2023 (7) TMI 217 - AT - Customs

Valuation of imported goods - Methyl Iso Butyl Ketone - excess of 1.66% in the quantity unloaded as compared to the Invoice and Bill of Lading quantity - HELD THAT - The Lower Authorities have relied upon the public notice F. No. S/20-022/2010, which does not indicate the basis on which percentage has been fixed in such general terms for all commodities. The decisions have been correctly relied upon by the Learned Advocate in M/S. WELSPUN CORP. LIMITED VERSUS COMMISSIONER OF CUSTOMS, MUNDRA 2018 (12) TMI 173 - CESTAT AHMEDABAD and are applicable in the present case. The tolerance limit of upto 3 or even 5 % has been approved in the above decisions and therefore percentage of 1.66 is within the limit of indicated tolerance limit of case law. Again the public notice does not bring out commodity wise tolerance limits citing any technical literature for the same and therefore the same cannot be preferred over the criteria indicated by the CBEC in circulars cited above. It, therefore, follows that for Bulk Cargo at the relevant time, not the weight but value paid was the criteria of duty and the transaction value or invoice price and not the quantity, in any case, was to be the basis of assessment. Demand do not sustain - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the determination of customs duty on excess quantity of imported goods beyond the declared weight, the applicability of public notice prescribing tolerance limits, and the relevance of board circulars and case laws in assessing customs duty on bulk liquid cargo.

Issue 1 - Determination of Customs Duty on Excess Quantity:
The case involved a dispute regarding the assessment of extra duty on a marginal excess quantity of imported goods. The appellant imported goods from a foreign supplier, and upon discharge at the Port of Kandla, it was found that the quantity received was in excess of the declared quantity by 1.66%. The lower authorities charged extra duty on this excess quantity and imposed fines and penalties. The appellant contested this decision, arguing that the excess quantity did not result in a change in the transaction value as the price paid remained the same.

Issue 2 - Applicability of Public Notice Prescribing Tolerance Limits:
The appellant's advocate cited previous decisions to argue that for bulk liquid cargo, a tolerance limit of up to 3% had been permitted, contrary to the public notice prescribing a 1% tolerance limit. The advocate highlighted the guidelines in the public notice and emphasized that the excess quantity fell within the tolerance limit approved in previous cases. The lower authorities had based their decision on the public notice, which did not specify the basis for the 1% tolerance limit for all commodities, leading to a discrepancy in the assessment.

Issue 3 - Relevance of Board Circulars and Case Laws in Customs Duty Assessment:
The appellant's advocate also referred to board circulars that emphasized the assessment of bulk liquid cargo based on transaction value rather than quantity, especially when duty is ad valorem. The circulars were rescinded in light of a Supreme Court judgment, directing that the shore tank receipt quantity should be the basis for customs duty on bulk liquid cargo imports. The advocate argued that the lower authorities had disregarded these circulars and case laws in favor of the public notice, leading to an incorrect assessment of customs duty.

Conclusion:
After considering the submissions from both sides, the appellate tribunal found that the lower authorities had incorrectly relied on the public notice prescribing a 1% tolerance limit without specifying the basis for this limit. The tribunal noted that previous decisions and board circulars supported a tolerance limit of up to 3% for bulk cargo, which encompassed the 1.66% excess quantity in this case. The tribunal held that for bulk liquid cargo, the assessment of customs duty should be based on transaction value rather than quantity. Therefore, the appeal was allowed, and the decision of the lower authority was deemed inconsistent with the board circulars and case laws cited.