs Act, 1962 for the vessel M.V. NIRMAL PRITI, which arrived at Visakhapatnam Port with 14749.322 MT of Bright Yellow Crude Sulphur (BYCS). A joint draught survey revealed a short landing of 210.322 MT. The applicant argued that the permissible tolerance limit should be 0.5% of the total cargo (36749.322 MT), equating to 183.75 MT. The Government accepted this contention, noting that the losses should be calculated on the total cargo loaded, not just the quantity discharged at Visakhapatnam. Thus, the actual shortlanded quantity was determined to be 26.572 MT after accounting for the permissible tolerance limit.

2. Application of Section 116 of the Customs Act, 1962 Regarding Penalty Imposition:
Section 116 of the Customs Act, 1962 stipulates penalties for short landing of goods. The original adjudicating authority imposed a penalty of Rs. 10,00,000, which was upheld by the Commissioner (Appeals). The applicant contended that the penalty was imposed without proper consideration of the facts and without proving mens rea. The Government noted that the penalty under Section 116 does not require proving mens rea and is applicable for any short landing or non-landing of goods. However, the Government found the penalty of Rs. 10,00,000 to be harsh given the circumstances and reduced it to Rs. 66,094, proportionate to the duty on the actual shortlanded quantity.

3. Consideration of Natural Losses and Handling Losses During Transit:
The applicant argued that natural losses such as evaporation, handling losses, and inaccuracies in draft surveys should be considered. The Government acknowledged that losses due to natural causes and handling are common in maritime cargo transport. It was noted that the cargo was sprinkled with water during loading, which could lead to weight discrepancies. The Government accepted the applicant's argument that a tolerance limit of 0.5% should be applied to the total cargo, recognizing these natural losses as genuine. This consideration led to the reduction of the shortlanded quantity and the corresponding penalty.

Conclusion:
The revision application was partially allowed, with the Government reducing the penalty from Rs. 10,00,000 to Rs. 66,094 based on the revised shortlanded quantity of 26.572 MT after applying a 0.5% tolerance limit on the total cargo. The impugned orders were modified accordingly, and the case was disposed of in these terms.