Customs, Excise and Gold Tribunal - Mumbai
Essar Oil Ltd. vs Commissioner Of Customs, Mumbai on 8 February, 2002
Equivalent citations: 2002(142)ELT657(TRI-MUMBAI)
JUDGMENT J.H. Joglekar, Member (T)
1. These two Appeals arise out of the same order and the issue involved is the same. They arc therefore taken for decision by this single order.
2. M/s. Essar Oil Ltd., (the 1st Appellants) filed Bill of Entry No. 7529, dated 18-3-1994 for importation of 'Lay barge LB-207' with accessories. The import was claimed under OGL vide Para 25 of the EXIM Policy AM 1992-1997 read with Sr. No. 12 of Appendix 3. This barge had come towed by Vessel M.V. SHAHRIAR. Certain queries were raised by the Customs. In the subsequent correspondence it was revealed that the importers had signed a Memorandum of Agreement for purchase of the barge from the owners and part payment was made immediately. Subsequently on 14-2-93 as also on 27-5-93, the barge had arrived at Bombay Port. Being a dumb barge, on both occasions it was towed by another vessel. The IGMs had on each occasion declared the lay barge as a towed vessel and did not declare it as cargo. This barge was put into operation by the Appellants for laying a pipe for an ONGC Project. Subsequent to the down payment immediately on filing of the MOU, later payments were made in October, 1993 and December, 1993 and at that point the Bankers had advised the Appellants to file a Bill of Entry and hence the Appellants filed the same. The 3rd IGM was filed on 4-3-94 declaring the same barge as towed barge but also showed it as "cargo".
3. On study of the documents and the various explanations advanced by the importers, the Customs Authorities observed that since the barge had effectively been bought by the Appellants in February, 1993, the Bill of Entry should have been filed on the first occasion when the barge had been brought in tow. It was also observed that while filing the general declarations on 14-2-93 and 27-5-93 the same barge should have been declared as 'cargo' and not as a 'vessel in tow'.
4. Show cause notice was issued alleging that the barge was liable to confiscation under Section 111(f) of the Customs Act, 1962 inasmuch as in the previous Manifests the barge was not declared as 'cargo'. It was also alleged that the barge having been used in India without filing a Bill of Entry, the same was liable to confiscation under Section 111(j) of that Act. It was alleged that the barge was more than 7 years old and did not fulfil the condition of importation under OGL. Since the importer did not have a valid licence the barge was alleged to be liable for confiscation under Section 111(d) of that Act. The barge was allegedly classifiable under Heading 8907.90 and duty amounting to Rs. 29,15,87,150/- was leviable. The importers and the Steamer Agents were also asked to show cause why Penalty should not be imposed upon them. The importers and the Steamer Agents filed their replies. After hearing the concerned persons, the Commissioner of Customs, Mumbai, passed Order Bearing No. 96/CAC/CC-II, dated 24-6-96. The im-
porters took the plea before the Commissioner that the barge was a foreign going vessel and therefore no Bill of Entry was required to be filed. The Commissioner observed that the barge was not engaged in the carriage of passengers or cargo between the ports in India and between ports outside India. He held that the barge was goods and for the importation of which a Bill of Entry had to be filed. He however observed that once the importation is complete the mere fact that the barge was utilised outside the waters of India was not material. He also did not accept the claim that on earlier occasions the towed barge did not belong to the Appellants and therefore they were not required to file any Bill of Entry. In this respect he held that part payment was made earlier and at the time of filing of the B/E, the entire payment had been made. He held that the Steamer Agent had erred in not showing the barge as 'cargo'. Examining the eligibility of the barge for importation under OGL he observed that the documents showed that the barge was over 25 years old. The fact that it was extensively rebuilt could not remove the prohibition of importation of capital goods of more man 7 years old. On this ground the barge was held to be liable for confiscation under Section 111(d) of the said Act. He did not accede to the claim of the importers that subsequently this para was removed from the import policy. The Commissioner thereafter examined the contested classification. After an exhaustive analysis the Commissioner held that proper classification was under Heading 8906.00. He also extended the benefit of Notification No. 133/87-Cus., dated 19-3-87.
5. Having established the liability to confiscation under Sections 111(d), (f) and (j) of the said Act and having observed that the barge was not available for confiscation, he imposed a penalty of Rs. 2.50 crores on M/s. Essar Oil Ltd. For rendering the barge liable to confiscation he also imposed a penalty of Rs. 5 lacs on the Steamer Agents M/s. Modest Shipping Fvt. Ltd. Against this order M/s. Essar Oil Ltd., and M/s. Modest Shipping Pvt. Ltd. have filed the present Appeals.
6. The first issue for decision is whether on the first two occasions when IGMS were filed on 15-2-93 and 26-5-93, the dumb barge was 'goods' or whether it was a 'foreign going vessel'. We observe that the entire dispute commenced with the filing of the Bill of Entry on 18-3-94 in which the same barge was declared as 'goods for home consumption'. The barge is utilised for pipe laying operations. The fact of filing of the Bill of Entry is on admission by the importers that the barge is 'goods' to be consumed in India. The barge is used for laying of pipe for movement of oil etc. from Bombay High to the shores of India. It is an admitted fact that on the earlier 2 occasions also this barge was used for the same purpose in the same manner in the same area. Therefore it does not He in the mouth of the first Appellant M/s. Essar Oil Ltd., that on the earlier two occasions the barge was not 'goods'.
7. Even then we would consider the case law cited and urged before us.
8. In their judgment in the case of Chowgule & Co. Pvt. Ltd. and Ors. v. UOI -1987 (28) E.L.T. 39 (S.C.) the Supreme Court was examining the question as to in what circumstances a 'vessel' would become 'goods'. Large vessels carrying iron ore would stand in deep sea. Smaller vessels carrying iron ore from the shore would unload their ore into such large vessel. Such smaller ships are called 'transhippers'. 2 vessels were imported for use as 'transhippers'. At all times the importer claimed that the vessels were 'ocean going vessel' and therefore could not be called 'goods' requiring filing of Bill of Entry. Before the Court it was pleaded that when not in use in the operation of transhipment the ships were also used for voyages to other ports. The Court observed that the vessels were primarily to be used as 'transhippers' even though they occasionally went 'into the open sea. As such they were 'goods for home consumption' and not 'ocean going vessels', requiring filing of Bills of Entry. It is significant to note that the vessels operated under their own power.
9. Such transhippers were again before the Supreme Court in the case of UOI v. V.M. Salgaonkar & Bros. (P) Ltd. [1998 (99) E.L.T. 3 (S.C.)]. In the said judgment the ratio of Chowgule judgment was modified. The Supreme Court observed that the phrase 'ocean going vessel' had not been defined in the Notification No. 262/58. The Supreme Court adopted the definition of 'foreign going vessel' from Section 2(21) of the Act. The Court held as synonyms the expressions 'ocean going vessel' and 'Sea going vessel'. The Supreme Court held that the transhippers would qualify for the phrase 'ocean going vessel'. The ratio of Chowgule judgment thus has changed.
10. The Appellants repeatedly claimed that the barge being an 'ocean going vessel' could not be considered as 'goods'. We find that the ratio of the cited cases do not apply to the case before us for the simple reason that the barge in question is not a powered barge. It is a dumb barge not capable of moving itself. In both these judgments it has been specifically noted by the Supreme Court that the transhippers were capable of moving on their own. Thus where locomotion is a basic criterion the contested goods would not qualify for the phrase 'ocean going vessel' or 'sea going vessel'. Therefore at the time of each entry, the said barge was 'goods' and was not a Vessel' immune from being described as 'cargo'.
11. The Tribunal judgment in the case of Sedco Forex Inc. & Ors. (Order Nos. C-I/303-309/WZB/2001, dated 2-2-01 [2001 (135) E.L.T. 625 (T)] has been cited. This case involved importation of rig in identical circumstances inasmuch as it was towed by another vessel. In examining the liability to confiscation under Section 111(f) of the Act the Tribunal took cognizance of the fact that the manifest did not declare the rig as cargo. The Tribunal however noted that the general declaration had shown that the rig was being towed. While accepting that the manifest was imperfect the Tribunal held that the general declaration had shown that the rig was brought in tow and therefore their liability to confiscation under that proviso was not attracted. We do not think that the ratio of the judgment is attracted in the present case. The Tribunal in Paragraph 20 were considering certain lapses by the shipping agent and the finding should not be taken to be universally applicable. We also find that in the cited case the Tribunal had upheld the orders of confiscation of the towed rig as also the levy of penalty on the importer.
12. We hold that at the time of each import the barge was 'goods' in respect of which a Bill of Entry was required to be filed and for not filing Bill of Entry on the earlier two occasions the barge would become liable to confiscation as alleged.
13. We now come to the allegation under Section 111(d) of the Act.
In his findings the Commissioner has stated that the barge was manufactured in 1958. In 1991 the barge underwent extensive rebuilding. The Chartered Engineer had certified that the barge had a residual life of more than 15 years. Shri Vikram Nankani in this connection contended that the age of the barge should be counted from the date of refurbishing and therefore at the time of importation it qualified for the condition laid down in Paras 26 and 27 of the Import Policy that the goods should not be more than 7 years old and should have a residual life of 5 years. In support of his claim, reliance was placed on Tribunal judgment in the case of Super Fasteners reported in 1984 ECR 443. We have seen the said judgment. In the said judgment the Tribunal observed that for determining the age the starting point was not given in the policy. The Tribunal observed that it could be the year of manufacture or of installation. The Tribunal observed that in the light of vagueness, the goods before them would qualify for the condition of importation under OGL.
14. We cannot pursuade ourselves to share this point of view. Age has been defined in Black's Law Dictionary (7th edition) as a period of time especially a period of individual existence or the duration of the person's life. Thus age is to be computed from the time of birth of the person or from the date of coming into existence of the goods. As far as machinery is concerned the decline in its value is termed as 'depreciation'. The depreciation is counted per year of use. If the policy was to be interpreted in the manner the Tribunal adopted, then the very prohibition would be rendered nugatory. It is on the basis of birth that the age of capacity, age of consent or age of maturity in the case of humans are counted. Viewed in this manner the Commissioner's observation that the barge did not fall in the permissible criterion and the liability of confiscation under Section 111(d) attracted would stand established.
15. The Commissioner refrained from confiscation of the barge on the ground that the same was not available for confiscation. However he imposed a penalty of Rs. 2.5 crores on M/s. Essar Oil Ltd. for rendering the barge liable for confiscation.
16. As far as the quantum of penalty is concerned, the learned Counsel submitted that it was exorbitant. Citing the Supreme Court judgments in the cases of Hindustan Steel -1978 (2) E.L.T. (J 159} = 1979 AIR S.C. 255 and Akbar Badruddin Jiwani -1990 (47) E.L.T. 161 (S.C.) prayer is made for removal thereof.
17. We have earlier observed that the circumstances in which the barge was brought in and also the use of which it was put, was the same on the earlier two occasions of its importation as on the 3rd occasion on which the Bill of Entry was filed. We do not consider as relevant the claim that on the second occasion it was brought in for repairs. The reason for which goods are imported is not a material aspect in determining whether a Bill of Entry is required to be filed. We have also observed that the claim made under OGL was patently wrong. In these circumstances, for rendering the goods liable for confiscation penalty is attracted by the importers. The question to be addressed is whether the quantum of penalty is commensurate with the gravity of the offence.
18. The Commissioner in his order has held that the benefit of the notification was available to the barge and as such the goods were eligible for duty free importation. That benefit was available to the goods even on the earlier two occasions when the Bills of Entry were not filed by the importers. This factor has a very significant bearing on the quantum of Penalty. Therefore, while maintaining that the penalty was correctly imposable, we reduce the same to Rs. 25 lacs, which was already deposited by M/s. Essar Oil Ltd., in terms of the interim Stay Order Nos. 3814-15/96 MRS, dated 18-11-1996.
19. As regards penalty imposed on the 2nd Appellants M/s. Modest Shipping Pvt. Ltd., the claim made is that they were Steamer Agents and they were under the impression that the owners were M/s. TPPL and the fact that M/s. Essar Oil Ltd., had purchased the barge came to their notice only on 24-4-94 when M/s. Essar Oil Ltd., advised them to declare the barge as 'cargo'. The claim is therefore made that they were not rendered the barge liable for confiscation under Sections 111(f) and (j) on the 2 earlier occasions. It is claimed that in the absence of Bill of Lading they were not in a position to know that the barge in the earlier two occasions was owned by M/s. Essar Oil Ltd.
20. We have considered the claim. In Para 30 of his order the Commissioner has observed that there was no mala fide on the part of M/s. Modest Shipping Pvt. Ltd., nor were any allegations made to that effect in the show cause notice. The penalty was however imposed on them on the observation that the vessel was rendered liable to confiscation by its not being manifested as 'cargo'. In our opinion the Commissioner was too harsh on the Steamer Agents. In the absence of any Bill of Lading they could not understand that the towed vessel was cargo. It is trite law that for attracting penalty the knowledge of the offender has to be brought out. The Commissioner made an error in imposing penalty upon the Steamer Agents while certifying their bona fides. Thus the order does not survive. The orders of penalty on M/s. Modest Shipping Pvt. Ltd., are set aside. Their appeal is allowed with consequential relief, if any.