NATIONAL ORGANIC CHEMICAL Vs. COMMISSIONER OF CUSTOMS (IMPORT)

JUDGEMENT

(1.) THIS is the party's appeal against impugned order dated 6.4.1998 praying for holding that the quantity actually received in the shore tank was the quantity required to be accounted by the appellant, and the quantity alleged to have been unaccounted represented losses during storage and transit on account of natural causes, evaporation, etc. and as such entire quantity ought to have been condoned and duty should not have been confirmed, and for any other relief deemed proper and fit.

(2.) NAPHTHA stored at BPCL refinery is thereafter transferred through underground pipeline of approximately 30 kms long from BPCL to the appellant's plant at Thane Belapur Road for use in the manufacturing process. The quantity of naphtha transferred from BPCL is received at the appellant's plant and the same is fully used and consumed in the manufacturing process. The receipted quantity is recorded and certified by the appellant's and also by Central Excise Department vide "end use certificates". Assistant Commissioner of Customs issued a show cause notice dated 12.12.1997 alleging that the appellant had separate generation of return steam naphtha and this naphtha has neither been consumed in the manufacturing process, nor has been sold to crude oil refineries as per para 156(J)(18) read with para 23 of Export Import Policy 1992 -97 and Foreign Trade (Development and Regulation) Act, 1972 and called upon the appellant to show cause as to why action should not be taken for the contravention of the above Policy under Sections 111(d) and 112 of the Customs Act, 1962 and also why differential duty of Rs. 11,68,04,329 as per the annexure should not be charged from them. It was further alleged that the quantity on which duty was leviable is the quantity ascertained as per the difference between discharge quantity and quantity consumed as per end -use certificate issued by the Central Excise authorities. It was also alleged that the appellant did not consume 70,648 MT (103.626 KL) and 64.721 MT (95.02387 KL) of imported naphtha covered under bill of entry Nos. 3368 and 3369 both dated 9.2.1994, nor submitted the end -use certificate in respect of bill of gntry Nos. 8142 and 8143 dated 24.2.1994. After receipt of the replies dated 2.1.1998, 18.2.1998 and hearing the appellant and after perusal of the documents produced, impugned order was passed on 6.4.1998 confirmed the demand of differential duty of Rs. 23,01,779 and Commissioner accepted the contention of the appellant that there is no violation of Exim Policy. Hence this appeal.

(3.) SHRI D.B. Shroff, the Learned Counsel for appellant has submitted in the course of arguments that Notification No. 158/76 exempts raw naphtha intended for use in the manufacture of petrochemicals. As per (sic) in the case of State of Haryana v. Dalmia Dadri the words intended for use does not mean "actually used". The only requirement of the above notification is that importer should give an undertaking that he would use the goods for the above purpose i.e. for manufacture of petrochemicals and he should maintain an account of the imported goods received and consumed in the place of manufacture. The appellant has done so. Central Excise officers had given a certificate certifying the quantity received and consumed. The appellant has fully complied with the requirement of the notification. Notification does not permit the department to demand customs duty if all the conditions are fulfilled. That contingency arises only when Clauses (a) to (c) of the notification are not fulfilled, under 11(d). Department cannot demand customs duty on some theoretical differences. There is no allegation of diversion of any quantity by the appellant. Subject to evaporation loss, all the raw naphtha imported by the appellant received was consumed by the appellant. Merely because there was some evaporation loss, it cannot mean that the appellant had not intended to use the said raw naphtha or the condition of notification was violated to deny the benefit of notification, as per . In the impugned order Commissioner, has failed to appreciate that a mere perusal of survey report, show that there has been a loss at every stage of recording and loss of raw naphtha even on the ship holds, and has proposed to hold that pipeline was a sealed one and there could not be any loss. He has failed to take into consideration the loss that could have occurred in the BPCL refinery tank. He admits the loss and holds it is negligible and the appellant had not questioned the measurement of quantity of naphtha unloaded as certified by the ullage surveyor nor sought for condonation of loss due to accident or leakage and in the past party had never demanded such losses. Show cause notice never proceeded on the basis of any permissible loss, and the appellant had no opportunity, as this was the first case of imported naphtha being taken for final assessments. Total loss of 430 KL of raw naphtha amounts to less than 1 percent and it ought to have been allowed. It is not permissible in law to take the quantity shown as quantity discharged, as this is only a notional quantity as per surveyor's report. The difference between the notional quantity discharged and the quantity received as per shore out turn is 164.499 KLS. This is not actual, but notional and this amount of raw naphtha did not exist at all. Thus no duty can be levied on the same. The difference between the shore out turn as per shore out turn and the quantity mentioned in the end -use certificate was 265.77 KLS. This differential amount of raw naphtha was never received by the appellant from the BPCL Refinery Tank. As admittedly this quantity was not sold to BPCL or diverted from BPCL tank to any other party; it has to be considered as accounted for as evaporation loss while in transit, storage and handling, measurement errors etc. No duty in any case could be demanded. So the appeal has to be allowed. Shri C.P. Rao the Learned DR has argued that the appellant has not accounted 430.3 KLS. of raw naphtha and the loss occurred cannot be accepted, as no such stand was taken in prior imports and there was no scope for such loss, in the present import, and survey done is accepted by the appellant, and the ullage survey report reflect the quantity imported. End -use certificates produced do not cover it. There is no dispute about the unloading of 436.269 KL of naphtha from steamer to BPCL tank. There is no account of receipt of the same into appellant's factory. Transit loss upto 1% is granted only for ocean loss. Naphtha is transported across long distance in steamer quantity unloaded from the steamer, correctly determined by ullage surveyor, has to be accounted for the consumption in full, by the appellant, of the quantity of raw naphtha imported. The appellant has not questioned the measurement of quantity of raw Naphtha unloaded from the steamer by surveyor nor sought for condonation of loss. Raw naphtha is conveyed through underground pipes. Question of evaporation does not arise at all. So under these circumstances, the contention of the appellant cannot be upheld. The impugned order is proper and correct.