2017 (10) TMI 221 - AT - Customs

Quantification of imported Crude Palm Oil in bulk - whether the difference between assessed quantity of bulk Crude palm oil as quantified at the time of import and the actual quantity utilised as worked out from the appellant s own records, and whether these shortfalls can be considered as quantities not utilised for use as intended by notification? Held that - there is no allegation supported by evidence either in the show cause notices or in the orders of lower authorities, that the quantities as found short as per the records of the appellant, have actually been diverted or clandestinely or removed for sale or otherwise disposed of, without discharge of custom duty liability thereof. When department alleges that part of the imported quantity has not been used for intended purpose , some evidence will have to be put forth to prove that they have used such quantity for any other purpose, contrary to conditionalties laid down in the exemption notification, or have illegally disposed of such quantity. This is sine qua non. Assumptions and presumptions cannot take place of evidence. Higher appellate fora have consistently reiterated the view that importer/actual user cannot be called upon to pay duty on negligible percentages of storage or transit loss etc. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Correct quantification of imported Crude Palm Oil in bulk.
2. Adherence to the procedure for measurement of imported oil.
3. Evidence of diversion or clandestine removal of imported oil.
4. Applicability of differential duty and penalties.

Detailed Analysis:

1. Correct Quantification of Imported Crude Palm Oil in Bulk:
The appeals revolve around the correct quantification of imported Crude Palm Oil in bulk. The appellants imported Crude Palm Oil at a concessional rate of duty under notification No. 21/2002 Cus, for manufacturing refined oil and other products. The quantification of bulk liquid cargo was done based on joint shore tank ullage by surveyors in the presence of importers and Customs authorities. However, discrepancies were noted between the quantities recorded by the appellants and those assessed by Customs, leading to demands for differential duty and penalties.

2. Adherence to the Procedure for Measurement of Imported Oil:
The appellants argued that the shore tank measurements were taken before the required 48-hour settling period for the turbulence and frothing to settle, as per international practice. They contended that this premature measurement resulted in higher dip readings and apparent shortages. The Tribunal acknowledged that the dip readings should have been taken after the cargo settled, as advised by the CBEC Circular No. 96/2002-Cus, which aligns with the international practice set by the Federation of Oil, Seeds, and Fats Association (FOSFA).

3. Evidence of Diversion or Clandestine Removal of Imported Oil:
The appellants consistently maintained that they utilized the entire imported quantity for the intended purpose without any diversion or clandestine removal. The Tribunal found no evidence in the show cause notices or orders from lower authorities to support allegations of diversion or clandestine removal. The Tribunal emphasized that assumptions and presumptions could not replace evidence, and the burden of proof rested with the department to establish any malafides on the part of the appellants.

4. Applicability of Differential Duty and Penalties:
The department argued that the shortfall in the quantities utilized, as per the appellants' records, indicated non-compliance with the intended use specified in the exemption notification. However, the Tribunal observed that the alleged short quantities were less than 1% of the total quantity imported, which was considered negligible. Higher appellate fora have consistently held that importers cannot be called upon to pay duty on negligible percentages of storage or transit loss. Consequently, the Tribunal found that the demand for differential duty and penalties could not be sustained.

Conclusion:
The Tribunal concluded that the impugned orders could not be sustained due to the lack of evidence of diversion or clandestine removal and the negligible percentage of the alleged short quantities. The appeals were allowed with consequential benefits, if any, as per law. The Tribunal emphasized the importance of adhering to proper measurement procedures and the necessity of evidence to support allegations of non-compliance with exemption notifications.