Appellate forum cancels show-cause notice against ‘dead freight’

LAHORE: A higher appellate forum has termed show cause notice against dead freight as null and void, as the importer had paid charges against empty space in an oil tanker before clearance of imported goods.

According to details, a petroleum company had imported furnace oil in an oil tanker which was partially empty and paid charges of dead freight for the empty space. The Appropriate Officer of Customs made Good Declaration (GD) as per the assessment against it.

However, Director General Audit Customs and Petroleum raised objection on the value determined by the Appropriate Officer on the ground that the GD failed to represent the correct amount of freight.

The importer challenged the objection by taking a stance that show cause notice was issued by an officer not competent to adjudicate the matter. He maintained that the said officer cannot open the order of assessment under section 195 of the Customs Act, 1969, and that only the Collector Customs is the competent officer to exercise such powers. The Customs Appellate Tribunal accepted the appeal of the imposter and set aside the impugned order.

The department filed a Reference against the judgment of the tribunal. Record revealed that the importer had undeniably chartered a vessel and signed an agreement to import crude oil from UAE.

The consignment was formally imported and cleared vide relevant GD. Director General Audit Customs and Petroleum Lahore, during audit, found a discrepancy in the GD that the freight included in the consignment was lower than the average freight charge per metric ton.

He further contended that it was not in accordance with the general market practice, thus, resulted in short-realization of revenue, amounting to millions of rupees.

Tanker wherein petroleum product was loaded was partially empty and dead freight was paid undeniably. It was also an admitted fact that the importer had paid duty on the furnace oil which was imported and declaration was made thereof and charges of dead freight were paid, therefore, neither the case of importer squared within the purview of relevant provisions of the Customs Act and the show cause notice issued by the department was without legal justification. The Reference was answered in negative.

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