Legal principle

Where the into-bond assessment is finalized on the quantity shown in an independent Ullage Survey Report conducted in the presence of the importer, supplier, vessel's master and Customs, any unexplained shortage vis-à-vis the Bill of Lading is a matter between the master of the vessel (liable to penalty under Section 116) and the supplier, entitling the importer to corresponding relief in price and duty.

Court decision

The Larger Bench held that there is no conflict between the Ruchi Infrastructure and MRPL decisions, as they were rendered on different sets of facts, and accordingly returned the matter to the referral bench for decision on the merits; it did not itself decide the merits of the assessment or refund disputes. In its discussion (para 8.2), it noted that in the present case the into-bond assessment was finalized on the Ullage-report quantity, making this a case of bonded goods found short at ex-bond clearance, distinguishable from Ruchi Infrastructure where the bonding assessments were provisional.

Facts

M/s. Nikhil Refineries Ltd. imported three consignments of edible oils in March 2003 through Kakinada port, totalling 5289.980 MT as per Bills of Lading; independent Ullage Survey Reports (prepared in the presence of the supplier, importer, vessel's master and Customs) showed 5287.829 MT, on which the goods were bonded. On ex-bond clearance of 5240.764 MT declared as per shore-tank receipts, the department noticed a shortage of 47.06 MT and demanded duty on the short-found quantity, which the importer paid under protest on provisionally assessed Bills of Entry dated 24.06.2003. The original authority held that assessment must be on Ship Ullage Survey Reports, but the Commissioner (Appeals) allowed the importer's appeals with consequential relief both on the duty demand and on the later rejected refund claim of Rs. 39,31,952; the department appealed to the Tribunal. A Division Bench, perceiving a conflict between Ruchi Infrastructure Ltd. (assessment of bulk liquid cargo on shore-tank quantity) and Mangalore Refinery & Petrochem Ltd. (duty liability on the entire Bill of Lading quantity), referred the matter to this Larger Bench.

Key provisions

• Section 116, Customs Act, 1962 — Penalty for not accounting for goods
• Section 14, Customs Act, 1962 — Valuation of goods