2017 (9) TMI 1507 - AT - Customs

Concessional rate of duty - N/N. 16/2000-Cus dated 01.03.2000 as amended - It emerged that there was short receipt of the imported goods and hence a case was made out against the respondents that such short received quantities were not used for the intended purpose - Held that - the total shortage of 325.491 MTS spread over five years, amount to only 1.5 % of total imported quantity. In fact if we are take into consideration only the transit loss of 123.904 MTS arrived in the at earlier paragraph, the loss would be only 0.57%. We are of the considered view, that such negligible loss percentages, that too over a five year period, are well within acceptable limits. If the department makes an allegation that a portion of the imported goods have not been used for the intended purpose, it will also have to establish that allegation and adduce proof that the goods constituting the short fall were clandestinely removed, or sold or transferred in any other manner in violation of the conditions of the import. This is a sine qua non. In the absence of any such proof or evidence the allegation of the department will have no legs to stand on. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Short receipt of imported goods for manufacturing vanaspathi and refined oils.
2. Allegations of non-use of imported goods for intended purpose.
3. Dispute over calculation of shortage at the port.
4. Applicability of customs duty and penalties.

Analysis:

Issue 1: Short receipt of imported goods
The case involved the respondents, manufacturers of Vanaspathi and Refined Oils, who imported edible oil under a concessional rate of duty. A discrepancy arose due to the short receipt of imported goods, leading to a demand for payment of differential duty and interest. The Original Authority confirmed a duty demand with interest and imposed a penalty under the Customs Act, 1962. The Commissioner (Appeals) later set aside the demand, prompting the Department to appeal.

Issue 2: Allegations of non-use of imported goods
During the hearing, the Department argued that the Commissioner erred in setting aside the original order, emphasizing that the respondents did not provide specific reasons for accepting lesser quantities than declared in the Bills of Entry. The Respondent's Counsel contended that the shortage was minimal and cited a Tribunal decision to support the argument that non-receipt of imported goods absolves the need to justify non-consumption for the intended purpose.

Issue 3: Dispute over calculation of shortage at the port
The Tribunal examined the discrepancy in the quantity of imported oils against the received amount, noting a total shortage over the years. There was a specific concern regarding the calculation of shortage at the port, attributing it to potential differences in ship ullage quantity and shore tank measurements. The Tribunal referenced a CBEC Circular clarifying the assessment basis, ultimately determining the transit loss as a smaller portion of the overall shortage.

Issue 4: Applicability of customs duty and penalties
The Tribunal analyzed the percentage of total shortage over five years, deeming it within acceptable limits. Emphasizing the need for the Department to prove diversion or misuse of imported goods for allegations to hold, the Tribunal found no evidence of clandestine removal or violation of import conditions. Consequently, the impugned order was upheld, dismissing the Revenue appeal.

In conclusion, the Tribunal's decision centered on the negligible loss percentages, lack of evidence supporting diversion allegations, and adherence to import conditions. The judgment highlighted the importance of substantiating claims with proof and ensuring compliance with customs regulations to establish liability for duty and penalties.