2005 (10) TMI 502 - SC - Customs

Interpretation of notification issued in terms of sub-section (1) of Section 25 of the Customs Act 1962 being General Exemption No. 121 Held that - It is true that ordinarily the golden rule of literal interpretation must be given effect to. But it is also well-settled that where literal interpretation gives rise to an anomaly of absurdity; the same should be avoided. It is also well-settled that the Legislature always intends to avoid hardship. In a situation of this nature the exemption notification cannot be construed in a way which would prove to be oppressive in nature. However we do not intend to lay down a law that delay on the part of the authorities in granting such certificates would automatically enable an assessee to obtain refund. Each case has to be judged on its own facts. We however do not agree with the contention of Mr. Lakshmikumaran that by reason of a public notice issued by a Custom House situated in a State the effect and purport of statutory notification can be taken away. In terms of Section 151A of the Customs Act it is only the Board which may issue instructions.Having regard to the facts and circumstances of this case we are of the opinion that the Tribunal has committed no illegality in remitting the matter back to the Commissioner. Civil Appeal dismissed.

Summary

Issues Involved:
1. Interpretation of General Exemption Notification No. 121 under Section 25(1) of the Customs Act, 1962.
2. Classification and duty applicability on 3-D seismic data tapes and seismic survey vessel.
3. Requirement and timing of producing essentiality certificates for claiming exemption.
4. Eligibility and applicability of exemption to ONGC and Tullow India Operations Limited.

Issue-Wise Detailed Analysis:

1. Interpretation of General Exemption Notification No. 121:
The appeals question the interpretation of the notification issued under Section 25(1) of the Customs Act, 1962, specifically General Exemption No. 121. The notification exempts certain goods from customs duty when imported for petroleum operations, subject to conditions including the production of an essentiality certificate from the Directorate General of Hydrocarbons.

2. Classification and Duty Applicability:
The Customs Department issued a show cause notice to ONGC, proposing that 3-D seismic data tapes should be classified under CTH 8524.99 and charged with duty, and the seismic survey vessel under CTH 8905.20. The value of the tapes and vessel was calculated based on contracts, and ONGC was asked to justify why these should not be subjected to customs duty and penalties under the Customs Act, 1962.

3. Requirement and Timing of Producing Essentiality Certificates:
The Tribunal held that the benefit of exemption should not be denied merely due to the late production of the essentiality certificate. ONGC applied for the certificate in April 1999 but could not produce it at the time of importation, leading to provisional clearance. The certificate was eventually granted on 23-6-2004. The Tribunal dismissed ONGC's appeal due to the absence of the certificate at the time of importation but allowed Tullow's appeal, remitting the matter for further consideration by the Commissioner.

4. Eligibility and Applicability of Exemption:
ONGC argued that the value of services recorded on tapes should not be subjected to customs duties and that the tapes qualify as IT software under Serial No. 231 of the notification. They also contended that the exemption should apply since the essentiality certificate was eventually produced. Tullow relied on a public notice by the Madras Custom House, suggesting that the late production of certificates should not deny exemption benefits. The Customs Department argued for strict interpretation of exemption notifications, emphasizing the necessity of producing the certificate at the time of importation.

Judgment:
The Supreme Court acknowledged that both ONGC and Tullow were entitled to the exemption subject to producing the essentiality certificate. It emphasized that the delay in granting the certificate was not the fault of the importers but a result of administrative delays. The Court recognized that the essentiality certificate serves as proof that the importers fulfilled the conditions for exemption.

The Court held that while eligibility clauses in exemption notifications must be strictly construed, the conditions for claiming the exemption can be interpreted liberally. The Tribunal's decision to remit Tullow's case to the Commissioner was upheld, and ONGC's case was similarly remitted for fresh consideration. The Commissioner was directed to report back to the Court, keeping other contentions open for future adjudication.

Conclusion:
The Supreme Court's judgment underscores the importance of administrative efficiency and fairness in the application of exemption notifications, balancing strict legal interpretation with practical considerations of public interest and administrative delays.