Case Law Details
ONGC Petro Additions Limited Vs C.C.-Ahmedabad (CESTAT Ahmedabad)
Introduction: The CESTAT Ahmedabad recently delivered a crucial verdict in the case of ONGC Petro Additions Limited versus C.C.-Ahmedabad. The dispute revolved around the denial of remission of customs duty for imported raw material destroyed in a fire incident at ONGC Petro’s SEZ unit. The impugned order rejected the application, citing reasons related to SEZ Act provisions and alleged negligence by the appellant.
Detailed Analysis:
1. SEZ Act vs. Customs Act: The appellant contended that Section 23 of the Customs Act is applicable despite the SEZ Act’s overriding effect, as the remission sought pertains to customs duty. The analysis emphasizes that customs duty, governed by the Customs Act, should be subject to remission under Section 23.
2. Negligence Allegations: The appellant argued that the fire incident occurred suddenly and beyond their control, as supported by the survey report. The analysis discredits the Commissioner’s claim of negligence, highlighting the thorough survey conducted for insurance purposes, which absolved the appellant of any wrongdoing.
3. Insurance and Customs Duty: The analysis addresses the contention that insurance only covered the principle value, excluding customs duty. Case precedents are cited to support the appellant’s position that duty remission applies even if insurance covers only the value of goods. The judgment emphasizes that duty remission under Section 23 is valid for SEZ units.
4. Customs Act Applicability: The order refutes the Commissioner’s argument that Section 23 does not apply to SEZ units, emphasizing that customs duty assessment falls under the Customs Act. It underscores that provisions of other acts inconsistent with the SEZ Act are overridden, but Section 23 aligns with the SEZ Act.
5. Insurance Claim and Lack of Inspection: The analysis highlights the insurance company’s approval of the claim as evidence that the fire was beyond the appellant’s control. It criticizes the absence of a customs department inspection to support the Commissioner’s claim of negligence, further strengthening the appellant’s case.
Conclusion: The CESTAT Ahmedabad, after careful consideration, overturned the impugned order, allowing ONGC Petro’s appeal for duty remission. The judgment, pronounced on December 11, 2023, emphasized the absence of negligence, the applicability of Section 23, and the insurance claim as evidence, providing a robust foundation for granting remission of customs duty in the aftermath of the fire incident at the SEZ unit.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal is directed against impugned order-in-original dated 03.09.2021 whereby the Adjudicating Authority namely Commissioner has rejected the application for remission of duty in respect of imported raw- material destroyed in fire, in the appellant’s SEZ unit. The Commissioner while rejecting the application given the following reasons:
I. The Customs provision of Section 23 in respect of remission of Customs duty is not applicable to the SEZ unit, as the SEZ unit is governed by SEZ Act, which overrides all other Acts.
II. The appellant have not taken proper precaution to avoid the fire incident.
III. The appellant, while taking the insurance policy have not covered the Customs duty but only Principle value of the goods is Thus, the appellant have not taken care about the customs duty, which is public money.
Being aggrieved by the Order-In-Original, the appellant filed the present appeal.
2. Sujit Ghose, Learned Counsel with Shri. Shubh Dixit, and Shri. Ajinkya Tiwari, Learned Advocates appearing on the behalf of the appellant submits that Section 23 of the Customs Act, is clearly applicable in the present case for the reason that as regard the overriding effect of SEZ Act, it only applies to the provision of other Act, which are not in consistent with the provision of other Act. In the present case the appellant has sought for remission of Customs Duty. As regard the levy of Customs Duty the Customs Act is applicable. Therefore, for remission of duty also provision for remission provided under Section 23 shall apply. Which is not inconsistence with the provision of SEZ Act.
2.1 As regard, the contention of the learned Commissioner that the appellant have not taken precaution to avoid the fire incident. It is his submission that from the survey report, it is clear that the fire incidence has taken place all of a sudden and beyond the control of the insured. Therefore, the thorough survey conducted for the purpose of insurance clearly established that there is no carelessness or any negligence on the part of the appellant, due to which the fire incident could not be avoided.
2.2 He also submits that as regard the insured value i.e. without the including of customs duty the insurance is done only on the basis of invoice value and the element of customs duty does not Therefore, the insurance company will not insure any amount which is not the part of the value of the goods. Therefore, the appellant have rightly insured the only value of the goods. For this reason the remission cannot be denied. In support, he placed reliance on the following judgments:-
- M/s Satguru polyfab Ltd V/s CC, Kandla reported as 2011 (267) ELT 273 (Tri.- Ahmd)
- M/s Jindal International v/s CC, kandla reported as 2013 (290) ELT 729 (Tri.- Ahmedabad)
- Sami Labs Ltd V/s. The Commissioner of Customs ( February 28th 2007)
- State of Haryana V/s. Dalmia Dadri Cement , 2004 (178) ELT 13 (SC)
3. Shri. Rajesh Nathan, learned Assistant Commissioner (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the records. We find that there is no dispute that the fire incident has taken place in the appellant’s factory located in SEZ As per survey report, it is clear that there is no negligence on the part of the appellant as the fire broken out suddenly beyond the control of the appellant. Therefore, the allegation that the appellant have not taken the proper precaution to avoid fire incident is absolutely baseless and imaginary. Moreover, it is the appellant who has to be most careful about their goods as it is not only the duty but the huge stake of value of the goods is involved. Therefore, it cannot be imagined that the appellant was careless and negligent due to which fire incidence has taken place. It is also fact that the extensive survey was conducted by the survey officer for the insurance purpose. However, there is no such inspection or analysis done by the Customs department to arrive at a conclusion that the appellant have not taken the proper precaution.
4.1 We find that once after carrying out thorough inspection and survey, the insurance company has satisfactorily granted the insurance claim that itself is evidence to establish that the fire incidence was beyond the control of the appellant. Therefore, the ground that the appellant was negligent in the matter of fire incident cannot be accepted.
4.2 As regard, the contention of the Learned Commissioner that the Section 23 shall not apply for remission of duty in the SEZ unit. We find that since the entire assessment of customs duty is done under the Customs Act. The provision for remission of custom duty shall automatically apply. We agree with the submission of the learned counsel that only those provisions of other Act shall not apply, which are inconsistence with the provision of the SEZ Act. In the present case the grant of remission in respect of customs duty in terms of Section 23 does not contradict any of the provision of the SEZ Act. Therefore, the contention of the Adjudicating Authority about non- applicability of the Section 23 of the Customs Act, is not sustainable.
4.3 As regard the contention that the appellant have not insured the customs duty along with the value of the goods, we find that it is obvious that only the value of the goods is liable to be insured, which is appearing in the invoices. If the invoice contain any taxes or duties, obviously the gross value inclusive of all these elements shall be taken for the purpose of However, in the case of SEZ, when the goods are imported and entered into SEZ, the value of goods remain the only principle value and since no duty was payable, question of inclusion of duty does not arise. However, this cannot be the reason for denying the remission of duty. The judgment relied upon by the learned counsel directly applies to the effect that in SEZ unit the remission of customs duty is applicable in terms of Section 23 of the Customs Act. Therefore, we are of the view that appellant has made out very strong case of remission of customs duty in respect of the destroyed goods in fire.
5. Accordingly, we set aside the impugned order and allow the appeal with consequential relief.
(Pronounced in the open court on 11.12.2023)
