Indirect Tax / Customs : Customs Duty on Crude Palm Oil Lost in Fire Incident

Indirect Tax / Customs : Customs Duty on Crude Palm Oil Lost in Fire Incident

In a recent case, the dispute, in question was with respect to Customs Act, 1962 and was regarding the differential duty to be paid on the Crude Palm Oil imported by the appellant for the purpose of manufacturing final products as per the 2016 Rules but which was not actually used because of the fire accident. 

The submissions was that 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. 

The undisputed facts were the appellant 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 2016 Rules. 

Due to fire accident, the oil which was cleared claiming the benefit of the exemption was lost. When the fire accident took place, the appellant had reported to the police, to the fire department and to the insurance company. The insurance company sent a surveyor who gave a detailed report running into 146 pages and ascertained the total loss of Crude Palm Oil as 230.77 M.T. The appellant 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 appellant 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. 

It was seen that 230.77 M.T. of Crude Palm Oil was lost in the fire accident. The contention of the appellant was that once this Crude Palm Oil is filled in their tanks, it must be treated as if it has already been used to manufacture final products. 

It was held that appellant 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. 

Case Reference : Ajanta Soya Ltd v. Commissioner of Customs [2025] GCtR 1655 (CESAT)