Commissioner of Customs, Cochin v Indian Oil Corporation Ltd.

``` IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT ``` ``` THE HONOURABLE MR.JUSTICE S.V.BHATTI ``` ``` & ``` ``` THE HONOURABLE MR.JUSTICE BASANT BALAJI ``` ``` WEDNESDAY, THE 3[RD] DAY OF AUGUST 2022 / 12TH SRAVANA, 1944 ``` ``` CUS.APPEAL NO. 3 OF 2019 ``` ``` APPELLANT: ``` ``` THE COMMISSIONER OF CUSTOMS COCHIN CUSTOM HOUSE, COCHIN-682 009, KERALA. BY ADVS. B.RAJESH (KOTTAYAM) Sreelal Warriar ``` ## **`RESPONDENT:`** ``` INDIAN OIL CORPORATION LTD. ERNAKULAM IRUMPANAM TERMINAL, COCHIN, MARKETING TERMINAL, IRIMPANAM, ERNAKULAM DISTRICT, KERALA, PIN-682 309 BY ADVS. SHRI.PRABHAKARAN P.M. SHRI.NAVAZ P.C. SRI.KARTHIK S. NAIR ``` ## **`OTHER PRESENT:`** ``` Petitioner: Sri.Sreelal N Warrier, SC Central Board of Excise and Customs ``` ``` THIS CUSTOMS APPEAL HAVING COME UP FOR ADMISSION ON 03.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` CUSTOMS APPEAL No.3 of 2019 2 **S.V.BHATTI & BASANT BALAJI, JJ. ----------------------------------------------** CUSTOMS APPEAL No.3 of 2019 **----------------------------------------------** Dated this the 3[rd] day of August, 2022 ## **JUDGMENT** ## _**S.V.Bhatti, J.**_ Heard Mr.Sreelal Warrier, the learned counsel for the appellant and Mr.Prabhakaran P.M., the learned counsel for the respondent. 2. The Commissioner of Customs, Cochin is the appellant. Indian Oil Corporation Limited is the respondent. 3. The Indian Oil Corporation – respondent is engaged in refining and marketing petroleum products. The respondent is permitted to receive and store imported petroleum products on which customs duty was paid, for CUSTOMS APPEAL No.3 of 2019 3 release later on, on payment of customs duty on the transaction value. The respondent was authorised to receive non-duty paid excise stocks which could be stored in the same tank as the duty paid customs stock. The respondent enjoys mixed bonding permission granted by the authorities. The respondent sells petroleum products either to other oil marketing companies or clears the stocks through their own depots and the price of petroleum products including the excise duty was fixed in terms of Administered Price Mechanism (for short APM). On 14.10.2004, the appellant issued notice to respondent alleging that the respondent collected excess customs duty which was later on deposited into the oil pool account. According to the Department, the alleged excess amounts collected by the respondents should have been credited to the consumer welfare fund under the head of _customs_ . The failure to credit the excess customs duty collected to the consumer welfare fund account resulted in a liability under Section 28B of the Customs Act, 1962. The CUSTOMS APPEAL No.3 of 2019 4 respondent, in reply, stated that the alleged excess amount collected by the respondent is not retained by the respondent and deposited the said amount to the oil pool account. The liability stated under Section 28B does not in the strict sense arise and prayed for dropping further proceedings under Section 28B. The Commissioner/the appellant on 27.10.2005 (Annexure-R1(D) confirmed the liability and raised the demand of Rs.1,83,70,114/- under Section 28B of the Customs Act. The respondent, filed appeal C/22/2006-DB before Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench at Bangalore, challenging order dated 27.10.2005. Through the order impugned (Annexure-A), the appeal filed by the respondent was allowed. Hence the appeal under Section 130 of the Customs Act. The appeal was admitted on the following questions: (i) Whether the Appellate Tribunal was justified in its finding that, instead of depositing Consumer Welfare Fund stjpulated by an Act (Customs Act), the duty payee can opt to pay the duty amount to `Oil Pool Account' maintained for the benefit of Oil Companies " ? CUSTOMS APPEAL No.3 of 2019 5 (ii) Whether the Appellate Tribunal was justified its finding that "the issue became finality" ,if another Tribunal has ordered in an identical matter and the matter was not reached or considered at Appellate Courts ( High court or Apex court).? 4. Mr.Sreelal Warrier argues that in the circumstances noted by the department, the question under Section 28B of the Act arises. There is no finding on the statutory obligation of respondent to deposit the excess customs duty collected to the credit of department and failure would result in a liability under Section 28B of the Act. Therefore, it is argued that the order under appeal is liable to be set aside and atleast for fair consideration remitted to CESTAT for disposal afresh. 5. Adv.Prabhakaran P.M. appearing for the respondent places strong reliance on the decisions of the CESTAT rendered in the following cases on the very same point, a. Indian Oil Corporation Ltd. Vs. CC, Kandla.2008(227)E.L.T. 263(Tri.-Ahmd.) b.Indian Oil Corporation Ltd. Vs. CCE, Guntur. 2007(210)E.L.T. 543(Tri.-Bang.) c.Indian Oil Corporation Ltd. Vs. CCE,Visakhapatnam- CUSTOMS APPEAL No.3 of 2019 6 2007(211) E.L.T.590 (Tri.-Chennai) d.Hindustan Petroleum Corporation Ltd.Vs. Commissioner. 2003 (162)E.L.T.391(Tribunal) e. CESTAT Final Order No. S/435&A/577/2005 dated 7.7.2005 in the matter of BPCL Vs. CCE,Kandla f. Hindustan Petroleum Corporation Ltd.Vs. CCE, Kandla. 2007 (219) E.L.T.408 (T) and argues that all these CESTAT Benches are unanimous and consistent in not treating the collection of excess customs duty or deposit of amount in oil pool account as arising a liability to the department. In that view, the deposit of surplus customs duty to the credit of oil pool account is accepted and the department did not question those orders in further appeal to this Court or to Supreme Court. It is argued that the questions on which the appeal was admitted and the questions on which the hearing now takes place and the liability tried to make out under Section 28B of the Act do not have sufficient basis in the order dated 27.10.2005 of the appellant or the order of the Tribunal dated 12.09.2018. Therefore, for considering a ground now raised before this Court and remitting the CUSTOMS APPEAL No.3 of 2019 7 matter to authority or Tribunal at this length of time is an avoidable exercise. He invites the attention of the Court to the following two paragraphs in the order under appeal. 5. In one of the cases, this Bench after considering various other decisions available, has held as under: "6.We have gone though the records of the case carefully. It is seen that during the relevant periods, the prices of the petroleum products were fixed under the Administered Price Mechanism `(APM). The appellants have explained that whenever there is excess collection of duty, the same is surrendered to the oil pool account. In the Commissioners of Customs, Visakhapatnam and Chennai have already decided the issue in favour of the appellants. These orders have not been appealed against by the department. Therefore, in terms of the Apex Court judgment in the case of CCE v Bigen Industries Ltd. Reported in 2006 (197) E.L.T. 305 (S.C.), the Department cannot be permitted to again raise the same dispute as the issue has reached finality between the appellants and the Department. The issue is also covered by the Tribunal's decision cited supra. In these circumstances, the impugned Orders-inOriginal are set aside and the appeals are allowed. 6. Similarly, Ahmedabad Bench of the Tribunal in the case of Indian Oil Corporation) Ltd. Has after considering decisions of various other Benches of the CESTAT, has held as under: "7. We have considered the submissions. There are a series of decisions of the Commissioners, Commissioner (Appeals) and the Tribunal holding that there is no excess collection of duty from the customers and therefore, demand is not sustainable. We also find merit in the appellant's contention that as per the Administered Price Mechanism Scheme, any excess recovery has to be deposited in the oil pool account and any deficiency is made good by CUSTOMS APPEAL No.3 of 2019 8 oil pool account, and therefore, it cannot be said that there is excess collection of duty. It may not be exactly fit into the scheme of Section 28B of Customs Act, 1962 or Section 11D of the Central Excise Act, 1944, but it has to be accepted that the purpose of legislation of these sections is fulfilled by this provision in the Administered Price Mechanism Scheme. Another Point which goes in favour of the appellant is that while fixing the price of petroleum products, the Government gives the final price and oil companies do not have any freedom to change this. This is the reason that there is a system of adjustment of duty paid by oil pool account. Threfore, we allow the appeal and set aside the order of the Commissioner of Customs, Kandla." 6. It is argued that the liability canvassed by reference to Section 28B of the Act does not fit into the scheme of the Act. He prays for dismissing the appeal. 7. We have taken note of the contentions and perused the orders including the orders by referring to which the appeal filed by the respondent was allowed by the CESTAT. The substantial questions on which the appeal was admitted, are relating to deposit the amount in oil pool account and whether the acceptance of earlier orders has resulted in finality on the same controversy in other companies. The substantial questions are excerpted in CUSTOMS APPEAL No.3 of 2019 9 paragraph No.3. 8. After taking note of the findings recorded by the CESTAT, we notice that the respondent clearly stated the place or the account to which the excess amount collected was deposited. The Tribunal, by referring to earlier orders, recorded a finding that in view of Administered Price Mechanism implemented for petroleum products at that point of time, no exception to the deposit could be taken. The next question relates to the following view taken by the Co-ordinate Bench of CESTAT as binding on the CESTAT, South Zone Bench at Bangalore. The Tribunal has noted under the circumstances a view taken by one of the Benches of CESTAT had become final and the Tribunal was convinced to adopt the same line of reasoning. In the above perspective, we are convinced, the substantial questions do not warrant our consideration under Section 130 of the Act. Therefore, the questions are answered against the appellant and in favour of the respondent. 9. Let us advert to other arguments developed CUSTOMS APPEAL No.3 of 2019 10 during the course of argument by Mr.Sreelal Warrier under Section 28B of the Act. The argument does not take note of one of the observations made by the Tribunal in the _Indian Oil Corporation Ltd. v C.C.,Kandla_ (Tri.Ahmd) that collection of excess duty may not be exactly fit into the scheme of Section 28B of Customs Act, 1962 or Section 11D of the Central Excise Act, 1944 but it has to be accepted that the purpose of legislation of these sections is fulfilled by this provision in the Administered Price Mechanism Scheme. For taking a different view, we find no material, and the said ground is without basis. 10. The dismissal of the instant Customs Appeal or the order of CESTAT dated 12.09.2018, it is made clear, that these orders are made by the respective forums in the peculiar circumstances in which the Administered Price Mechanism was operated by the respondent company. The views expressed in the instant judgment shall not be understood as deciding the scope and object of Section 28B of the Act. The questions arising under Section 28B CUSTOMS APPEAL No.3 of 2019 11 of the Act are left open for consideration as and when an issue is raised. Sd/- S.V.BHATTI, JUDGE Sd/-BASANT BALAJI, JUDGE css/ CUSTOMS APPEAL No.3 of 2019 12 ## **`APPENDIX OF CUS.APPEAL 3/2019`** ``` PETITIONER ANNEXURES ``` ``` ANNEXURE ATHE FINAL ORDER NO. 21349/2018 DATED 12.09.2018. ANNEXURE BTRUE PHOTOCOPY OF THE ORDER IN ORIGINAL PASSED BY THE COMMISSIONER OF CUSTOMS DATED 27.10.2005. ```