1. These petitions can be disposed of together inasmuch as their facts are similar and they involve a common question. The facts that are stated are the facts of the first petition.
2. On 9th October 1977 the vessel M.T. 'Aryadoot' belonging to the petitioners, arrived at Bombay from Iran bringing a cargo of aviation gasoline. The fuel was pumped from the vessel into the storage tanks of the Indian Oil Corporation. The pipeline along which the fuel travelled is above 17 kilometers in length.
3. Almost six months after, the petitioners received from the Assistant Collector of Customs a notice which stated that the outturn of the vessel disclosed shortages. The petitioners were called upon to show cause within 15 days why a penalty should not be imposed upon them under Section 116 of the Customs Act, 1962. The quantity short landed was stated to be 31.846 M.Ts. On 25th May 1978 the petitioners asked the Assistant Collector of Customs for extension of time by one month from 27th May 1978 to reply to the said notice. On 28th September 1978 the Deputy Collector of Customs passed an ex part order stating that the vessel had arrived from Iran had discharged 3718.274 M.Ts., as against the bill of lading quantity of 3788 M.Ts. of fuel. Ocean loss of 69.726 M.Ts. was noticed. The benefit of maximum permissible loss of 1% i.e., 37.880 M.Ts. was extended, in spite of which the excess shortage of 31.846 M.Ts. was observed. In these circumstances, the show-cause under Section 116 had been issued. The petitioners had asked for time which had been extended upto 26th June 1978. The petitioners had not replied even after grant of time. It was held that the shortage was not satisfactorily accounted for. The penalty of Rs. 1 lakh, representing the actual Customs duty on the same at the rate applicable to the fuel on the date of entry inward of the vessel, was imposed upon the petitioners under Section 116.
4. The petitioners made an appeal to the Collector of Customs (Appeals) and relied upon a report prepared by J. B. Boda Marine & General Survey Agencies Private Ltd. in respect of the ullages of the vessel. The report noted that the quantity of 3778.701 M.Ts. of fuel had arrived on board the vessel when it came into port at Bombay. The petitioners also relied upon a certificate issued by the same surveyors stating that the vessel's tanks had been empty after complication of discharge of the fuel. It was contended on behalf of the petitioners in the appeal that the ullage report ought to be relied upon and it showed that the shortage of the fuel was less than 1%, and that, therefore, the order imposing the penalty ought to be set aside. The Collector held that the determination of the quantity by ullage was meant only for discharging the carrier's liability towards the suppliers and receivers and had nothing to do with the requirements under the Customs Act. The deficiency for Customs purposes was determined by comparing the manifest quantity with the actual discharge quantity. Though the fuel had travelled 17 kilometers by pipeline there was no finding of any possible leakage on record. The discharge through the pipeline and the receipt of the fuel in shore tanks belonging to the importers of the fuel had the full approval of the Customs authorities. The shore tanks had been calibrated and were approved by the Customs authorities. In view of this, the appeal was found to merit no consideration and was rejected. The petition impugned the original order and the order in appeal.
5. In some of the other petitions the petitioners did appear before the Assistant or Deputy Collector of Customs pursuant to the show-cause notice under section 116 and relied upon ullage reports obtained from qualified surveyors. In those cases too the authorities brushed aside the same and chose to reply only upon the measurement of the fuel in the shore tanks belongings to the importers of the fuel.
6. Section 116 reads thus :
'If any goods loaded in a conveyance for importation into India, or any goods transhipped under the provisions of this Act or coastal goods carried in a conveyance, are not unloaded at their place of destination in India, or if the quantity unloaded is short of the quantity to be unloaded at the destination, and if the failure to unload or the deficiency is not accounted for to the satisfaction of the Assistant Collector of Customs, the persons-in-charge of the conveyance shall be liable, -
(a) in the case of goods loaded in a conveyance for importation into India or goods transhipped under the provisions of this Act, to a penalty not exceeding twice the amount of duty that would have been chargeable on the goods not unloaded or the deficient goods, as the case may be, had such goods been imported;
(b) in the case of coastal goods, to a penalty not exceeding twice the amount of export duty that would have been chargeable on the goods not unloaded or the deficient goods, as the case may be, had such goods been exported.'
For the imposition of penalty under Section 116 the Assistant Collector of Customs must find (a) that the quantity of the goods unloaded is short of the quantity that should be unloaded and (b) that the shortage is not accounted for to his satisfaction.
7. It was submitted by Mr. Venkteswaran, learned counsel for the petitioners, that, for the purposes of determining whether there was a deficiency, the quantity that should be taken into account was the quantity that was discharged by the vessel and not the quantity which was stored and measured in the shore tanks of the importers of the fuel after the fuel had travelled 17 kilometers through a pipeline over which the petitioners had no control. In the alternative, he submitted that the ullage report was a material factor which the Customs authorities should have taken into consideration in determining whether the deficiency was accounted for to their satisfaction under Section 116.
8. It was submitted on behalf of the Customs authorities that ullage reports are not an accurate measure of the quantity carried by a vessel for variety of reasons, and that the method of measurement by using a dip-stick in storage tanks is the more reliable system. It is not for me in these writ petitions to enter into that controversy. I proposed to proceed upon the basis that measurement in the shore tanks is the more accurate method of measurement.
9. It strikes me, however, that measurement by ullages is a recognised method and the petitioners were certainly entitled to ask the Assistant Collector under Section 116 and the Collector in appeal to take account of such measurement in arriving at a conclusion as to whether or not they had satisfactorily accounted for the deficiency. Such measurement by ullages, when carried out by qualified surveyors, is relevant, especially when the fuel has travelled to shore tanks over a long distance through a pipeline over which the petitioners have no control. The ullage report is a relevant piece of evidence. The Deputy or Assistant Collector acting under Section 116 and the appellate authority were bound to consider it. It could not be brushed aside by saying that the Customs authorities were not concerned with it.
10. In this view of the matter the orders of the Assistant/Deputy Collector of Customs under Section 116 and the orders in appeal therefrom are quashed and set aside. Each of the matters is remanded to the Assistant or Deputy Collector of Customs for determination of whether the petitioners therein have satisfactorily accounted for the deficiency. In arriving at such determination, the authorities shall take into account the ullage reports submitted by the petitioners.
11. Rules accordingly. No order as to costs.
12. In Writ Petition No. 602 of 1979 the petitioners have furnished a bank guarantee pursuant to an interim order of this court. It shall be kept alive until the order under Section 116 is passed afresh. In the other three petitions the penalties ordered have already been paid. In the event of the petitioners therein succeeding either before the Assistant/Deputy Collector of Customs under Section 116 or in appeal, the amounts of the penalties shall be refunded.