Provisions of Remission of duty applicable even if there is loss of goods during transit from one warehouse to another.

PJ/Case Law/2014-15/2174

Case:-C.C.E., C.& S.T., BHUBANESWAR-I VERSUS INIDAN METALS & FERRO ALLOYS LTD.

Citation:-2014(301) E.L.T. 340 (Tri.-Kolkata)

Brief Facts:-Revenue had filed this appeal against the Commissioner (Appeals) Order No. 05/CUS/BBSR-I/2006, dated on 25-01-2006, whereby the Commissioner(A) had rejected the Department’s appeal filed under Section 129D(4) of the Customs Act, 1962.
Briefly stated, facts of the case were that the Appellant had imported a consignment of 9618.000 MT of Chinese Metallurgical Coke and cleared the said goods for re-warehousing, on the provisionally assessed warehousing bills of entry bearing No. 28/Bond/2001-2002, dated on 18-03-2002 and No. 1/Bond/2002-2003, dated 16-05-2002 for the purpose of manufacture of Charge Chrome in their factory at Choudwar. The permission to remove the goods without payment of duty was given to the Appellant under the provisions of Section 60 of Customs Act, 1962 and Regulation No. 4 of Warehouse Goods (Removal) Regulation Act, 1963. They had executed the B-17 Bond. At the time of re-warehousing of the goods in question to the factory premises of the Appellant at Choudwar, the goods warehoused were found 9509.170 MT thereby short to the extent of 108.830 MT of coke and therefore, duty of Rs. 2,29,692/- were sought to be recovered from them under section 142 read with section 67 of Customs Act, 1962 and Regulation No. 4 (supra), by enforcing the bond. The deputy Commissioner of Central Excise & Customs, Bhubaneswar Division, dropped the demand on the ground that loss was only to the extent of 1.13%, the goods were highly susceptible to moisture variation and therefore, the shortage was genuine. He further observed that there was no allegation of theft, pilferage or clandestine removal. He accordingly granted remission of duty on lost, destroyed or abandoned goods under section 23(1) of Customs Act, 1962. While holding so, he placed reliance on various case laws in assessee’s own case and other cases. Being aggrieved, Revenue filed an appeal before the Commissioner (Appeals) who also had rejected the Department’s appeal upholding the order of the Adjudicating Authority. Against this order, the present appeal had been filed before this Tribunal.

Appellant contentions:-The contention of the revenue was that the assessee’s case was not covered by Section 23 of the Customs Act, 1962, inasmuch as Section 23 comes into play in regard to the goods imported only after an order for clearance of such goods for home-consumption had been passed by a proper officer of Customs, but not before such goods were actually cleared. In the instant case, no order for its clearance for home-consumption had been passed and even an ex-bond bill of entry for such clearance had not been filed. The contention was that Section 67 of the Customs Act, 1962 was a self-contained statutory provision which regulates the removal of imported goods from one warehouse to another, subject to compliance of the specified conditions thereof, with an execution of a bond and production of a re-warehousing certificate for the entire quantity of the in-bond removals of such goods. Since the said section does not envisage any remission/abatement of Customs Duty in respect of the quantity of such loss during the transit/transportation, the benefit of remission of duty cannot be extended. It had also been stated that the importer did not take adequate measures to prevent such loss.

Respondent contentions:-On the other hand, ld. Advocate appearing for the Respondent had submitted that the difference between the quantity discharged from the vessel and the quantity re-warehoused at their bonded warehouse Works out to 48.830 MT only (i.e. 9558.000 MT- 9509.170 MT) and not 108.830 MT, because the import documents and the draft survey report confirmed to the quantity of cargo to be 9558.000 MT. He had further contended that the Larger Bench of the Tribunal in case of IOC v. Collector of Customs, Bombay reported in 1985 (21) E.L.T. 881 (T), and this Tribunal in their own cases respectively reported in (i) 1991 (52) E.L.T. 268 (T); (ii) 1999 (34) RLT 532 (CEGAT) = 1999 (114) E.L.T. 103 (Tribunal); and (iii) 2002 (49) RLT 230 (CEGAT-KOL) - had allowed remission of duty in case of goods lost in transit and found short at the time of warehousing. The ld. Advocate further submitted that in case of Bharat Petroleum Corporation Ltd. v. Collector of Customs, Bombay reported in 1988 (33) E.L.T. 563 co, the Tribunal held that in case of transfer of petroleum product from one warehouse to another, the losses occurred before the removal of the goods for home-consumption were eligible for remission of duty, if the Assistant Commissioner was satisfied that the losses were genuine and have not occurred due to human negligence.

Reasoning of Judgment:-The Tribunal considered the submissions made by both sides. They found that the issue of remission on goods lost in transit in case of warehousing had been dealt in detail by the Larger Bench in case of IOC (supra). In this case, the Tribunal observed as under:
"It is, thus, clear that if warehoused goods were lost or destroyed for whatever reason at any time before they were cleared for home consumption, the Assistant Collector of Customs was obliged to remit the duty on such goods. The contention of the Chief Departmental Representative that the bond executed by the importer binding himself to pay duty on goods short-received at the destination cannot be said to be unreasonable and against public policy is, no doubt, good as far as it goes but, as we have seen, the bond cannot be read or implemented as if Section 23(1) did not 'apply to warehoused goods. Therefore, notwithstanding the execution of the bond, Section 23(1) will have to be given full effect. We do not accept Shri Raghavan lyer's contention that goods in transit en route from one warehouse to another were not warehoused goods. We do not find any warrant for this proposition. Looking at the scheme of the Act, it was clear beyond doubt that they continue to be warehoused goods till they were cleared out of the warehouse for home consumption after compliance with the prescribed procedures. In this view of the matter, it was not material (indeed it was not necessary) that Section 67 had not specifically provided for remission of duty on goods lost or destroyed at any time before clearance for home consumption."
The Larger Bench in case of Indian Oil Corporation(supra) had thus held that Section 23 of the Customs Act, 1962 was to be extended also to the assessee in case of Transit loss during the transfer of goods from one warehouse to another.
It was rightly contended by the ld. Advocate for the Respondent company that a similar matter in respect of the same assessee had come up for consideration in the decisions referred to supra. In those cases, the Tribunal had observed that the remission of duty was permissible on goods lost or destroyed at any time before clearance for home-consumption. In these circumstances, the Tribunal in its orders, had observed that the demand of duty was not justified.
We find that the lower authorities had recorded that the shortage question was genuine and did not occur due to negligence, such losses occurred due to natural causes like the nature of the goods being susceptible to moisture weigh-bridge difference and handling loss due to loading and unloading of the materials at both ends, etc. The Adjudicating Authority though did not agree with the submission of the assessee that loss was only to the extent of 48.830 Pa but. at the same time, observed that even after considering that the loss was 108.830 MT, the same roughly works out to 1.13% only and the same was dues genuine reasons. Nowhere in the show cause notice, the allegation of theft, pilferage or the clandestine removal of the goods in question had been made. We careful consideration of the findings of the lower authorities and the submission made by the Appellant, we find that the Revenue had not been able to make out a case for not allowing the remission in case of the genuine loss occurred due to natural causes in the process of warehousing/re-warehousing of the goods. In view of these facts and following the ratio of the decisions laid down by the Larger Bench in case of IOC(supra) cited before us and the Tribunal's various judgments in respect of the same assessee, and BPCL (supra), we hold that there was no warrant of demand of duty from them. Consequently, the Appeal of the Revenue was dismissed and the Order passed by the Commissioner (Appeals) was upheld.

Decision:-Appeal dismissed.

Comment:-The analogy of this case was that remission of custom duty cannot be denied by department when goods were lost due to natural causes. Remission is admissible with respect to goods lost or destroyed (other than pilferage, theft and clandestine removal) at any time before clearance for home-consumption and provisions of section 23 are applicable.

Prepared by: Hushen Ganodwala

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PJ/Case Law/2014-15/2174

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