Shifting directives on a fluid dispute

In the light of a judgment, CBEC has said in the case of all bulk liquid cargo import, whether for home consumption or warehousing, the shore tank receipt quantity should be taken as the basis for levy of customs duty

Last week, the Central Board of Excise and Customs (CBEC) sought to put an end to the controversy regarding the basis for assessment of bulk liquid cargo, usually imported in tankers. It is, however, difficult to say if the disputes will end.

In the case of bulk liquid cargo, due to transit losses, the quantity shipped might be more than what is received when the vessel enters India. Which, in turn, might also be more than the quantity received in the shore tanks. Based on the Bombay High Court judgement in the case of Shaw Wallace, the CBEC directed in 2000 that the assessment has to be done on the basis of the ullage quantity at the port of discharge, determined on the basis of a survey carried on board the vessel by independent surveyors, in the presence of customs officers, master of the vessel and the consignee's representative.

In the case of National Organic Chemical Industries Ltd l [2002 (142) E.L.T. A280 (SC), the Supreme Court upheld a tribunal order that customs duty should be demanded on the quantity that is pumped into the shore tanks. So, the CBEC, in its circular 96/2002-Cus dated December 27, 2002, said the quantification of bulk liquid cargo for the purpose of assessment should be done on the basis of shore tank receipt. That is, the dip measurement in tanks on shore into which such cargo is pumped from the tanker.

In the case of Exim India Oil Company Ltd. [2001 (131) ELT 2007 (Tri. Kol)], the tribunal held that ocean loss on account of spillage or evaporation or any other count is not a permissible deduction when full payment has been made for the entire quantity, inclusive of loss. So, in 2006, the CBEC changed its view and said the assessment of bulk liquid cargo should be based on the invoice price, which is what is paid or payable for the imported goods, i.e transaction value irrespective of quantity ascertained through shore tank measurement or any other manner. But, wherever the duty is leviable at a specific rate, the quantity determined during the shore tank measurement should be accepted.

The tribunal upheld this view in the case of Mangalore Refinery & Petrochem Ltd [2006 (205) ELT 0753 (Bang)] The Supreme Court, in a detailed order, set aside the tribunal's judgement and held that the quantity of crude oil actually received into a shore tank in a port in India should be the basis for payment of customs duty [2015 (323) E.L.T. 433 (SC)].

In the light of this latest judgment, the CBEC has withdrawn its earlier circulars and said in the case of all bulk liquid cargo import, whether for home consumption or warehousing, the shore tank receipt quantity should be taken as the basis for levy of customs duty. This is irrespective of whether such duty is leviable at a specific rate or an ad valorem basis, including cases where the tariff value is fixed under Section 14(2) of the Customs Act. Further, where bulk liquid cargo is cleared directly on payment of duty, without being pumped in a shore tank, assessment may continue to be done in line with the ship's ullage survey report at the port of discharge.

With so many flip-flops by the courts and CBEC, it is not certain if the last word has been said on the issue.
Email: tncrajagopalan@gmail.com