Customs Duty Payable On Imported Goods Lost In Fire; Exemption Not Available: CESTAT New Delhi

The exemption Notification No. 12/2012-CUS dated 17.03.2012 allows the importers to import certain goods at a concessional or NIL customs duty.

Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) held that the assessee was liable to pay the customs duty on entire quantity of the Crude Palm Oil which was either lost in the fire accident or was found short along with interest.

In this case, the assessee/appellant is a manufacturer of Refined Oil, Vanaspati and Bakery Shortening.

The assessee had imported Crude Palm Oil for use in manufacture of specified goods and availed the benefit of exemption Notification No. 12/2012-CUS dated 17.03.2012.

This exemption was available subject to the condition that the Palm Oil is used to manufacture specified goods after following the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 (2016 Rules).

Due to fire accident, the oil which was cleared claiming the benefit of the exemption was lost. The insurance company sent a surveyor who gave a detailed report and ascertained the total loss of Crude Palm Oil as 230.77 M.T.

The assessee had informed the department claiming loss of 282.92 M.T. while on joint physical stock verification only 214.07 M.T. was found to have been lost.

The assessee explained the additional claim loss of 68.850 M.T. as being on account of the difference in opening balance of the Crude Palm Oil and that they had rectified the error.

The dispute was regarding the differential duty to be paid on the Crude Palm Oil imported by the assessee for the purpose of manufacturing final products as per the 2016 Rules but which was not actually used because of the fire accident.

As per the assessee the Crude Palm Oil must be treated as having been lost in the process of manufacture was not accepted as no processing was done in the feed tank of deodorizer as it was just a holding tank in which no change occurred. It was also alleged that the importer did not inform the department about the fire accident in time.

As for the cause of not using this quantity, the case of the department is that this quantity of Crude Palm Oil was clandestinely removed.

The Tribunal opined that the assessee was liable to pay customs duty on the 230.77 M.T. of Crude Palm Oil which was imported by it but which was not used in the manufacture of final products specified in the Notification No. 12/2012-CUS in view of the fire accident.

As regarding the rest of the quantity of Crude Palm Oil, the bench noted that evidently it was not used for manufacture of the specified goods. At least, there is no evidence that the Crude Palm Oil was used for manufacture of specified goods. Therefore, the condition to avail the benefit of the exemption Notification No. 12/2012-CUS was not fulfilled.

The bench stated that there is no evidence of clandestine removal. The assessee's case is that the shortage was on account of accounting error. There is no sufficient evidence to support the contention of the assessee that there was an accounting error and how it had occurred.

Regarding the penalty under section 114A of the Customs Act, the bench opined that the vast majority of the disputed quantity was lost in a fire accident. There is no evidence that the assessee had caused the fire accident or that they gained anything by destroying the Crude Palm Oil in the fire. Therefore, the penalty under section 114A cannot be sustained.

In view of the above, the Tribunal partly allowed the appeal.

Case Title: M/s Ajanta Soya Limited v. Commissioner of Customs (Preventive), Jodhpur

Case Number: CUSTOMS APPEAL NO. 51089 OF 2020

Counsel for Appellant/ Assessee: Shubhankar Jha

Counsel for Respondent/ Department: Ranjan Prakash

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