Just a moment...

Report
FeedbackReport
Bars
×

By creating an account you can:

Logo TaxTMI
>
Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2006 (2) TMI 386

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....,00,000/- (Rupees five crores only), and imposing a penalty of Rs 2,00,00,000/- (Rupees two crores only), under Section 112(a) of the said Act on the appellant. 2. The appellant had filed bill of entry No. 14315, dated 28-4-1993, seeking clearance of one second-hand jack up rig deepsea matdrill, nine leg sections for the said rig, one anchor for the rig and twenty containers for the rig (6 nos.). The value declared by the appellant was US $ 3,400,000 (C&F) equivalent to Rs. 10,79,55,397.50 (CIF) as per the bill of entry. Though initially the appellant had claimed assessment of the rig under Tariff Heading 8430.49 and claimed benefit of Notification No. 279/92 that was changed by the appellant by their letter dated 29-7-1993 to claim assessment under Heading 8905.90 read with Notification No. 133/87 attracting "nil" rate of duty. The appellant relied upon a letter of the Chief Engineer (Drilling) of the ONGC in which it was stated that the matt supported jack up rig deepsea matdrill was not a floating or submersible drilling or production platform. They also relied upon a letter from Adkins Oil Tools Inc. 2.1 As per the show cause notice, the said rig did not fall under ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....-heading 8905.90 read with Notification No. 133/87 at 'nil' rate of duty, the appellant had approached the civil court for immediate release of goods. The Court of Commercial Sub-Judge, Delhi passed an order on 24-8-1993 in the said civil suit No. 481/93 restraining the Customs authorities from causing obstruction in the movement and operation of the said rig. A copy of that order dated 24-8-1993, which is at Annexure 4 to the appeal memo reads as under : - "IN THE COURT OF SMT. KAMLESH SABHARWAL : COMMERCIAL SUB-JUDGE Suit No. 481/93. Jagson International Ltd. A company incorporation under the Companies Act, 1956 Regd. At 5, Krishna Menon Lane, New Delhi. ......Plaintiff v. 1. Central Board of Excise & Customs, North Block, New Delhi. 2. Collector of Customs (Docks) Customs House, Madras. ... .Defendents Suit for permanent injunction. To Collector of Customs (Docks) Customs House, Madras. WHEREAS in the above-noted case the plaintiff has filed a suit with application under order 39 Rule 1 of CPC. You are hereby restrained from causing obstruction in the movement and operation of Deepsea Matdrill to the ONGC sites in India Waters till the disposal of the suit....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....status quo be maintained in terms of order passed previously from the court of Smt. Kamlesh Sabharwal, CJ, Delhi, the pltf. is directed to comply with the provisos or order 39 Rule 3, C.P.C. Put up on 6-12-94. Sd/- CJ/Delhi" 3.3 It will be noticed that when the order was made on 1-11-1994, the earlier suit was already withdrawn and, therefore no interim order in that suit could have survived beyond the withdrawal of that suit. The civil court, however, ordered status quo to be maintained in terms of the interim order previously made by the Civil Judge, Delhi, named in the order. 3.4 After the show cause notice dated 27-5-1995 was issued alleging that the goods were classifiable under sub-heading 8905.20 and not under 8905.90, the appellant challenged that show cause notice in the civil court by making an amendment application in the pending suit, as stated in Paragraph 9 of the appeal memo and asked the authorities to keep the proceedings in abeyance during the pendency of the suit. 3.5 It also appears that the appellant had approached the designated authority under the Kar Vivad Samadhan Scheme. However, the appellant did not comply with the order made in that ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of the conditions thereof. Since the appellant had not produced the "essentiality certificate" at time of clearance and since when the certificate was issued in May, 1999, the Notification No. 196/89 was already rescinded (on 1-3-1997), the appellant was not eligible for such benefit on the ground that the conditions of the notification were not satisfied. It was, therefore, held that the appellant was liable to pay duty of Rs. 13,30,22,640/- under Section 28 of the said Act, and the goods were confiscated and penalty imposed as per the impugned order. Arguments on behalf of the appellant : 6. The learned Counsel appearing for the appellant contended that the rig in question was falling under Tariff Heading 8905.90 and not under Heading 8905.20, because it was not "floating or submersible drilling or production platform". It was submitted that classification was a matter of chargeability and the burden would be squarely upon the department to show that the goods were covered by a particular tariff entry. The learned Counsel contended that one has to understand the expression describing the goods as per the commercial parlance and in accordance with the meaning assigned to i....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....notification on the basis of the "essentiality certificate" which was produced before the making of the order of adjudication in view of the stand taken up in the show cause notice that the rig was covered under Heading 8905.20. It was submitted that the impugned proceedings before the Commissioner were for deciding the classification of the goods and consequently till that time there was no duty determination, nor any decision on classification. Therefore, the appellant ought not to have been denied the benefit of that notification, since earlier there could have been no occasion to file the "essentiality certificate", because, as per the assessee, the goods were classifiable under Heading 8905.90 in respect of which 'nil' rate of duty was payable under the Notification No. 133/87. It was also argued that since the show cause notice did not refer to the provision of Section 111 (j) and had referred to the provision of Section 111(d) of the said Act in connection with confiscation, the adjudicating authority could not have confiscated the goods under Section 111(j). It was also submitted that since the goods were removed on the strength of the order of the civil court, there was no....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..... Collector of Central Excise, Bombay reported in 1985 (19) E.L.T. 254 (Tribunal), were cited in support of the contention that the opinion of the Government officials and the Government certificates cannot be brushed aside lightly. (g)     The decision of the Supreme Court in Dabur (India) Ltd. v. Commissioner of Central Excise, Jamshedpur reported in 2005 (182) E.L.T. 290 (S.C.) Commissioner of Central Excise, Nagpur v. Vicco Laboratories reported in 2005 (179) E.L.T. 17 (S.C.) was cited for the proposition that in classifying the product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. (h)     The decision of the Supreme Court in Formica India Division v. Collector of Central Excise reported in 1995 (77) E.L.T. 511 (S.C.), was cited to point out that it was held therein that once the Tribunal took the view that the appellants were liable to pay duty on the intermediary product and that they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..... Collector of Customs reported in 1991 (56) E.L.T. 753, Bajaj Auto Ltd. v. Commissioner of Central Excise, Indore reported in 2004 (165) E.L.T. 323 and Commissioner of Central Excise, Cochin v. Dynaspede Integrated Systems Ltd. reported in 2002 (147) E.L.T. 541. (l)      The decision of the Supreme Court in Birla Corporation Ltd. v. Commissioner of Central Excise reported in 2005 (186) E.L.T. 266 (S.C.), was cited to point out that where same question arose for consideration and the facts were almost identical, the Supreme Court held that it cannot permit the Revenue to take a different stand in the case. (m)    The decision of the Calcutta High Court in Rasoi Ltd. v. Union of India reported in 2004 (176) E.L.T. 101 (Cal.), was cited for the proposition that vested right can be invoked in accordance with the conditions mentioned in the notification as it then stood. (n)     The decision of Tribunal in Mohamad Naseer v. Collector of Customs reported in 2003 (162) E.L.T. 560 (Tribunal) was cited to point from Paragraph 11 of the judgment that where the provisions of Sections 111(m) and 111(o) of the Customs Act were not ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Arguments on behalf of the Revenue : 7. The learned Senior Advocate appearing for the Revenue submitted that the certificate of the Chief Engineer (Drilling), ONGC, as regards the nature of the rig was not supported by any reasoning. He submitted that the letter of the Ministry of Petroleum as well as the endorsement on the licence were based on this certificate. Moreover, the Chief Engineer had changed his opinion after going through the HSN Explanatory Notes. He also submitted that there was clear reference to the discussion with the Chief Engineer and his altered opinion, in the show cause notice. The learned Counsel pointed out that by communication dated 4-9-1995, the appellant was provided with an extract of the oral discussion held with the Chief Engineer, ONGC on 1-2-1994 in the Custom House, at the request of the appellant, and therefore, there was no denial of opportunity of being heard to the appellant on the altered view of the Chief Engineer. The learned Counsel further submitted that the rig in question, having regard to its description and nature of functions, clearly fell within Tariff Heading No. 8905.20. He submitted that it is the character of the item whic....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of licence, it cannot be said that mere non-mention of the particular Clause (j) of Section 111 was fatal and that the goods could not have been confiscated. The learned Senior Advocate also submitted that the appellant had adopted delaying tactics by resorting to civil proceedings though the civil court had no jurisdiction to entertain the matters pertaining to classification of goods and levy and collection of duties. He submitted that it was a settled legal position that the civil court had no jurisdiction to entertain such matters and the appellant could not have removed the goods even on the strength of the order of the civil court which clearly contemplated that the appellant shall be bound by the observation of the Customs duty provisions and to pay Customs duty, if any, under Heading 8905.90. It was submitted that the question of applicability of the Notification No. 133/87 was required to be decided by the proper officer before the appellant could have cleared the goods. Therefore, the goods were liable to be confiscated since they were removed without following the essential part of the interim stay and without allowing the proper officer to provisionally assess and perm....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ing away the illegality already committed by them, and that in the face of the factual situation therein and on the plain term of the Notification No. 134/89-Cus., they would not have been entitled to the refund of duty even if they had been detected and made to pay duty on the removal of the goods from customs area. (d)     The decision of the Supreme Court in Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd. reported in 2005 (189) E.L.T. 401 (S.C.) (supra) was cited to point out from Paragraphs 30 to 36 of the judgment that the Supreme Court held that the essentiality certificate must be treated to be a proof of the fact that the importers have fulfilled the conditions enabling them to obtain the benefit under the exemption notification, and that whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. In Paragraph 30 of the judgment, it was held that the conditions referred to in sub-section (1) of Section 25 as regar....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....y 8430.49, it subsequently claimed by its letter dated 29-7-1993 that the earlier indication was wrong and the classification was now claimed under Heading 8905.90 claiming the benefit of the Customs Notification No. 133/87 attracting 'nil' rate of duty. 8.1 The Tariff Heading 89.05 reads as under : - "Light vessels, fire floats, dredgers, floating cranes and other vessels, the navigability of which is subsidiary to their main function; floating docks, floating or submersible drilling or production platforms. 8905.01 - Dredgers 8905.20 - Floating or submersible drilling or production platforms 8905.90 - Others" 8.2 The appellant has claimed that the rig fell under Heading 8905.90, on the strength of the opinion of the Chief Engineer (Drilling) ONGC in which it was stated as under : - "STATEMENT OF FACT The Mat Supported Jackup Rig Deepsea Matdrill is not floating or submersible drilling or Production Platform. This is being issued on the request of M/s. Jagson International Limited vide their letter dated 28-7-1993. (A. VAZEERULLAH ) CHIEF ENINEER (DRILLING)" It will be seen that the Chief Engineer simply asserted that the mat-supported jack up rig deepsea matdrill ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....f its Customs tariff and statistical nomenclatures that : - "(i) it shall use all the headings and subheadings of the Harmonised System without addition or modification, together with their related numerical codes; (ii) it shall apply the General Rules for the interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes, and shall not modify the scope of the Sections, Chapters, headings or subheadings of the Harmonised System; and (iii) it shall follow the numerical sequence of the Harmonised System." As indicated in Article 7 of the Convention one of the functions of the ' Harmonised System Committee was to prepare Explanatory Notes, classification opinions or other advice as guides to the interpretation of the Harmonized System. 8.5 Thus, the Harmonized System Explanatory Notes are the authentic material which can be used for understanding the commodity description. When reliance is placed on HSN Explanatory Notes, which are duly published and known in the field concerned, there can arise no question of any opportunity to cross-examine the members of the Harmonized System Committee which prepares the Explanatory Notes, classif....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... discovery or exploration of off shore deposit of oil or natural gas, which are neither floating nor submersible, are excluded from the heading (Heading 84.30). The heading also excludes ferry boats (Heading 89.01), factory ships for processing fishery products (Heading 89.02), cable ships and weather ships (89.06)." 8.7 The description of the rig imported by the appellant as given by the appellant shows that the deepsea matdrill is a jack up drilling platform. It is stated in the "Introduction" part of the literature placed on record by the appellant that the company is the proud owner of a rig called Deepsea Matdrill which can operate under the following conditions: - "Water depth-250 Drilling Depth-20,000 Huli- 191'x 132' x 16' V Load- 1560 Short Tons" On the page entitled "Technical Data" the legs of the rigs are described as : - "Three tabulars, 10 ft. diam. by 235 ft. can be extended to 255 ft. or 325 ft. long." Admittedly, the rig has self-elevating platform. The legs of the rig and the mat, rest on the sea bed when drilling is performed. The legs are drawn back vertically and then the mat is also drawn back and the rig becomes capable of floating and can be tow....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....in the communication dated 4-9-1995 which was addressed to the consultant of the appellant and a copy of which has been placed on record. The fact of the altered opinion was also mentioned in detail in the show cause notice. The appellant was informed on 4-9-1995 that there was discussion with the Chief Engineer on 1-2-1994 and that he had stated that originally when he gave the certificate to the effect that jack up rig deepsea matdrill is not a floating or submersible drilling or production platform, he was not certifying in terms of the Customs Tariff Heading. The extract of the oral discussion recorded by the office was reproduced in that letter as under : - "The issue has been discussed with the Chief Engineer, ONGC on 1-2-94. He said, originally when he gave the certificate to the effect that 'Jack-up rig Deepsea Matdrill' is not a floating or submersible drilling or production platform, he was not certifying in terms of the customs tariff heading. Normally, in international oil trade, Drill-ships/barges are called floaters, since they float on sea while drilling, Jack-up rigs are not grouped as floaters since they do not float while drilling but with the help of retractable....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....notifications issued thereafter. It was certified that the imported goods described in the attached statement (i.e. Rig "Deepsea Matdrill") are considered essential for the purpose of the offshore oil exploration or exploitation. The essentiality certificate was issued with reference to the said goods cleared by Customs under bill of entry No. 14315, dated 28-4-1993. The certificate was valid for a period of three months from the date of issue. The Commissioner has recorded in the order that the additional claim of the importer was made at a subsequent date to the effect that they were entitled to the benefit of the Notification No. 196/89, dated 30-6-1989 and in this connection they had also produced the "essentiality certificate" issued by the Additional Director (EC) for the purpose of claiming the benefit. It is also stated that the certificate was produced in May, 1999. As per the said Notification No. 196/89 issued by the Central Government under Section 25(1) of the Customs Act, 1962, "off-shore drilling Rigs including Jack/up Drilling, Drilling Rigs, Drilling Drillships spares" were described at S.No. 1 amongst the goods which were entitled to partial exemption when importe....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ification while the notification was operative. However, the certificate was not produced at the time of clearance of the goods and the rig was not cleared by the proper officer, but was removed purportedly on the strength of interim injunction granted by the civil court. ' The rig was removed on 9-10-1993. 9.2 It is evident from the record that the appellant had relied on the essentiality certificate in the context of the Notification No. 196/89 for claiming the benefit of reduced rate of duty. As per the settled legal position, the production of the essentiality certificate, which only reflected the purpose for which the rig was imported and which purpose has not been disputed at any point of time, entitled the appellant to claim the benefit of the notification, when it was held by the Commissioner that the rig in question was covered by Heading 8905.20 of the Customs Tariff. The reasons given by the Commissioner for holding that the goods were not eligible for the benefit of the Notification No. 196/89 cannot, therefore, be sustained. The appellant is, therefore, liable to pay duty in respect of the said rig at the reduced rate as contemplated by the Notification No. 196/8....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....icer under Section 47 of the said Act nor the obligation of the appellant to pay Customs duty, if any, under the Heading 8905.90, as was contemplated in the order of the civil court, by approaching the proper officer under the said provision. In other words, even under the interim order of the civil court, the rig could not have been removed by the appellant who was bound to observe the provisions of the Customs Act and pay Customs duty, if any, under the Heading 8905.90, as mentioned in that order itself. The appellant had claimed the benefit of the Notification No. 133/87 in the context of the tariff entry 8905.90 and whether such benefit was admissible was yet to be decided by the proper officer and which could have been done only if the appellant had approached the proper officer under Section 47 of the Act, as contemplated by the order of the civil court. 10.3 There was a specific allegation made in the show cause notice that the goods had been cleared without payment of duty and were liable for confiscation. It appears that the provisions of Section 111(d) were referred to in the show cause notice in the context of requirement of a valid licence, because, initially the ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....idity of the confiscation order cannot, therefore, be accepted. 11. It was then contended by the learned counsel for the appellant that the redemption fine of Rupees Five crores imposed on the appellant was excessive, and that normally the redemption fine should not exceed ten percent of the market value of the goods. The value declared by the appellant in respect of the said goods, in the bill of entry No. 14315, dated 28-4-1993 was US$ 340000 (C&F) equivalent to Rs. 10,79,55,397.50 (CIF). By the impugned order, the said goods, namely, second hand jack-up rig deepsea matdrill were confiscated under Section 111(j) of the said Act, but the appellant was given the option to redeem the same on payment of a fine of Rupees Five crores in lieu of confiscation. 11.1 Section 125 of the said Act provides for option to pay fine in lieu of confiscation. Under the proviso to Section 125(1), it is, inter alia, provided that such fine shall not exceed the market price of the goods confiscated, less, in the case of imported goods, the duty chargeable thereon. Under subsection (2) of Section 125, where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owne....