Custom, Excise & Service Tax Tribunal
Jagson International Ltd vs Jamnagar(Prev) on 31 July, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No.C/10431,10426/2017-DB
[Arising out of OIO-07-COMMISSIONER-2016 dated 23.11.16 passed by the Comr.of Cus(prev)
Jamnagar]
M/s Jagson International Ltd. Appellants
Oil & Natural Gas Corporation Ltd.
Vs
C.C.-Jamnagar (prev.) Respondent
Represented by:
For Appellant: Mr. Sanjay Grover, D.B. Shroff, T.
Vishwanathan, Manish Jain, Advocate(s)
For Respondent: Mr. J. Nagori (A.R.)
CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE Mr. DEVENDER SINGH, MEMBER (TECHNICAL)
Date of Hearing:10.04.2018
Date of Decision:31.07.2018
Final Order No. A / 11651-11652 /2018
Per: Dr. D.M. Misra
These appeals are filed against order-in-original No.
07/Commr/2016 dated 23.11.2016 passed by Commissioner
(Customs).
2. Briefly stated the facts of the case are that M/s ONGC has
floated e-tender on 10.08.2012 for charter hire of off-shore rig
under international competitive bidding. The appellant M/s
Jagson International Ltd. (herein after called as Jagson)
being successful in the said bid, accordingly awarded the LOA
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on 13.6.2018 for period of three years. Conequently, Jagson
had imported the rig 'Deep Sea Treasure' without payment of
duty under bill of entry no. 4083823 dated 16.12.2013 at
Pipabhav port availing the benefit of Notification 12/2012-cus
dated 17.03.2012 (serial no. 356, Condition No. 41). They have
also imported the Components and parts of the said rig by
filing bills of entry at other ports. On the basis of intelligence
received by the Customs Dept., that the contract for
deployment of Deep Sea Treasure was cancelled by the ONGC
and Jagson had not deployed the said rig for Oil exploration,
investigation was initiated and statements of various persons
were recorded and the Rig Deep Sea Treasure with its parts
and components totally valued at Rs.299,38,28,906/- was
seized by the Customs department on 29.12.2014.
3. Consequently, a SCN was issued to the app-ellant
proposing to recover the customs duty forgone on the said
imported rig Deep Sea Treasure with interest and proposal for
confiscation of the same under the provision of the Customs
Act, 1962. Similar SCNs were issued on imports made at other
ports. All these SCNs have been adjudicated by a common
adjudicator as per the notification issued by the Board. On
adjudication, total demand of Rs. 46,02,76,965/- with interest
was confirmed and penalty of Rs. 4,60,27,800/- imposed under
Section 112 of the Customs Act,1962; besides, the adjudicating
authority has directed confiscation of the said Deep Sea
Treasure valued at Rs.299,38,28,906/- under Section 111(o) of
Customs Act, 1962 with an option to redeem the same on
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payment of fine of Rs.74,85,11,000/-. In the respective SCNs,
M/s ONGC was also made a party on the basis of undertaking
furnished by them at the time of import of goods as per
Notification No. 12/2012-Cus dated 17.03.2012. Consequently,
the Ld. Adjudicating Authority directed recovery of the fine,
penalty, and interest from M/s ONGC in the event, Jagson fails
to pay the duty, fine and penalty. Hence, both Jagson
International and M/s ONGC are in appeal.
4. Ld. Senior Advocate, Sh. D.B. Shroff for the appellant M/s
Jagson International Ltd. assailing the impugned Order has
submitted that the Ld. Adjudicating Authority erred in denying
the benefit of exemption notification 12/2012-Cus dated
17.03.2012 by misreading and mis-interpretation of the same.
It is his contention that Jagson pursuant to the LOA awarded
by ONGC had filed the Bill of Entry for import of the Rig Deep
Sea Treasure on 16.12.2013 and parts thereafter. It is his
contention that since the said rig was not mobilized within 180
days from the date of LOA, due to delay for various reasons,
including obtaining various certificates from third party
agencies, extensions were requested by Jagson which was
allowed to them by ONGC and the last extension was valid till
07.05.2014. The Ld. Advocate has further submitted that
Jagson had obtained all the necessary certificates required for
deployment of the Rig Deep Sea Treasure, including 'Fit for
Purpose' certificate & 'class certificate', submitted to ONGC on
05.5.2014/ 06.05.2014 and intimated that the Rig Deep Sea
Treasure is ready for mobilization. However, to their surprise
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they received an intimation from ONGC about cancellation /
termination of LOA dated 13.06.2013. It is his contention that
thereafter they entered into correspondences with M/s ONGC to
reconsider the decision of cancellation of the LOA/ contract and
allow them to deploy the Rig Deep Sea Treasure, since they
have invested huge amount in procuring the said Deep Sea
Treasure Rig and cannot be used for any other purpose.
5. It is his contention that they have complied with all the
conditions of the Notification which are necessarily pre-import
condition, by producing essential certificates from Director of
Hydro Carbon in the Ministry of Petroleum and Natural Gases,
Govt. of India, Affidavit of M/s ONGC in accordance with clause
(ii) and undertaking from ONGC as per clause(iii) of condition
41(c) of the said Notification. It is his contention that there has
been no end use requirement nor any post import condition
stipulated under the said Notification, therefore, non-
deployment of the Rig due to cancellation of the LOA/ contract
cannot invite liability to discharge duty forgone on the said
imported Rig and confiscation of the rig.
6. Interpreting the scope of Serial No. 356 of the
Notification No. 12/12-Cus dated 17.03.2012, he has submitted
that exemption was extended to the 'goods specified in list 13
'required in connection with petroleum operations'. In the
present case, there is no dispute that goods imported are
mentioned under List 13 and its requirement for petroleum
operations has not been disputed by the department as the
essentiality certificate about requirement of such rig is in
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connection with the petroleum operations at the site of ONGC
has been obtained from DGHC. It is his contention that
condition 41 required to be complied with in availing the benefit
of exemption of the goods mentioned at serial 356 of the
Notification No. 12/2012 Cus. Dt.17.03.2012. It prescribes pre-
import conditions only and there is no post import requirement
of the use of the rig after its import. He has vehemently argued
that the Ld. Commissioner cannot read an end use condition
into the said notification. In other words, 'required in
connection with petroleum operation' indicates that the goods
must be proved to the satisfaction of the assessing authority at
the time of its import that it is required/ or intended to be used
in the petroleum operations. Once the assessing authority is
satisfied subject to production of prescribed documents
stipulated in the Notification, then there is no need to find out
end use of the imported goods.
7. He has submitted that in the present case from the
documents produced at the time of import, the assessing officer
was satisfied that that the goods are 'required in connection
with petroleum operations' hence, no further condition required
to be fulfilled. Further, he has submitted that the expression
'required in connection with petroleum operations' is even wider
than the words 'for use' what is relevant to examine is the
condition 'required for use' and not actual use. He has
vehemently argued that there is no condition in the text of the
notification nor the conditions attached with the notification
that the rig must have been deployed or installed. No such
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words has been used in the said Notification. Thus, the Ld.
Commissioner had wrongly read these words into the
notification which is illegal and not permissible. He has
submitted that the wordings employed in the present
Notification indicates that the intention to use the imported rig
in Oil exploration is relevant rather than its actual use. In
support, the Ld. Advocate referred to the judgment of the
Hon'ble Supreme Court in the case of State of Haryana vs
Dalmia Dadri Cement Ltd. 2004 (178) ELT 13-SC and BPL
Display Device Ltd. vs CCE Ghaziabad 2004 (174) ELT 5 (SC).
Further, he has submitted that they have imported goods in
December 2013 and January 2014 and SCN was issued
invoking section 28(1) of the Customs Act, 1962 on
09.06.2015. He has submitted that in the impugned order the
Ld. Commissioner has clearly observed that there was no
suppression of fact , therefore, the notice issued to the
appellant is barred by limitation. Further, he has submitted
that seizure and confiscation under Section 111(o) is
unwarranted and without any legal basis. He has argued that
re-export of the goods on its non-use was not a condition in the
exemption notification, therefore, non-compliance of the same
cannot render the goods liable for confiscation. Thus, Section
111(o) has been wrongly invoked and the confiscation is illegal.
8. The Appellant has further submitted that the present
notice is issued by ADG(DRI), hence in view of the judgment of
the Hon'ble High Court in the case of Mangley Impex Ltd. vs
UOI 2016 (335) ELT 605-DEL, a SCN is bad in law as the DRI
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Officer cannot be treated as 'proper officer' even if deemed to
be empowered to perform such functions by way of Section
28(11) of the Customs Act, 1962.
9. The Ld. Advocate Shri T. B. Vishavnathan for M/s ONGC
has submitted that ONGC is one of the prominent Government
of India undertaking, engaged in the exploration and
exploitation of petroleum resources, both on-shore and off-
shore. Apart from ONGC itself engaged in petroleum
operations, they also engaged sub-contractor for the said
purpose. It is his contention that M/s Jagson was awarded a
contract against LOA dated 13.06.2013 for charter-hire of an
off-shore rig and as per the said contract, the rig was to be
mobilized and deployed within 180 days i.e. by 10.12.2013.
For various reasons, M/s Jagson could not deployed the rig
despite repeated extensions granted by ONGC. Ultimately,
ONGC had to cancel the LOA awarded to Jagson. Consequent
to cancellation on 07.05.2014, ONGC informed the Directed
General of Hydrocarbon, for cancellation of the essentiality
certificate and copy was endorsed to customs department on
28.05.2014 . Further, ONGC has repeatedly requested to
Jagson to re-export the goods which were imported without
payment of duty as per the Notification No. 12/2012-Cus dated
17.03.2012.
10. The Ld. Advocate has submitted that in the present
appeal, ONGC assails the observation and direction of the
adjudicating authority recorded at Para 47 of the impugned
order.
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11. The Ld. Advocate has submitted that even though the Ld.
Commissioner in the impugned order has categorically stated
that conditions of the notification have been complied with at
the time of import, however, he has proceeded on the basis
that since the rig has not been actual been deployed or used for
petroleum operations, hence, there is a violation of condition of
the notification. It is his contention that non-use of the
imported rig by Jagson, for petroleum operations, cannot be
regarded as non-compliance of the condition of the notification.
He has submitted that the exemption of customs duty as per
entry 356 of Notification 12/2012Cus. Dt.17.3.2012 is subject
to Condition No. 41 and in so far as it related to import by a
sub-contractor, these conditions have been complied with at
the time of import. He has argued that the conditions
mentioned in Condition No. 41 are pre-import and not post
import conditions. Further, he has argued that Condition No.
41(a) is meant for the DGHC to evaluate as to whether the
goods are mentioned in the list 13 of customs notification No.
12/12-Cus are required for petroleum operations, the goods
are imported pursuant to a contract between sub-contractor
and ONGC and whether the block or field, where the petroleum
operations to be undertaken fall within the PEL/ML oil fields. It
is his contention that once a certificate has been issued, by
DGHC, then there is compliance of Condition No. 41(a).
Drawing analogy with conditions stipulated for import of goods,
under the same exemption notification, viz. Sr. No. 368 of
Notification No. 12/2012-Cus, Condition No. 9 appended to it
says that the imported goods should be exclusively used for
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constructions; similarly condition No. 40 relating to entry nos.
350, 351, 452, 453, stipulates end use of the imported goods.
He has submitted that since in the present entry i.e. Sr. No.
356 read with condition 41(c), on submissions of three
documents mentioned thereunder, exemption was granted at
the time of import and there is no post-import condition
indicating for furnishing end-use undertaking/bond either by
the importer-sub-contractor or licensee ONGC. It is his
argument that subsequent non-use of the imported goods for
petroleum operations, cannot be construed as non-compliance
of these conditions. He submits that perhaps this is the
intention of the Government, since, the imported rig could only
be deployed for petroleum operations. In support, he has
referred to the judgement of the Hon'ble Supreme Court in the
case of Commissioner of Customs (Import), Mumbai vs. Tullow
India Operations Ltd. - 2005 (189) ELT 401 (SC). Further, he
has submitted that in absence of actual user condition of the
imported goods for petroleum operations, since not
contemplated in Sr. No. 356 of Notification No. 12/12-Cus read
with condition 41, benefit exemption cannot be denied. In
support, he has referred to the judgement of Hon'ble Supreme
Court in Dalmia Dadri, BPL Display devices and Tribunal in the
case of Clough Engineering Ltd. Vs. Commissioner of Customs
(Import), Mumbai -2006 (198) ELT 457 affirmed vide 2006
(202) ELT 59 and Asian Trading Agency vs. CC-1991 (55) ELT
263 (T) confirmed vide Collector vs. Asean Trading Co.-1997
(94) ELT A129 (S.C.). It is his contention that in all of the
above decisions, the intention to use the goods at the time of
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import, is primary importance, to extend the benefit of
exemption. As long as the imported goods are not diverted for
other purposes or other uses, there is no violation of condition
of the notification. For this reason also, no duty can be
recovered from ONGC. Further, he has submitted that it is also
the case of department that if the rig is exported out of India,
then no duty is payable. That only means that non-use of the
rig is not the cause for demanding duty, but non-export of the
same. Further, he has submitted that Condition No. 41(d) of
the Notification No. 12/12-Cus as amended applicable to Sr.
No. 356, contemplates transfer of the imported goods from one
project to another project. In the present case, Jagson has
stated during the investigation that they have participated in
another tender of ONGC for deployment. If the rig is deployed
for that contract (for which the exemption is also available), the
duty would not have been demanded in the light of the
Condition 41(d). Further, he has submitted that Condition No.
41(c)(iii) of the notification is contrary to the Scheme of the
Customs Act,1962 where only the importer is liable to duty and
no other person can be made liable to duty. In this connection,
he has referred to the judgment of Bombay High Court in the
case of Commissioner of Customs (Import), Mumbai vs. VXL
India Ltd. - 2006 (193) ELT 396 (Bom.). The undertaking
being contrary to the law, cannot be enforced in the
departmental proceedings. In this regard, he has placed
reliance on the decision of Yashwant S.S.K Ltd. Vs. Collector of
Central Excise 1990 (49) ELT 534.
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12. Per contra, the Ld. AR for the Revenue has submitted that
there is no dispute of the fact that the imported Rig "Deep Sea
Treasure" was not deployed/used for petroleum operations and
the argument of the appellants that the Notification No.
12/2012-Cus dated 17.03.2012 does not contain an end use
condition is fallacious, baseless and not maintainable. It is his
contention that the appellant has tried to mis-interpret the said
notification only by picking the expression 'required in
connection with', and without going to other part of the said
notification; it is a well settle legal principle of interpretation
that any provision or an exemption notification should not be
read in piecemeal, but should be read as a whole. It is his
contention that exemption notifications are issued under
Section 25 of the Customs Act, 1962 by the Government of
India with a single object/motto, that is public interest, and it
gets defeated, when the imported goods exempted from the
duty for the avowed purpose, is not used for the specified
purpose. It cannot be the intention of the legislature to extend
the exemption to the imported rigs without being
used/deployed for petroleum exploration for the specific
exploration License issued on nomination basis to ONGC. It is
his contention that the appellant had failed to establish as to
what else should be the requirement of the said imported rig
other than deployment of the same for the specified purpose.
Further, he has submitted that reference was made to various
exemption notifications, where the condition of use has been
specifically mentioned and attempt was made to compare it
with the present notification. He has argued that such
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comparison is absurd in view of the basic principles of
exemption allowed under Sec.25 of CA,1962 that each
exemption notification has its own subject and object and the
wordings used in one notification cannot be pressed into service
to interpret the object and purpose of another notification,
because any such attempt would defeat the basic purpose of
the notification for which it has been issued. In support he has
referred to the decision of the Hon'ble Supreme Court in the
case of CCE vs. Harichand Shri Gopal-2010 (260) ELT SC),
IOCL vs. CCE - 2012-TIOL-04-SC-CX.
13. Further, he submits that if the entire expression "required
in connection with petroleum operations undertaken under
petroleum exploration licenses" is considered then it would be
clear that the interpretation advanced by the appellants is
faulty. Further, he has submitted that in clause (a) of
Condition No. 41 attached to serial no. 356 of the said
notification, it is clear that "the goods are imported by ONGC or
a sub contractor and each case in connection with petroleum
operations to be undertaken under petroleum exploration
licenses or mining licenses, as the case may be, ............"; thus
use of such imported goods, is the fundamental requirement for
availing the benefit of the notification. As per the condition
41(c)(i), a certificate from Director General of Hydrocarbons is
required, in connection with the goods required for petroleum
operations referred in clause (a) of condition 41. As per
condition 41 (c)(ii) and 41 (c) (iii), ONGC is supposed to submit
a bonafide certificate about the sub-contractor and an
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undertaking to pay the duty, fine, penalty in case the sub-
contractor fails to pay it. Further, from the documents
submitted by the appellants, bringing out the intention, for its
use/deployment in oil exploration, the Ld. AR has submitted
that in the LOA dated 13.06.2013 issued by the ONGC, at para
3.0, it is mentioned about deploying/mobilizing the drilling unit
within a specific period or the contract would be cancelled. The
Clause 6.4 also specifically says about deploying the drilling
unit. Further, a certificate issued by the Director General of
Hydrocarbons in terms of condition no. 41 (c) (i) allows the
import for execution of contract as per subject and reference
i.e. for petroleum operations undertaken; and in the list of
goods at column no. 7, the purpose of goods has been
specifically mentioned as 'Drilling'. Further, in the affidavit
dated 13.12.2013, submitted by ONGC in favour of the
appellants in terms of condition no. 41(c)(ii), it has been stated
that the appellant are their bonafide contractor for provisions of
drilling for Oil & Natural Gas Corporation in PEL-ML-ONGC
block. Further, in condition 41(c)(ii) of the notification, ONGC
had filed an undertaking on 10.12.2013, wherein it has been
specifically mentioned "items imported vide below mentioned
invoice number by our bonafide sub-contractor M/s JIL, would
be used for the petroleum operations and have been imported
for the use in PEL/ML block for provisions of drilling under the
LOA number..........." Therefore, cumulatively reading all these
documents which necessarily filed to comply with condition of
the notification clearly indicate that the benefit of exemption
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would be available only on the use for the imported rig in the
exploration oil.
14. The Ld. AR for Revenue has vehemently argued that an
exemption notification cannot be extended to an import on the
basis of the intention to use the goods when it has been
allowed to be imported for specified purpose. The 'intention' is
the interim stage, which enables the importer to import duty
free goods for the specified use and the said requirement, does
not over with the completion of the import of the goods, but it
is a continuous obligation, which can be discharged only when
the duty free imported goods have been used for the specified
purpose. The interpretation advanced by the appellants that
once there is an intention to use the goods, exemption benefit
would be extended even if the imported goods are not put to
use, is an absurd and fallacious argument. It is his contention
that the Hon'ble Apex Court dealing with such situation rejected
the said argument in the case of Mediwell Hospital and
Healthcare vs. UOI - 1997 (89) ELT 425 (SC).
15. The Ld. AR for the Revenue has further submitted that in
absence of suppression, mis-declaration etc, with intend to
evade payment of duty, the present show cause notice since
issued after one year from the date of import, claimed to be
time barred, is an incorrect argument, inasmuch as the issue
being fulfillment of use of the rig for oil exploaration, therefore,
in view of the judgement of five member larger bench of
Tribunal in the case of Bombay Hospital Trust vs. CC - 2005
(188) ELT 374 (Tri.-LB), and Hon'ble Supreme Court in the case
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of CC (Import) Mumbai vs Jagdish Cancer and research Centre
2001 (132) ELT 257, the period prescribed under Section 28 (1)
of Customs Act cannot be held applicable and the assessed
amount is payable under Section 125(2) of the Customs Act,
1962, when the goods are directed to be confiscated. It is his
contention that the said view has been followed later in the
case of Air India Limited vs. CC (import), ACC, Mumbai 2017
(346) ELT 399 (Tri.-Mum) and King Rotors and Air Charter P.
Ltd. Vs. CC (ACC & Import), Mumbai - 2011 (269) ELT 343
(Tri.-Mum). Further he has submitted that the argument of the
appellants that had they re-exported the goods, the duty would
not have been leviable is in contradiction to the facts of the
present case. He has submitted that in fact, ONGC had
requested to the appellant through various letter to re-export
the rig between May 2014 and October 2014, which was never
agreed upon by the appellants. Therefore, this is a fancy
argument and has no basis.
16. The Ld. AR for the Revenue has submitted that in view of
the undertaking furnished by ONGC in compliance with the
condition of the exemption Notification, the ONGC should
accept the liability to discharge duty, fine and penalty when the
appellant M/s Jagson fail to discharge the same.
17. Heard both the sides at length and perused the records.
18. The undisputed facts are that M/s ONGC has awarded
LOA to M/s Jagson on 13.06.2013, valid for 3 years for
petroleum operation/ exploration at the respective oil blocks
Licensed to ONGC on nomination basis by Govt. of India.
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Under the said LOA, M/s Jagson is required to mobilize the Rig
Deepsea Treasure within 180 days and commence petroleum
operation/exploration, accordingly. Since, M/s Jagson could not
mobilize the Rig Deepsea Treasure within the stipulated time
i.e. till 10.12.2013, extensions were allowed from time to time
by ONGC to M/s Jagson till 07.05.2014. In the meanwhile, in
December 2013/ January 2014, M/s Jagson had imported the
Rig Deepsea Treasure and its parts & components without
payment of customs duty by availing exemption under
Notification No. 12/2012-Cus dated 17.03.2012 (Serial No. 356
read with condition No. 41) as sub-contractor of M/s ONGC.
The said imported Rig Deepsea Treasure and its parts &
components were assessed to Nil duty and cleared by the
customs department allowing the benefit of exemption under
Notification No. 12/2012-Cus dated 17.03.2012. The LOA
awarded to M/s Jagson was cancelled by ONGC on 07.05.2014
and necessary intimation of cancellation was given to the
Director General of Hydrocarbon, who issued essentiality
certificate, and a copy was endorsed to the customs
department on 24.05.2014. There is no dispute of the fact that
the Rig Deepsea Treasure which was imported for the purpose
of oil exploration at licensed Oil blocks of ONGC has not been
put to use for the said purpose. The department has seized the
said Rig on 19.12.2014 and after adjudication, the same was
confiscated and duty forgone was confirmed with interest and
also penalty imposed on M/s Jagson. It is also ordered that in
default of payment of said duty, fine and penalty by M/s
Jagson, the same would be paid by M/s ONGC. It is informed by
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both sides that the Rig Deep Sea Treasure has been still lying
idle, and in the custody of customs, as M/s Jagson has not
cleared the same on payment of appropriate fine, duty, penalty
etc. nor the ONGC has paid the said confirmed liability.
19. Before the adjudicating authority, the Appellant M/s
Jagson has neither filed their reply to notice nor appeared for
personal hearing, inspite of sufficient opportunities being
allowed to them by the adjudicating authority. Nonetheless,
before this forum, they have neither raised the said issue nor
pleaded violation of principles of natural justice. However, M/s
ONGC has filed reply and appeared for personal hearing
contesting the demand; in nut shell, submitted that there is no
violation of the conditions of the Notification by M/s Jagson or
ONGC, hence, no duty is recoverable either from M/s Jagson or
from ONGC.
20. Both the appellants i.e. M/s Jagson and M/s ONGC, have
vehemently argued that there has been no violation of any of
the conditions prescribed under Notification No. 12/2012-Cus
dated 17.03.2012, therefore, demand of duty with interest,
imposition of penalty and confiscation of the Rig Deepsea
Treasure, by the adjudicating authority is bad in law.
21. Thus, the issues involved for determination in the
present appeals are: whether any of the conditions of the
Notification No. 12/2012-Cus. dated 17.03.2012 (Serial no.356
read with condition No. 41) has been violated and
consequently, M/s Jagson is required to pay confirmed duty,
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interest, penalty & fine, and in default, the liability to pay such
confirmed duty, fine and penalty, etc. be shifted to M/s ONGC.
22. Exemption Notification No. 12/2012-Cus dated
17.03.2012 has been issued under Section 25 of the Custom
Act, 1962. Before analyzing the said Notification, it is
necessary to refer to Section 25 of the Customs Act, 1962,
under which the said Notification is issued, and the relevant
portion reads as follows:
"25. Power to grant exemption from duty. - (1) If the
Central Government is satisfied that it is necessary in
the public interest so to do, it may, by notification in the
Official Gazette, exempt generally either absolutely or
subject to such conditions (to be fulfilled before or after
clearance) as may be specified in the notification goods
of any specified description from the whole or any part
of duty of customs leviable thereon."
23. Needless to emphasize, an exemption from payment of
customs duty, on goods imported into India, is issued in the
public interest, which may be absolute or subject to such
condition(s) and the exemption may be whole or any part of
the duty of Custom leviable thereon. The present notification
no. 12/2012 Cus. Dt.17.3.2012 has been issued under Section
25 of the Custom Act, 1962. The relevant entry (sr.no. 356)
reads as follows:
"Goods specified in List 13 required in connection with
petroleum operations undertaken under petroleum
exploration licenses or mining leases, as the case may
be, issued or renewed after the 1st of April, 1999 and
granted by the Government of India or any State
Government to the Oil and Natural Gas Corporation or
Oil India Limited on nomination basis."
24. The condition appended to Serial No. 356 of Notification
No.12/2012 Cus., is condition no. 41, reads as below:
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"41. If,-
(a) the goods are imported by the Oil and Natural Gas
Corporation or Oil India Limited (hereinafter referred to
as the "licensee") or a sub-contractor of the licensee and
in each case in connection with petroleum operations to
be undertaken under petroleum exploration licenses or
mining leases, as the case may be, issued or renewed
after the 1st of April, 1999 and granted by the
Government of India or any State Government on
nomination basis;
(b) where the importer is a licensee, he produces to the
Deputy Commissioner of Customs or the Assistant
Commissioner of Customs, as the case may be, at the
time of importation, the following, namely, a certificate
from a duly authorised officer of the Directorate General
of Hydro Carbons in the Ministry of Petroleum and
Natural Gas, Government of India, to the effect that the
imported goods are required for petroleum operations
referred to in clause (a) and have been imported under
the licences referred to in that clause, and
(c) where the importer is a sub-contractor, he produces to
the Deputy Commissioner of Customs or the Assistant
Commissioner of Customs, as the case may be, at the
time of importation, the following, namely:-
(i) a certificate from a duly authorised officer of the
Directorate General of Hydro Carbons in the Ministry
of Petroleum and Natural Gas, Government of India,
to the effect that the imported goods are required for
petroleum operations referred to in clause (a) and
have been imported under the licenses or mining
leases, as the case may be, referred to in that clause
and containing the name of such sub-contractor,
(ii) an affidavit to the effect that such sub-contractor is
a bona-fide sub-contractor of the licensee or lessee,
as the case may be,
(iii) an undertaking from such licensee or lessee, as the
case may be, binding him to pay any duty, fine or
penalty that may become payable, if any of the
conditions of this notification are not complied with
by such sub-contractor or licensee or lessee, as the
case may be, and
(iv) a certificate, in the case of a petroleum exploration
license or mining lease, as the case may be, issued
or renewed after the 1st of April, 1999, by the
Government of India or any State Government on
nomination basis, that no foreign exchange
remittance is made for the import of such goods
undertaken by the sub-contractor on behalf of the
licensee or lessee, as the case may be :
Provided that nothing contained in this sub-clause
shall apply if such sub-contractor is an Indian
Company or Companies.
[(d) where the goods so imported by the licensee or a
sub-contractor of the licensee are sought to be
transferred, the importer produces to the Deputy
Commissioner of Customs or the Assistant Commissioner
of the Customs, as the case may be, at the time of such
transfer, the following, namely:
(i) a certificate from a duly authorized officer of the
Directorate General of Hydro Carbons in the Ministry of
Petroleum and Natural Gas, Government of India, to the
effect that the said goods may be transferred in the
name of another sub-contractor of the licensee or
another licensee or a sub-contractor of such licensee
(hereinafter referred to as the "transferee") and that the
said goods are required to petroleum operations to be
20 | P a g e C/10431,10426/2017-DB
undertaken under petroleum exploration or mining leases
referred to in clause (a);
(ii) undertaking from the transferee to comply with all
the conditions of the notification, including that he shall
pay duty, fine or penalty that may become payable, if
any of the conditions of the notification are not complied
with by himself, where he is the licensee or by the
licensee of the transferee, where such transferee is a sub
contractor;
(iii) a certificate, in the case of a petroleum exploration
license or mining lease as the case may be, issued or
renewed after the 1stof April, 1999, by the Government of
India or any State Government on nomination basis, that
no foreign exchange remittance is made for the transfer
of such goods undertaken by the transferee on behalf of
the licensee of lessee, as the case may be:
Provided that nothing contained in the sub clause shall
apply if such transferee is an Indian Company or
Companies.]
25. Before making an attempt to interpret the said
exemption Notification, it is necessary, to keep in mind the
principle of interpretation of an exemption Notification laid
down by the Hon'ble Apex Court, in Commissioner of Central
Excise,New Delhi Vs. Hari Chand Shri Gopal 2010(26) ELT
3(SC). Their Lordships observed as:
22. The law is well settled that a person who claims
exemption or concession has to establish that he is entitled to
that exemption or concession. A provision providing for an
exemption, concession or exception, as the case may be, has
to be construed strictly with certain exceptions depending upon
the settings on which the provision has been placed in the
Statute and the object and purpose to be achieved. If
exemption is available on complying with certain conditions,
the conditions have to be complied with. The mandatory
requirements of those conditions must be obeyed or fulfilled
exactly, though at times, some latitude can be shown, if there
is a failure to comply with some requirements which are
directory in nature, the non-compliance of which would not
affect the essence or substance of the notification granting
exemption. In Novopan Indian Ltd. (supra), this Court held
that a person, invoking an exception or exemption provisions,
to relieve him of tax liability must establish clearly that he is
covered by the said provisions and, in case of doubt or
ambiguity, the benefit of it must go to the State. A
Constitution Bench of this Court in Hansraj Gordhandas v. H.H.
Dave - (1996) 2 SCR 253, held that such a notification has to
21 | P a g e C/10431,10426/2017-DB
be interpreted in the light of the words employed by it and not
on any other basis. This was so held in the context of the
principle that in a taxing statute, there is no room for any
intendment, that regard must be had to the clear meaning of
the words and that the matter should be governed wholly by
the language of the notification, i.e., by the plain terms of the
exemption.
26. Now, On a simple reading of the said entry 356, it is
clear that the goods specified in list 13, required in connection
with petroleum operations, undertaken under petroleum
exploration licenses or mining leases, as the case may be,
which are issued or renewed after 01.4.1999, and granted by
the Government of India or State Government to Oil & Natural
Gas Corporation or Oil India Limited, on nomination basis,
would be eligible to be imported duty at Nil rate. In other
words, the goods which are eligible for exemption from import
duty are mentioned at list 13, and are required in connection
with petroleum operation and referable to petroleum
exploration licenses or of mining leases; further limitation is
that such license should have been issued after 01st April
1999 by the Government of India or any State Government to
ONGC or Oil India Limited, and that too on nomination basis.
Therefore, exemption from duty has been granted to the
imported goods under this entry, is on compliance of specific
conditions, that is ,(i)....... for undertaking petroleum
operations,(ii) against the petroleum exploration licenses or
mining leases only, (iii) issued to Licensees, namely, ONGC &
Oil India Ltd., by the central or State Govt. as the case may be
and(iv) on nomination basis.
27. The contention of the appellants is that once the goods
fall under the list 13, and the goods are required in connection
22 | P a g e C/10431,10426/2017-DB
with petroleum operations, it is not necessary, whether
ultimately the same has been used for petroleum
operation/exploration or otherwise. The Revenue's contention is
that the entry 356 and the condition 41 specifically, puts a
burden on the importer to undertake petroleum petroleum
operation/exploration of the goods specified in list 13 and
imported for the said purpose. The entry 356 would be more
clearer when the condition 41, appended to it is analyzed.
28. Reading the stipulations contained under Condition 41, it
is clear that under clause (a), the goods that are imported by
ONGC or Oil India Limited(licensee) or a sub contractor of the
licensee, in each case in connection with petroleum operations
to be undertaken under petroleum exploration license or mining
leases........Thus, it indicates that these goods imported are to
be used in connection with petroleum operations against
petroleum licenses. Clause (b) requires that the licensee, that
is either ONGC or Oil India Ltd., when they are the importer, to
produce before the customs authorities, at the time of
importation, a certificate from Director General of Hydro Carbon
in the Ministry of Petroleum Natural Gas to the effect that the
imported goods are required for petroleum operations referred
to in clause (a). Clause (c) of the said condition 41 is meant for
an importer who is sub-contractor of the licensee i.e. either
ONGC or Oil India Limited; besides they are required to
produce a certificate form Director General of Hydro Carbon
(DGHC), as necessary for the licensee under clause(b), in
addition, they are required to produce an affidavit by the
23 | P a g e C/10431,10426/2017-DB
licensee to the effect that the sub-contractor is a bonafide sub-
contractor and also an undertaking from the licensee binding
him to pay the duty, fine or penalty that may become payable,
if any of the conditions of the Notification are not complied with
by sub-contractor or licensee as the case may be.
29. The Ld. Advocates for the appellants vehemently argued
that liability to pay duty, fine or penalty etc. would arise only if
any of the conditions mentioned above is violated. It is their
submission that in the present case there is no violation of any
of the conditions, which are pre-import conditions, and in
absence of any post import end-use condition, non-deployment
of imported Rig Deep Sea Treasure for petroleum
operation/exploration could not be considered breach of the
conditions of the said notification. They have mostly referred to
the expression, under entry 356 and also Clause(a) of condition
41, that is, 'required in connection with petroleum operation',
which according to them, once the assessing officer is satisfied
that there is an 'intention to use' the imported goods for the
purpose of petroleum operation, even if, thereafter, the
imported goods are not put to use for petroleum operation, the
benefit of exemption, once granted at the time of import,
cannot be denied subsequently. The Revenue, on the other
hand, has argued that all conditions referred to in the said
Notification 12/2012-Cus dated 17.03.2012 have been though
complied with at the time of the import of the goods, and
assessed to Nil rate of duty, on the basis of various documents
filed by the appellants, but the condition to use the Rig
24 | P a g e C/10431,10426/2017-DB
Deepsea Treasure, which is in built, and though not spelt out
separately, since the Notification is user specific, that is, ONGC
themselves or through its sub-contractor M/s Jagson, therefore,
the duty foregone in allowing the exemption is recoverable with
consequences of its non-compliance. It is their contention that
end-use condition is implicit in the Notification, and becomes
explicit when the documents filed in compliance with the
conditions, to avail the benefit of exemption is considered. The
Revenue has placed reliance on the conditions of the LOA, ,
essentiality certificate issued by the DGHC, Affidavit and
undertaking filed by the ONGC.
30. In the LOA dated 13.06.2013, at para 3, it is made
obligatory on the part of the sub-contractor to deploy the
drilling unit Deepsea Treasure along with crew so as to
commence the operation within 180 days from the date of LOA.
It is mentioned as:
MOBILZATION PERIOD
The contractor shall mobilize and deploy the drilling unit
'Deepsea Treasure' (Ex. Pride Hawaii) along with crew so
as to commence the operations at the designated first
drilling location nominated by operator within a period of
180 days from the date of this LOA from operator.
.........................................................................................................
In the case the contractor fails to mobilize and deploy the drilling unit alongwith crew and/ or fails to commence operations within the period specified above, operator shall have, without prejudice to any other provision in the contract, including clause 1.4, the right to invoke the performance bond, forfeit the amount of performance bond and terminate the agreement. Apart from termination, contractor will be put up on holiday of two years as per clause no. 22.8.1 of model contract conditions.
25 | P a g e C/10431,10426/2017-DB Customs duty The drilling unit will be deployed, in eligible PEL/ ML areas and NELP areas (issued or renewed after 01.04.1999) where presently exemption of customs duty is available as per Notification No. 12/2012-CUSTOMS dated 17th March, 2012.
31. Similarly, the affidavit/undertaking filed by M/s ONGC, pursuant to clause (c)(ii) & (iii) of condition 41, indicates the use of such Rig. The said affidavit reads as:
26 | P a g e C/10431,10426/2017-DB
32. The essentiality Certificate issued by the DGHC is reproduced below:
27 | P a g e C/10431,10426/2017-DB
33. Analyzing these documents, filed at the time of import to avail the benefit of exemption under entry 356 read with condition 41 of the exemption Notification 12/2012 Cus. 17.3.2012, it can safely be inferred that the Rig Deepsea Treasure has been imported by the sub-contractor M/s Jagson, pursuant to the LOA issued by the licensee M/s ONGC, for its use for the petroleum operation for drilling purpose at the sites of M/s ONGC and these documents are necessary to avail exemption from payment of duty on the import of the Rig Deepsea Treasure. Thus, the argument of the appellants that since there is no user condition specifically mentioned in the Notification, consequently, non-use of imported Rig Deep sea Treasure, in the petroleum operation, would not result into violation of the condition of the Notification, is devoid of merit. On the contrary, the said Notification, in the present circumstances, is directed at only one user, that is, the ONGC, who got the goods imported through its sub-contractor, for oil exploration/operation at the oil blocks obtained on nomination basis, by filing the affidavit of the bonfideness of the Sub- contractor, procuring the essentiality certificate in favaour of the sub-contractor and undertaking to discharge duty, fine and penalty in case of violation of the condition of the Notification by the sub-contractor, therefore, non-use/deployment of the Rig Deepsea Treasure, resulted into breach of the condition of Notification .
34. The appellants have heavily relied upon the judgement of the Hon'ble Supreme Court in State of Haryana vs. Dalmia 28 | P a g e C/10431,10426/2017-DB Dadri Cement Ltd.- 2004 (178) ELT 13 (S.C.) to advance the argument once, the intention to use the rig Deepsea Treasure, is established from the documents filed at the time of import, benefit of the Notification cannot be denied, even if the Rig Deepsea Treasure was not put to use for petroleum operation/exploration, after importation of the same. We find that the principle laid down in Dalmia Dadri Cement Ltd's case(supra) was in a different set of circumstances, hence cannot be made applicable to the facts of the present case. In the said case, the respondent, a dealer of cement, supplied cement to the Punjab State Electricity Board, which was required for use in the generation or distribution of electricity energy, and availed exemption from applicable tax on such supply/sale. However, a small quantity of the supplied cement free of tax was used by Punjab State Electricity Board for construction of their staff quarters. The benefit of the exemption was denied to the dealer for non-fulfillment of the condition of the Notification. The Hon'ble Supreme Court held that merely because a small portion of the cement supplied was not used by the Board for activities not directly connected with the generation or distribution of electrical energy, it makes no difference regarding the availability of the exemption.
35. The facts in BPL Display Devices Ltd's case (supra) more of less similar to Dalmia Dadri Cement Ltd's case. The appellant therein had imported parts of picture tubes for manufacture of colour picture tubes availing benefit of Notification No. 13/97-Cus, as amended. During the course of 29 | P a g e C/10431,10426/2017-DB transit, a small percentage of the imported parts were damaged and could not be used in the manufacture of picture tubes by the appellant. The appellant had claimed the benefit of notification in respect of the entire lot of parts imported. In that context, the Hon'ble Supreme Court referring to the Dalmia Dadri Cement Ltd's case observed that the benefit of notification cannot be denied merely because a small percentage of parts could not be used in the manufacture of picture tubes, being damaged during transit.
36. In Clough Engineering Ltd. Vs. Commissioner of Customs, (Import), Mumbai - 2006 (198) ELT 457 (Tri.-Mumbai), the facts before the Tribunal was whether excess quantity of the pipes, imported for oil exploration purpose availing benefit of Notification No. 21/02-Cus dated 01.03.2002, are liable for confiscation and imposition of penalty. This Tribunal taking note of the facts that the seamless pipes imported were required for petroleum operations on the basis of essentiality certificate issued by the Director General of Hydorcarbon, New Delhi in compliance with condition No. 31 of the said Notification had been used in the project and after completion of the project, the remnant/excess quantity of pipes, were sold by the appellant therein, therefore, the benefit of Notification 21/2002 cannot be denied to the appellant.
37. In the present case, the imported Rig Deepsea Tressure has been imported by M/s Jagson for the purpose of petroleum operation/ exploration in the blocks allotted to M/s ONGC, as per LOA awarded to them for a period of 3 years, but the said 30 | P a g e C/10431,10426/2017-DB rig has never been put to use on cancellation of the LOA by the ONGC. Thus, it is not the case of the appellants that duty foregone was demanded denying the benefit of exemption notification, even if the rig Deepsea Treasure was put to use for petroleum operation/exploration for a certain period but less than the contract period of 3 years. Therefore, the aforesaid judgements are not applicable to the facts of the present case.
38. The Ld. Advocates for the appellants drawing analogy from entry no. 350, 452 and 453 of the same notification no. 12/2012-Cus dated 17.03.2012 vehemently argued that whenever the legislature intended to put the end-use condition, for the goods to be imported duty free under these entries, the same is specifically mentioned as condition in the notification; whereas, in the case of entry no. 356, in absence of any such condition, no breach of the notification could be alleged.
39. On a close scrutiny of the said entries, it would be clear that there is no specific user of the goods mentioned thereunder, but its use and user are general in nature; thus requirement of end use certificate so as to be eligible to the benefit of the exemption notification, could have been stipulated thereunder and the same is considered not relevant with regard to entry 356. In this connection, we find force in the contention of the Ld. AR for the Revenue that each exemption notification issued in the public interest having its own subject and object and the condition in one, cannot be 31 | P a g e C/10431,10426/2017-DB compared with the other and applied so as to consider the benefits extended under the respective notification.
40. In view of the above findings, there is no difficulty to conclude that by not putting into use the imported Rig Deepsea Treasure for petroleum operation/exploration at the Licensed oil block of ONGC, irrespective of the reasons for such non-use, there has been violation of the condition of Notification 12/2012 Cus. dt.17.3.2012 (entry 356), consequently, the said Rig Deepsea Treasure has been rightly confiscated by the adjudicating authority, under Sec.111(o) of Customs Act, 1962 and we uphold the same; also imposition of penalty under Sec.112(a) of the Customs Act, 1962 is justified, as no mens rea is required for the said violation, in view of the principle laid down in the case of Commissioner of Customs vs Bansal Industries 2007 (207) ELT 346 (Mad.).
41. But, we find that the redemption fine and penalty is disproportionate and highly excessive in the facts and circumstances of the case. It is not in dispute that the LOA was abruptly cancelled by M/s ONGC on 07.5.2014, the day when the rig was ready for use, being supported by various certificates issued by third party agencies, a fact not disputed by ONGC. It is also borne out of the record that deployment of the rig was not cancelled on the ground of defective or incapacity and the rig is lying idle for last four years, post cancellation of the LOA, incurring huge losses to the Appellant, since could not be utilized for petroleum operation, the purpose for which it was imported. Therefore, keeping in mind the 32 | P a g e C/10431,10426/2017-DB gravity of the case and in the interest of justice, it would be appropriate to reduce the fine to Rs.1.00 crore and penalty to Rs.10.00 lakhs.
42. The next argument advanced by the appellants that no recovery could be made as the demand is barred by limitation, in view of the finding of the Ld. Commissioner that there is no suppression of fact. Answering the said argument, the Ld. AR for the Revenue has submitted that since there has been violation of the conditions of the Notification, subsequent to import of the Rig Deep sea Treasure, by not deploying the same for petroleum operation/ exploration, time limit prescribed under Section 28(1) of the Customs Act, 1962 is not applicable and alternatively, he has submitted that since the goods are directed for confiscation under Sec.111(o) of CA,1962, the duty is payable under Sec.125(2) of CA,1962. In support, he has referred to the judgment of Five Member Bench of this Tribunal in the case of M/s Bombay Hospital Trust vs CC Sahar, Mumbai 2005 (188) ELT 374 (Tri-LB) and CC (Import), Mumbai Vs. Jagdish Cancer and Research Centre 2001 (132) ELT 257 (SC).
43. We find that in Bombay Hospital Trust's case the Larger Bench of this Tribunal, after analyzing the provisions of Customs Act,1962 and the relevant exemption Notification, observed as follows:
12. As regards the time limits under Section 28, both sides have agreed that since the duty demand does not relate to short levy or non levy at the time of initial assessment on importation, but has arisen subsequently on account of failure to fulfil the post- importation conditions under the Notification No. 33 | P a g e C/10431,10426/2017-DB 64/88, the said Section 28 has no application to a duty demand of this kind. We do not, therefore, wish to dwell further on the inapplicability of Section 28 to such demands. However, we note that since no specific time limit is prescribed under any other provision of the statute, the notice of demand in such cases cannot be subjected to any limitation of time.
This view is supported by the ratio of the following two decisions of the Honourable Bombay High Court and the Apex Court :-
(i) Prakash Cotton Mills Pvt. Ltd. v. S.K. Bhardwaj, A.C.C.E. - 1987 (32) E.LT. 534 (Bombay)
(ii) Commissioner v. Raghuvar (India) Ltd. - 2000 (118) E.L.T. 311 (S.C.)
13. We find that while Section 12 gives the power to levy customs duty, Section 25 gives the power to grant exemption of duty in the public interest either absolutely or subject to conditions. In the case of Notification No. 64/88, the exemption granted is conditional. The conditions relating to (i) free treatment of 40% outdoor patients and (ii) reservation of 10% of beds for free treatment of patients with family income less than Rs. 500 p.m. make it manifestly clear what the public interest behind the said exemption is. If these conditions are not fulfilled after importation and the public interest is not served, the exemption becomes unavailable and full duty as leviable under Section 12 becomes payable.
14. We note that the impugned notification has not provided for obtaining any bond or bank guarantee for recovery of duty in the event of failure to fulfil the conditions of free treatment. However, it is the prerogative of the Government to grant exemption, as has been held in Sri Sathya Sai Inst. (supra), and it is for the Government to incorporate appropriate provisions. Merely because some other exemption notifications incorporate provisions regarding bond etc. by way of extra precaution and this one does not (as the Government may have valid reasons not to burden hospitals doing genuine charitable work with bonds and bank guarantees), this cannot be a valid plea by the appellants not to pay the demanded duty when the conditions of free treatment are violated.
We also do not think that it is necessary for an exemption notification issued under Section 25 to contain a recovery provision when the power to recover duty can be traced to Section 12, nor any mandate to provide such a recovery provision in an exemption notification is contained in the said Section
25.
21. For the reasons staged above, we agree with the conclusion in Lady Amphthil (supra) that duty can be recovered by the Department when post importation conditions of an exemption notification are not fulfiled. We, however, do not agree with the observation in Lady Amphthil (supra) that the period of limitation in such cases will commence from the date of issue of notice. Since the time limit prescribed under Section 28 has been held to be not applicable to such cases, and since there is no other specific time-limit prescribed under the customs law to cover such cases, we are of the view that the notice of demand will not be subject to any limitation of time in such cases of non-fulfilment of post-importation conditions casting a continuing obligation as noted by us in Pararaph 12 above.
34 | P a g e C/10431,10426/2017-DB
44. In Jagdish Cancer and Research Institutes' case(supra), their Lordships of Hon'ble Supreme Court observed as:
11. Whenever an order confiscating the imported goods is passed, an option, as provided under sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in lieu of the confiscation and on such an order being passed according to sub-section (2) of Section 125, the person "shall in addition be liable to any duty and charges payable in respect of such goods". A reading of sub-sections (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under sub-
section (1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to sub- section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc. The order for payment of duty under Section 125 (2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. A reference may beneficially be made to a decision of this Court reported in Mohan Meakins Ltd. v. Commissioner of Central Excise, Kochi, 2000 (115) E.L.T. 3 (S.C.) = (2000) 1 SCC 462 wherein it has been observed in Para 6 "..... Therefore, there is a mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy under sub- section (1) of that section." In this view of the matter the objection raised by the Centre that Section 28 of the Customs Act would be attracted is not sustainable.
45. Following the aforesaid ratio, we are of the view that in the present case, the Rig Deepsea Treasure has been confiscated under Sec.111(o) of Customs Act, 1962 and option to redeem the same on payment of fine has been allowed. In these circumstances, applicable duty is payable as per Sec.125(2) of the Customs Act, 1962 in exercising option to redeem the same and accordingly, the time limit prescribed under Sec.28(1) is not applicable. Also, in the facts and circumstances of the case, following the principle laid down in 35 | P a g e C/10431,10426/2017-DB the above judgments, we are of the view that even if the duty has been confirmed under section 28(1) of Customs Act,1962, but since its payment is referable to Sec.125(2) of the Customs Act,1962, and the assessment and applicable duty needs to be determined before release of the goods, accordingly, the confirmation under Sec.28(1) becomes irrelevant, and the duty so determined, is payable under Section 125(2) of Customs Act, 1962, in exercise of the option to redeem the goods confiscated.
46. The Ld. Advocate for M/s ONGC has argued that the amount confirmed against M/s Jagson cannot be recoverable from M/s ONGC solely on the basis of an undertaking furnished at the time of import of the goods by the sub-contractor M/s Jagson. In support he has referred to the judgment of Hon'ble Bombay High Court in the case of Commissioner of Customs(Import), Bombay Vs.VXL India Ltd.
47. We do not find merit in the argument of the Ld. Advocate for the ONGC. The license for petroleum operation/exploration of the Oil Block has been allotted by the Government of India to M/s ONGC, a Public Sector Undertaking, on nomination basis, in the interest of public. The Rig Deep sea Treasure was allowed to be imported at Nil rate of duty to be used for petroleum operation/ exploration in the said blocks allotted to M/s ONGC. Further, at the instance of M/s ONGC on filing necessary affidavit, procuring essentiality certificates from DGHC and furnishing an undertaking to discharge the duty, fine and penalty in the event of violation of any of the 36 | P a g e C/10431,10426/2017-DB conditions of the Notification, by the Sub-contractor, the rig Deepsea Treasure was allowed to be imported duty free by the Sub-contractor M/s Jagson. In the event, M/s ONGC, being the licensee, itself was the importer, then there would not have any undertaking/affidavit necessary for import of the goods for petroleum operation/exploration in view of clause (b) of condition 41 appended to entry 356 of the Notification. In these circumstances, we are of the firm view that the plea of the ONGC that duty, fine, and penalty cannot be recovered from them on the basis of an Undertaking, needs to be rejected outright. The judgment in VXL India Ltd.'s case(supra) is not applicable to the facts of the present case as in that case the duty was sought to be recovered from the purchaser of the imported vehicle, since the importer of the vehicle had absconded. In that context the Hon'ble High Court upheld the view of the Tribunal that duty can only be recovered from the importer of the vehicle.
48. Needless to emphasize, in the process of compliance of various provisions of the Customs Act for export and import, as a policy of liberalization in general and for Public Sector Undertakings in particular, Bonds and Bank Guarantee are not insisted, but to suffice, simple undertakings are accepted.
49. In directing recovery of the amount of duty, fine and penalty from ONGC, in the event, the sub-contractor M/s Jagson defaults in making such payments, it is worth mentioning that after cancellation of the LOA, M/s ONGC immediately enforced the Bank Guarantee executed by the sub- 37 | P a g e C/10431,10426/2017-DB contractor M/s Jagson and recovered the guarantee amount of USD 346,389.00 equal to Rs. 20,34,93,915/- as damages, however, they chose not to discharge the customs duty claimed as an exemption at the time of import of the Rig Deep sea Treasure, on filing necessary certificates of DGHC, affidavit of ONGC on the bonafide of the Sub-contractor and letter of undertaking to discharge the duty, fine and penalty, on cancellation of LOA. On the contrary, without seeking any permission of the department, M/s ONGC kept on insisting the sub-contractor to re-export the rig in absence of any such stipulation in the Notification. Also, as on date, M/s ONGC has not made it clear whether the said rig would be used in future for oil exploration or otherwise. Thus, we uphold the direction of the adjudicating authority that in the event M/s Jagson defaults in payment of duty, fine and penalty, the same should be recovered from M/s ONGC.
50. There has been a feeble argument advanced by the Appellants about the jurisdiction of the DRI Officers in issuing the SCN based on the judgment of the Hon'ble Delhi High Court in Mangli Impex Ltd.'s case (supra). We find that the Hon'ble Supreme Court has stayed the operation of the said judgment and contrary view has been expressed by the Hon'ble Andhra Pradesh High court Vuppalamritha Magnetic Components Ltd. Vs Dri (Zonal Unit), Chennai 2017 (345) ELT 161 (AP). Therefore, the said contention is rejected following the judgment of the Hon'ble Andhra Pradesh High Court. 38 | P a g e C/10431,10426/2017-DB
51. Further, taking note of the fact that the imported Rig Deepsea Treasure have not been put to use since the LOA has been cancelled by M/s ONGC and the Rig has been lying idle, as informed by both the appellants, though there was no request for re-export of the goods advanced by M/s Jagson before the adjudicating authority, however, in the interest of justice, in the event, such a request if made by M/s Jagson as the purpose for which it was imported not achieved, the Ld. Commissioner consider the same, within framework of the Customs Act,1962 and the Rules made thereunder.
52. The appeals are disposed of as above.
(Pronounced in the open court on 31/07/2018) (Mr. Devender Singh) (Dr. D.M. Misra) Member (Technical) Member (Judicial) Neha