Custom, Excise & Service Tax Tribunal
Schlumberger Asia Services Ltd vs Cc (Adj.) on 14 July, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. I
APPEAL NO. C/120 & 121/06 Mum
Arising out of Order-in-Original No. CAO No.89/A/2005/CAC/CC/ PK dated 29.09.2005 passed by the Commissioner of Customs (Adj.), Mumbai.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri P.K. Jain, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Schlumberger Asia Services Ltd.
Shri Sudhir Pai
:
Appellant
Versus
CC (Adj.)
Mumbai
Respondent
Appearance Shri Vipin Kumar Jain, Advocate for appellant Shri D.Nagvenkar, Addl. Commissioner (A.R.) For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.K. Jain, Member (Technical) Date of Hearing :12.06.2014 Date of Decision :..2014 ORDER NO.
Per Ashok Jindal The appellants are in appeals against the impugned order wherein duty has been demanded along with interest and imposition of penalties on both the appellants.
2. Brief facts of the case are that M/s Schlumberger Asia Services Ltd., (the main appellant) is having its registered office in Hong Kong with a project office established in India under the erstwhile FERA Regulations. The appellant is a service provider to ONGC and was engaged by ONGC for rendering services such as wire line testing, measurements while drilling etc. in their offshore oil well drilling operations, beyond the territorial waters of India. The appellant used to assist ONGC in contracting with overseas vendors for procurement of second hand logging tools and spares required on hire basis for oil well drilling operations. There was no outright sale of such goods either to the appellant or to ONGC and the title of the imported tools and spares remained with the overseas vendor. As per contract, the CIF value of any tools which were lost in the sea during operations was recovered from ONGC and in most cases the said tools and spares were re-exported after being used for the ONGC work. In the year 1998, the DRI initiated investigations and asked certain information from the appellant regarding the import of logging tools and spares for ONGC contract. The appellant produced the documents and the statement of Shri Sudhir Pai was recorded. After scrutiny of the documents, it was revealed that in a few instances, there was a difference between the values declared to the Customs in the invoices submitted to the Customs at the time of import vis-`-vis the values stated in the documents available in the appellants file. Thereafter a show-cause notice was issued on 29.9.1991 demanding customs duty on imports made through courier/hand baggage and in three cases by sea along with interest and penalties were also proposed. The appellant also deposited a sum of Rs.2 crores during the course of investigation. The show-cause notice was adjudicated and the demand against the appellant along with interest and penalties were confirmed. When the matter came up before this Tribunal, this Tribunal remanded the matter back to the adjudicating authority for readjudication. In remand proceedings, again the demand of duty, interest and penalties on both the appellants have been confirmed. Aggrieved by the said order, the appellants are before us.
3. Heard both sides.
4. Shri Vipin Kumar Jain, learned Advocate for the appellants submits that in this case the appellants are not the importer of the goods. As the goods have been imported through courier or hand baggage and in some cases by channel of sea where ONGC has filed bill of entry. Ownership of the goods was never remain with the appellants. As per the Section 2(26) of the Customs Act, 1962, the appellants were neither the importer nor they claimed to be the owner of the goods therefore, they are not liable to pay duty. Hence, on this ground, the demand is required to be set aside. The learned Advocate further submits that as these goods were imported were ship stores which were meant for on board consumption on foreign going vessels. As per Section 85 of the Customs Act, no customs duty is payable on Ship Stores and if the goods were not ship stores, no duty was payable on the disputed goods as immediately after their import, the said had been taken outside the territorial waters of India to places where the vessel/rig operating at ONGC sites, therefore the Customs have no jurisdiction to levy duty on goods. To support his contention the learned Advocate placed reliance on the decision in the case of Amership Management Pvt. Ltd. 1996 (86) ELT 15 (Bom). It is further submitted that no duty is leviable under the Customs Act for goods in transit/transshipment. It is further submitted that the goods have been imported and used for oil exploration work for ONGC which was otherwise exempt from payment of duty. As end-use of the goods was not in dispute therefore, merely in the absence of essentiality certificate, exemption should not have been denied. It is further submitted that in some cases, ONGC was able to obtain essentiality certificate for the import of the said goods. It is further submitted by the learned Counsel that after being used for ONGC work most of the goods were re-exported back to the overseas owners of the goods and consequently even if any duty was payable, most of it is eligible for refund as draw back. If this contention was not taken as correct then also the appellants are liable to pay a small amount of duty as the appellant has already paid Rs.2 crores during the course of investigation. It is also submitted that the difference in value declared to the customs and reflected in the documents were explained by Shri Sudhir Pai during the course of investigation as the values declared to the Customs were the depreciated value of the old and used equipment actually imported for ONGC work, whereas the values shown in the documents from the possession shows the value of new parts. Therefore, the value of new parts cannot be considered as true value for the importation of used and old parts. The said explanation has not been considered by the adjudicating authority. Except from the documents reflected from the possession of the appellant, no other evidence or material has been adduced by the Revenue to prove the under-valuation of the imported goods. Therefore, the charge of under-valuation has been confirmed on the basis of assumption and presumption. It is further submitted that as the appellants are neither importer nor claimed to be owner of the goods. After use, the goods were re-exported to their foreign supplier and considering the fact that the goods have been immediately taken outside the territorial water of India for the operational purpose of ONGC, penalty is not leviable. In the last, the learned Counsel submits that as the appellant has already paid a sum of Rs.2 crores during the course of investigation and the same be adjusted towards the demand of duty & interest and penalty against the appellant be waived. If penalty is waived against the appellant, the appellant shall not claim any refund of the amount of Rs.2 crores paid during the course of investigation.
5. On the other hand, the learned A.R. reiterated the allegations made in the show-cause notice as well as supported the impugned order.
6. Considered the submissions made by both the sides.
7. In this case, we find that under Section 28 of the Customs Act, 1962 duty is to be demanded from the persons chargeable to duty. The said term has been interpreted by the Honble High Court in the case of UOI v. Jupiter Exports 2007 (213) ELT 641 (Bom) and also by this Tribunal in the case of Commissioner v. Dinesh Chhajer 2008 (233) ELT 436 (Tri. Bang) which was affirmed by the Honble Karnataka High Court in 2014 (300) ELT 498 (Kar) to mean the importer. The term importer has been defined in Section 2(26) of the Customs Act, 1962 to mean, in relation to any goods at any time between their importation and the time when they are cleared for home consumption included any owner or any person holding himself out to be the importer. In the light of this provisions, it is not in dispute the imports in the instant case were effected either by ONGC or by courier or by hand baggage. Therefore, in these circumstances, the appellants cannot be held as importer as the appellants neither filed bill of entry nor they claimed owner of the goods or the goods were imported for the benefit of the appellants. In fact, by all means, the goods were imported for and on behalf of the ONGC by courier agency or by hand baggage. In case, the imports were made by courier agency, the courier agency is required to file bill of entry therefore the courier is the importer. In case of hand baggage, the passenger who brought the baggage is the importer. In case the imports were made through sea, ONGC has to file bill of entry as importer. This position has not been disputed by the Revenue. Therefore, the liability of payment of duty cannot be fastened on the appellants as the appellants are neither the importer of the goods nor the owner of the imported goods as per the agreement between the ONGC and the foreign supplier which read as under:-
d) M/s. SASL Imports logging tools and spares required for rendering the services towards the oil well drilling operation either on its own name or in the name of the contracting agency. Majority of the imports are from their parent or associated firms located in Dubai, France, Canada and United States. There is no outright sale of the imported goods to M/s. SASL, Mumbai or the contracting agency. The service charges are paid by the contracting agency to the parent firm directly. The title of the imported tools and spares remains with the parent firm even though M/s. SASL or the contracting agency as the case may be, are the importer and the invoices for Customs purposes are raised in either of their name. However, the CIF value of any tool which is lost in the sea during the operations, is recovered from the contracting agency. 7.1 Therefore, duty liability cannot be confirmed against the appellant as the appellants are neither importer nor claimed themselves to be the owner of the goods. We further find that the impugned goods were used on board rigs which were rendering services to ONGC beyond the territorial waters of India as these were called as ship stores and consumption on board foreign going vessels. Section 85 of the Customs Act gives exemption from payment of duty for such ship stores. This fact has not been disputed by the adjudicating authority that the rigs have been used beyond the territorial waters of India which qualify as foreign going vessel by virtue of the definition of the expression foreign going vessel in Section 2(21) of the Customs Act, 1962. The adjudicating authority has denied the benefit on the ground that the appellants have not claimed the benefit under Section 85 of the Act at the time of import. The issue came before the Honble Apex Court in the case of LIC vs. Escorts Ltd. AIR 1986 SC 1370 wherein it was held that requires permission to be taken such permission can always be granted post facto by the competent authority as long as the statute does not require prior permission to be taken. Since Section 85 of the Customs Act, 1962 does not require any prior permission to be taken, the learned Commissioner ought to have taken note of the undisputed position emerging from the detailed investigation of the case that the goods in question had indeed been used as ship stores and granted post facto permission under Section 85 of the Act. The judgement relied upon by the appellant in the case of Amership Management Pvt. Ltd. (supra) has not been dealt with by the learned Commissioner as the same is directly binding on the adjudicating authority in favour of the appellants. We further find that when the factum of export has not been disputed therefore, the benefit of exemption should not be denied for procedural violation as held by the Honble Bombay High Court in the case of Repro India Ltd. v UOI 2009 (235) ELT 614 (Bom.). In this case it is not in dispute that immediately after importation of the goods, the goods were re-exported after use by ONGC therefore, the goods are not liable to pay any duty. It is also not disputed that the equipment in dispute were used on board rigs which were rendering services to ONGC in the Mumbai Offshore area beyond the territorial waters of India therefore, once goods are being imported in India and are being cross the territorial waters, they are said to be exported from the country as held by the Honble Apex Court in the case of CC v. Sun Industries 1988 (35) ELT 241 (SC).
8. With these observations, we hold that as the appellants are neither importers nor they claim to be owner of the goods therefore the appellants are not liable to pay duty. Further, as per Section 85 of the Customs Act, 1962 the goods are entitled for exemption of duty.
9. But we find that vide letter dated 29.9.2005 the appellants have admitted that the appellants were not opposed the confirmation of duty to the extent of Rs.1,84,08,757/- if the penalties on the appellants are waived which is reproduced here-in-under:-
In response to a query raised by Your Honour, it was stated on behalf of our clients that our clients would not oppose a confirmation of customs duty to the extent of Rs.1,84,03,780.37 which has been computed in Annexure F to our clients earlier appeal to the CESTAT, a copy of which is Annexure 1 to their written submissions dated 6th December 2004. It was, however, made clear that this offer was being made Without Prejudice to the submissions contained in their written submissions and purely with a view to put an end to the long-standing dispute with the customs department. It was also clarified that the offer was Without Prejudice to our clientsrights and contentions in the criminal case filed by the Department being Case No.29/S/03 are pending before the Chief Metropolitan Magistrate, Esplanade, Mumbai relating to the present matter.
It was therefore submitted that in view of this position and the payment of the full amount of duty by our clients even before a Show Cause Notice was issued, no penalty/interest or a very nominal penalty/interest should be imposed in the present case.
9. As discussed in para 8 here-in above wherein it is held that the appellants are not liable to pay duty but as they are not contesting the confirmation of duty against them. In these circumstances, we drop the penalty imposed on both the appellants. Appeals are disposed of with these terms.
(Order pronounced in Court on..) (P.K. Jain) Member (Technical) (Ashok Jindal) Member (Judicial) nsk Per : P.K. Jain
10. I have gone through the order recorded by my learned Brother. However, my views are at variance with that of my learned Brother and, therefore, I am recording a separate order.
11. Brief facts of the case are that the appellant is having their main office in Hong Kong and they have a project office in India. During the period 1993 to 1998 they were providing certain services to ONGC. For providing the said services certain equipments and tools were imported (either by ONGC or the appellant). It is claimed that ONGC was paying rent for the said equipments. These equipments were being used by the appellant and the ONGC in addition to rent on the equipments was paying serving charges for the services provided by the appellant. During the said period the appellant imported certain spares parts (i) through courier service, (ii) by hand baggage brought by the employees of the appellant when traveling from abroad to India after collecting the same from overseas office of the appellant and hand over the same to the appellant and (iii) few consignments by sea/air. Based upon the information collected by the Directorate of Revenue Intelligence, an investigation took place and it was found the value of the spare parts while clearing through courier service or import through sea/air was mis-declared and the value declared was much much lower than the actual value of the spare parts. In case of hand baggage, it was found that the employees of the appellant-Company did not declare the said parts or declared very very low value. After passing through the Customs, the same were handed over to the appellant. Investigation also revealed that they got two sets of invoices, one indicating correct value and the other indicating a very low value and the second invoice was presented to the Customs at the time of clearance. Investigation also revealed that the appellant has written to their counter-parts in their own offices abroad to make two sets of invoices and mis-declaration in value was done at the instance of officials in the project office of the appellant. In certain correspondence they have also indicated that the value should be 25% of the actual value and in some cases they indicated the invoice value should be only 10 US $. At time they directed the supplier to mis-declare the description as mechanical spares instead of indicating the correct and specific description.
12. During the investigation the appellants admitted the above irregularities and also accepted the duty liability and in pursuance of that they deposited an amount of Rs.2,00,00,386/-. After the investigation, a show-cause notice was issued to the appellants. The case was adjudicated and an amount of Rs.2,00,80,894/- was confirmed along with interest and penalties. Appellant file an appeal before this Tribunal, this Tribunal vide order dated No. C-III/708-710/WZB/2003 dated 17.4.2003, remanded the matter for re-adjudication. The said order of the Tribunal is reproduced below:-
Shri M. Setalwad, learned Advocate appearing for the appellants states that these three appeals are essentially on the same issue. The appellants imported some items through courier, part of which came through Madras (Appeal No. C/461/02-Mum). The third appeal is against penalty of Rs.1 lakh imposed on official of the appellant company. The learned Advocates main submissions are:-
1) The order-in-original has been passed without taking into consideration exemption Notification fixing the effective rates of duty on the ground of mis-statement and suppression. The effective rates cannot be denied and duty cannot be charged at the tariff rate on such grounds.
2) If the duty amounts are correctly computed, the amount paid before the issue of show-cause notice would exceed both the amounts payable. Consequently, no interest would be chargeable under Section 28AB.
3) The provisions of Section 28AB and Section 114A cannot be invoked prior to September 1996 when they were introduced.
4) Penalty under Section 112 is not imposable since penalty has been imposed under Section 114A. Further, penalty under Section 114A cannot be sustained as no amount has been specified.
5) Penalties are excessive both on thee appellant company and the official of the appellant company.
2. Shri M.K. Gupta, learned Jt. C.D.R. appearing for the department states that for the period prior to insertion of 114A penalty can be imposed under Section 112. He fairly concedes that the case needs to be remarked back to the Adjudicating Commissioner to apply the effective rate of duty correctly in respect of various imports.
3. After hearing rival submissions and perusal of case records, we are of the opinion that the impugned order is not sustainable at it has computed the duty liability without applying the exemption Notifications prescribing effective of duty from time to time. We also observe that penalties have been imposed both under Section 112 and under Section 114A which are mutually exclusive. The Commissioner has also not quantified the amount of penalty under Section 114A and has merely stated that the appellants are liable to pay mandatory penalty as envisaged under Section 114A. In view of the foregoing, we have no option but to set aside the order-in-original and remand the same for re-adjudication with the direction that appropriate effective rates of duty should be applied, the appellants should be heard and while determining the penal liability due consideration should be given to the fact that the appellants have paid the duty amount even before the issue of show-cause notices.
4. The appeal is allowed by way of remand.
13. It would thus be seen from the said order of the Tribunal the purpose of remand was two fold. The first was to correctly assess the quantum of duty after applying the exemption notification and the second direction of the Tribunal was to separately quantify the penalties under Section 112 and Section 144A as the two sections are mutually exclusive. The Tribunal also ordered that while determining the penal liability, due consideration should be given to the facts that appellant paid duty even before issue of show-cause notice. It would thus be seen from the remand order that the appellant had not disputed that they are liable to pay duty and the penalty. It was only the quantum of duty and penalty that was being disputed. It may not be out of place to mention as against the confirmed amount of Rs.2,00,00,386/- the appellant had submitted before this Tribunal in the first round of litigation that the duty liability will be around Rs.1.8 crores.
14. In pursuance of the said Tribunal order, the impugned order has been passed. I find that my learned brother has set aside the demand mainly on two grounds. First ground being that the appellants are neither importer nor claimed themselves to the owner of the goods therefore duty liability cannot be confirmed against the appellants. The second ground is that the Section 85 of the Customs Act gives exemption from payment of duty for ship stores and in view of this position no duty is chargeable on the goods.
15. At the outset in my view both the issues are beyond the direction of remand and, therefore, cannot be taken in the second round of litigation. No appeal was filed by either party and hence Tribunals order has attained finality. This Tribunal therefore need not go into these questions and should limit to the directions as per remand order. It is to be noted that the appellants have accepted the duty liability right from the time of investigation. In the first round of litigation including the CESTAT stage, duty and other liabilities and the fact that they are owner of the goods/person chargeable to duty on import were not disputed. Even while passing the impugned order emphasis was on the quantification of the duty amount. Similarly, even in the appeal filed before this Tribunal, the main issue was not about their duty liability. It was only during the argument that the Learned Advocate for the appellants raised this issue and thereafter made this as the main point in the written submissions. In my view it is not correct to entertain such plea at this stage more so, when they have accepted the duty and penal liability due to importation of the goods through courier, through their own employees and through sea/air at the beginning of investigation itself and investigating officer did not note details on these aspects.. Remand direction was only relating to quantification of duty and penalty. I also find that in the appeal the re-quantified amount has not been questioned by them and, therefore, appellant seems to be satisfied with the re-quantification.
16. Even if for some reasons it is accepted that appellant is entitled to raise such a plea even at this stage, I proceed to examine on merit. My learned Brother has relied upon the decision of the Honble Bombay High Court in the case of Union of India v. Jupiter Exports ((supra). I have gone through the said judgment. The fact in that case was that the appellant obtained an advance licence by manipulating certain export documents. This manipulation led to higher entitlement of duty-free goods. Later-on they sold/transferred the said licence to some other parties. Certain goods were imported duty-free by the said transferee. Commissioner in the adjudication order has taken a view that such transferees are not liable to pay customs duty as they have purchased the said licence in accordance with law and duty should be recovered from the appellant as he has done the manipulation in the advance licence. No appeal was filed against the said order of the Commissioner by Revenue. In the said, the Honble High Court has taken a view that even though the manipulation has been done by the appellant but the duty free goods have not been imported by the appellant but by the transferee and, therefore, the duty liability is on the transferees and cannot be fastened on the appellant. In the present case, it is not in dispute that the spare parts were sent in courier parcel in the name of the appellant from their offices abroad or of their associates. Further, the appellants employees only brought certain spare parts in their baggage from appellants offices abroad and passed through Customs without declaration or mis-declaring the value and after clearance, handed over the same to the appellant. Similarly consignments imported through sea/air were under-valued at the direction of the appellants and was also cleared by the appellants. In view of these facts the ratio of the decision of the Honble Bombay High Court is not applicable in the facts and circumstances of the case. I have also gone through the judgement of this Tribunal as also that of Honble Karnataka High Court in the case of Dinesh Chhajer (supra). In the said case certain electronic items were smuggled by some unknown persons from Nepal to Kolkata. Shri Dinesh Chhajer was a dealer in electronic goods and he purchased the smuggled goods from certain dealers based in Kolkata and after purchasing, sold the same in the domestic market. Revenue wanted to recover customs duty from Shri Dinesh. The Tribunal has taken the view that investigations have revealed that Shri Dinesh Chhajer was only dealing in the smuggled goods and has not himself imported or smuggled the said goods and therefore duty liability cannot bee fastened on him. It was also observed that no goods have been seized and confiscated from Shri Dinesh Chhajer and therefore duty cannot be demanded even under Section 125 of the Customs Act. I do not find any application of the said case law in the facts of the present case. In the present case, even the goods brought as baggage were by appellants employees as per appellants direction. Goods were collected by them abroad from appellants office and were handed over to appellant in India. Such employees have only acted as carrier and smuggled the goods on behalf of the appellant.
17. Section 28 of the Customs Act under which demands were raised stipulates serving notice on the person chargeable with duty. Further Section 2(26) of the Customs Act, 1962, defines the importer in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. In the present case it is not in dispute the spare parts have been sent by the appellants offices abroad or appellants associates offices abroad and were to be received by their project office in India. ONGC was to pay the rent charges for such spare parts/equipment that were being used for their work. Ownership of the goods was with the appellant alone. Even the goods were in physical possession of the appellant. All the spare parts received by the courier were in the name of the appellant. Spare parts received through baggage were again sent by the appellants office abroad and were delivered to the appellants project office in India. The carriers of such goods were the appellants employees. Even the goods which had come through sea/air were sent by the appellants offices abroad and received by the appellants project office in India. Under the circumstances, in my considered view the main appellant is the importer and is also the person chargeable to duty as provided under Section 28 of the Customs Act.
18. The duty confirmed for the three modes is as under:-
Sl.No. Mode of Import Duty Payable (Rs.)
(i) Courier 135,20,252.19
(ii) Hand Baggage 48,19,955.11
(iii) Air/sea 68,549.48 My learned Brother has observed that the imports were made by courier agency, the courier agency is required to file Bill of Entry and therefore the courier agency is the importer. I am unable to agree with such conclusion. Courier agency by no stretch of imagination can be called as the importer. Courier agency only provides door to door transportation services of packets/parcels. Since majority of courier parcels are of small value, a simplified procedure has been prescribed by the Government under Courier Imports (Clearance) Regulation, 1995. Regulation 2(1) of the said Regulation reads as under:-
Application. -(1) These Regulations shall apply for assessment and clearance of goods carried by the representatives of Authorised Couriers on incoming scheduled passenger flights on behalf of a consignee for a commercial consideration."
Further Regulation 7 of the said Regulations reads as under, -
7. Entry of goods on importation.- The authorized courier shall make entry of goods imported by him by presenting to the proper officer a bill of entry in Form III or as the case may be in Form V appended to these regulations:
Provided that the authorized courier, or with the concurrence of the authorized courier, the consignee or a Customs House Agent on behalf of the consignee, may file a bill of entry in the form prescribed in the Bill of Entry (forms) Regulations, 1976 for clearance of any of the imported goods:
Provided further that for the following goods the entry shall be made in the form prescribed in the Bill of Entry (Forms) Regulation, 1976, namely:-
(a) goods in respect of which an exemption from the levy of duty applicable to hundred per cent export oriented undertaking or to units in a free trade zone, as defined under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944), is claimed;
(b) goods imported under the Exports Promotion Capital Goods Scheme or the Duty Exemption Scheme specified in Chapter VI and Chapter VII respectively of the Export and Import Policy (1st April 1992 31st March, 1997) published under the Ministry of Commerce Public Notice No. 1-ITC(PN)/92-97, dated the 31st March, 1992 as amended from time to time;
(c) goods imported against any other licence issued under the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);
(d) goods imported by or on behalf of a person who is related to the consignor within the meaning of Rule 2 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988; and
(e) goods in respect of which the proper officer directs filing of a bill of entry in such form.
Thus the said regulation provides that the assessment and clearance of goods is on behalf of consignees. Thus consignee is importer. Regulation provides that the courier shall present a Bill of Entry in form V. It would be seen from the said Bill of Entry it is a common Bill of Entry for assessment of all the parcels received by the courier agency in one flight/bunch. The value and description is filled by the courier agency as per the declaration provided by the consignor/consignee. It is seen from the said courier Bill of Entry format that the courier is required to give the following declaration:-
Please indicate all other charges such as commissions includible in the assessable value as per Section 14 of the Customs Act, 1962.
i. I/We hereby declare that I/we have obtained the authorization from each of the consignees mentioned above to act as an agent for the clearance of the goods described above.
ii I/We declare that I/we have not received any other documents or information showing a different price, value, quantity or description of the said goods and that if at any time hereafter I/we receive any documents from the importer showing a different state of facts I/we will immediately make the same known to the Commissioner of Customs.
iii I/We hereby declare that the contents of this Bill of Entry are true and correct in every respect and are in accordance with the Airway Bills and the invoices and other documents attached herewith.
iv I/We enclose herewith (number) of airway bills and (number) of invoices for the aforesaid consignments with this Bill of Entry.
From the above it is clear that the courier agency handles goods as an agent of the consignee or the importer and is not an importer himself. Courier Agency collects duty from the importer or consignee at the time of delivery and remits the same to the Customs department. In view of this position in my view courier agency cannot be considered as the importer of the goods. Incidentally exactly similar situation occurs in the case of post parcels. There also based upon the declaration pasted by the consignor, the Customs assess the duty and the postal authorities collect the duties from the consignee/importer and remit the same to the Customs department. It is not the postal authorities or the consignor but the consignee who is considered as importer and has to ensure that import is authorized and as per law. If any law is violated in respect of goods in the courier parcel or a postal parcel it is the consignee who has to face the consequences and not the courier agency or the postal authorities (unless and until they have connived with the consignee). If any duty is short paid due to mis-declaration in value or any other reason, same has to be paid by consignee. In view of this position, appellant is the importer/chargeable to pay duty and not the courier agency. Incidentally, appellant is also the owner of goods.
19. As far as hand baggage is concerned, the spare parts were supplied by the appellants offices abroad, were brought by the appellants employees and after passing through the Customs were handed over to the project office of the appellants and the ownership of the goods as also effective control remained with the appellants. By non-declaring or under declaring the value of spare parts, during baggage clearance individual employees have committed irregularities and are also liable to penalties. However, if such employees would have declared the correct value/description at the time of passing through the Customs, they would have paid the duty and in turn they would have collected from the appellant, as they were only carrier and their role was nothing more than the carrier. During initial investigation itself the appellant has accepted the duty and other liabilities on behalf of their employees and it is for this reason that the Customs did not investigate further and did not issue notices to individuals by finding out the name and other details of such employees.. After more than a decade, the appellant now cannot turn back and say that he is not required to pay duty and it is their employees who have to pay customs duty. Appellants are the owner of the goods and the goods were also used by them for providing service to ONGC. The fact that the goods were used in connection with the service being provided to the ONGC by the appellant will not make any difference. In view of this position, appellant is the person chargeable to pay duty.
20. As far as the import through air/sea is concerned, the duty liability is only Rs.68,549/-. There is no dispute about the fact that the goods were supplied by appellants office abroad and were received by appellant for providing service. Appellant have also not produced any evidence to show that the Bills of Entry were filed in the name of the ONGC in this case. On the contrary they have admitted that under-valuation was at their instance and admitted duty liability on the said goods and the duty had been demanded only on the differential value. Thus even in this case duty and other liabilities is on the appellants.
21. In view of the above position, I am of the considered view that the duty liability in all the three situations is on the main appellant and the main appellant alone and duty demand has been correctly confirmed in the impugned order.
22. The second ground on which my learned brother has taken a view that duty liability cannot be confirmed as the goods were used on board rigs which were rendering services to ONGC beyond the territorial waters of India as these were called as ship stores and consumed on board foreign going vessels. It is also stated that Section 85 of the Customs Act gives exemption from payment of duty for such ship stores. Learned Brother has also observed that adjudicating authority has denied the benefit on the ground that the appellants have not claimed the benefit under Section 85 of the Act at the time of import. From the details provided it appears that the appellant is providing wire line testing and measurement services to ONGC. In the case of Amership Management Pvt. Ltd. (supra) the Honble High Court has taken the view that oil rigs are vessels/ships and spare parts of such vessels will therefore cover by the definition of ship stores. It is nowhere the case of the appellants that the spare parts imported are that of oil rigs so as to claim the same as ship stores. They are only providing the services of wire line testing and measurement services to the ONGC. These services may be provided while carrying out the operation based upon oil rigs. However the same are not part of oil rigs. Spare parts imported are parts of certain equipments used by the appellant while providing earlier mentioned services viz. wireline testing and measurement service. Thus prima facie spare parts cannot be considered as ship stores. I also note that the appellants have not produced any catalogue or literature either at the time of original investigation nor at the time of adjudication or at the time of first round of litigation or 2nd round of litigation before this Tribunal to establish that a particular spare part is meant for a particular equipment and that equipment can be considered as ship stores as defined in Section 2(38) of the Customs Act. The said section defines stores means goods for use in a vessel or aircraft and included fuel and spare parts and other articles of equipment, whether or not for immediate fittings. In the absence of such details, goods in question cannot be considered as ship stores.
23. Section 85 reads as under:-
Stores may be allowed to be warehoused without assessment to duty.- Where any imported goods are entered for warehousing and the importer makes and subscribes to a declaration that the goods are to be supplied as stores to vessels or aircrafts without payment of import duty under this Chapter, the proper officer may permit the goods to be warehoused without the goods being assessed to duty. It would thus be seen from the above Section that it does not exempt the ship stores. The Section provides that the ship stores can be kept in a warehouse without assessment of duty. In the present case no goods were kept in warehouse. In fact, all the goods were cleared clandestinely through baggage and also misdeclaring the value and description by courier/air/sea. No catalogue literature were produced at any stage so as to even examine whether the goods can be considered as stores to vessel or aircraft and therefore benefit of Section 85 cannot be extended at this stage. In my view findings of the Commissioner in the facts are correct. I have gone though Honble Honble Supreme Court judgement in the case of LIC v. Escorts Ltd. (supra). The said case was relating to acquiring of share stakes and is in totally different circumstances. Main issue is relating to Customs duty at the time of import. Proper officer has to satisfy various conditions at the time of import. Section 85 itself stipulate (i) goods to be ship stores, (ii) goods are entered for warehousing, (iii) makes and subscribes to a declaration that goods are to be supplied as stores thereafter proper officer may permit. In this case none of the three conditions were satisfied at the time of import. On the contrary, parts were smuggled or misdeclared in value/description. There is therefore no question of granting permission after being caught. In the context of taxation law, Honble Supreme Court in the case of CCE vs. Harichand Shri Gopal reported in 2010 (260) ELT 3 (SC) has observed as under, -
24.?The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness, the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential.
In the case of Indian Aluminium Company Ltd. vs. Thane Municipal Corporation reported in 1991 (55) ELT 454(SC) in para 3 and 7 has observed as under:-
3. The declaration contemplated in Form 14 is to the effect that the goods imported shall not be used for any other purpose for sale or otherwise etc. It can thus be seen that an incentive is sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. That being the object a verification at the relevant time by the octroi authorities becomes, very much necessary before a concession can be given. In the absence of filing such a declaration in the required Form 14, there is no opportunity for the authorities to verify. Therefore the petitioner Company has definitely failed to fulfil an important obligation under the law though procedural. The learned Counsel, however, submitted that even now the authorities can verify the necessary records which are audited and submitted to the authorities and find out whether the material was used in its own undertaking or not. We do not think we can accede to this contention. Having failed to file the necessary declaration he cannot now turn around and ask the authorities to make a verification of some records. The verification at the time when the raw material was still there is entirely different from a verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification.
7. In? Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Calcutta and Ors. the appellant which was a Public Limited Company, sought exemption under the provisions of the Bengal Finance (Sales Tax) Act, 1941 in respect of certain sales but did not produce before the Officer the declaration forms from the purchaser dealers required to be produced under the proviso to that sub-clause granting exemption. It was contended on behalf of the appellant that proviso to the sub-clause was only directory and the dealer is not precluded where the proviso is not strictly complied with from producing other relevant evidence to prove that the sales were for the purposes mentioned in the said sub-clause. The contention on behalf of the respondent was that the dealer can claim exemption under the sub-clause but he must comply strictly with the conditions under which the exemption can be granted. Rejecting the appellants contention, this Court held thus :
Section 5(2)(a)(ii) of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly construed. The substantive clause gives the exemption and the proviso qualifies the substantive clause. In effect the proviso says that part of the turnover of the selling dealer covered by the terms of sub-clause (ii) will be exempted provided a declaration in the form prescribed is furnished. To put it in other words, a dealer cannot get the exemption unless he furnishes the declaration in the prescribed form. It was further held as under :
There is an understandable reason for the stringency of the provisions. The object of Section 5(2)(a)(ii) of the Act and the rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well-nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the two-fold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the said clauses seek to avoid. It can thus be seen that the submission namely that the dealer, even without filing a declaration, can later prove his case by producing other evidence, is also rejected. This ratio applies on all fours to the case before us. As already mentioned the concession can be granted only if the raw material is used in the industrial undertaking seeking such concession. For that a verification was necessary and that is why in the rule itself it is mentioned that a declaration has to be filed in Form 14 facilitating verification. Failure to file the same would automatically disentitle the Company from claiming any such concession.
In the present case, appellant has not even clearly told under which provision he is claiming the benefit.
24. I have gone through the judgement of Amership Management Pvt. Ltd. (supra). In the said judgement the Honble Bombay High Court held that oil rigs are to be considered to be vessels/ships. There is no doubt or dispute of this fact in the present case. The spare parts are not parts of oil rigs or ship but require in the equipment for wireline testing and measurement. Section 85 was not an issue before the Honble Bombay High Court and the Honble High Court has said as per Section 85 any stores imported in a vessel or aircraft can be transferred to any vessel or aircraft as stores for consumption therein. In the present case first of all no stores have been imported and whatever have been imported has not been imported in the vessel or aircraft and it has not been manifested as goods for transit and transshipment and therefore, the appellants will not be entitled to benefit of the said Section. My Learned Brother has also mentioned that there is no dispute that the goods, immediately after importation, the goods were re-exported after use by the ONGC therefore, the goods are not liable to pay any duty and the goods were also used in area beyond the territorial water of India. These are bald claims of the appellants. However, the facts are that when a particular spare part was shifted, to which place it was shifted (was it not within Exclusive Economic Zone where Customs Law are applicable) and when was it received back in the mainland and when it was re-exported out of India have not been detailed or given by the appellants at any stage in respect of even a single import. Spare parts were used by appellant and not ONGC. No procedure as per law was followed. In fact the appellants have not claimed benefit of ship stores in the first round of litigation and before the adjudicating authority though mentioned by the appellants and claim is not supported with details. It is only the learned Advocate for the appellants during the 2nd round of litigation has pressed this point without any details. In my view it is too late to claim the said benefit particularly when the appellants have accepted the liability in the beginning of investigation itself. Even if for some reason, the claim had to be examined it is absolutely necessary on the part of the appellants to produce leaflet of each items (it may be mentioned that the appellant intentionally has directed the supplier to declare the description as mechanical spares instead of correct description in number of cases). Leaflet catalogue of each equipments and use of the same so as to enable to Revenue to examine whether the said spare parts can be considered as ship stores. Appellants have also to provide details of the goods sent to rigs and when they received back and re-exported.
25. My learned Brother has quoted the judgement of Honble Bombay High Court in the case of Repro India Ltd. (supra). I have gone through the said judgement. The said judgement is in the context of CENVAT credit taken as inputs used in the manufacture of printed books and export thereof. The issue was relating to Rule 6(6)(v) vs. Rule 6(1) of the CENVAT Credit Rules, and liability created under Rule 6 (3)(6. In this context Honble Bombay High Court observed that only if petitioner does not export the printed goods and do not maintain the account as contemplated by Rule 6(2) ibid he petitioner would be required to pay 10% on the sale price of printed goods not so exported. The facts of present case are totally different. The issue is relating to Customs duty on imported goods which were clandestinely smuggled through Baggage or cleared through courier/sea/air by misdeclaring the value and description. No procedure whatsoever stipulated under Customs Act was followed, even after getting caught and two rounds of litigation no details like when goods transferred to which rig, where the said rig was located whether in territorial waters of India or exclusive economic Zone (where Customs Act is applicable) where the goods were used and for what purpose, when the goods were received back and details of re-export, movement of goods is under which provisions of law. In brief, the issue relating to ship stores is beyond the remand order passed by this Tribunal and therefore cannot be entertained at this stage, particularly in view of the fact that the appellants have admitted their duty liability in the beginning of investigation itself. Even if fo some reason the Tribunal is of the view that this claim has to be examined, the matter will need to be remanded back to the Commissioner and the appellants will be required to produce leaflet of each item of spare parts along with catalogue of the main equipment and also to prove that the said spare parts/equipment is ship stores as defined under Section 2(38) of the Customs Act. For benefit of export, the appellants have to provide the details of shifting the items to the oil rigs (which are located in area where Customs Act is applicable) and the details of receiving back and thereafter exporting back from India. In the absence of all these details, it cannot be said that no duty is leviable.
26. As far as penalty under Section 112 on the main appellant is concerned, I find that the said goods were (i) smuggled through employees of appellant and were sent from appellants office abroad and finally collected and used by appellant (ii) were imported through courier by misdeclaring the value as also in some cases the description were again sent from appellants office abroad and collected in India and used by the appellant. Ownership as also effective control remained with the appellant. The fact that they were used for providing services to ONGC does not make any difference. Smuggling and misdeclaration were at the instance of appellant. Appellant is therefore liable to penalty under Section 112 of the Customs Act and the penalty has been correctly imposed in the impugned order.
27. Incidentally, Learned Advocate for appellant has tried to claim that goods imported were old and used and value declared were that of old and used while Revenue has taken the value of new spare parts. Learned Advocate has also quoted the statement of Shri Sudhir Pai. We are unable to agree with this contention. Spare parts are required to replace a defective part. Normally, spare parts are new and unused. It is only when a new and unused part is not available one may use an old part as spare part. Under ITC Policy, old spare parts are not allowed to be imported. There are hundreds of consignments in the present demand. No correspondence or any evidence has been brought on record to establish that even a single consignment was that of old part. On the contrary, e-mail/correspondence establishes directions to mis-declare the value. Employees not declaring the goods in the baggage and hence the contention needs to be out-rightly rejected.
28. A penalty of Rs.1 lakh is imposed on Shri Sudhir Pai, second appellant. Correspondence recovered clearly establishes his role in the whole episode of misdeclaration/smuggling. Penalty on him is correctly imposed and is not excessive. Impugned order is this regard is upheld.
29 . In view of above, we dismiss both the appeals.
(P.K. Jain) Member (Technical) Difference of Opinion In view of Difference of Opinion between Mumber (Judicial) and Member (Technical), the matter may be referred to the President to nominate a 3rd Member to resolve the following issues:-
1. Whether in the facts and circumstances of the case appellants can at this belated stage raise the issue that they are neither importer nor person claimed themselves to be the owner of goods and hence no duty can be confirmed against them as allowed by Member (Judicial).
Or In view of the facts that the goods belongs to the appellant or their associate and sent at their instance, the appellant admitted the duty liability at the time of investigation thereby stopping further investigation and the fact that during the first round of litigation that is before the adjudicating authority or before this Tribunal, the appellant did not dispute the duty liability and the matter was remanded by this Tribunal for the limited purpose of quantification of the duty amount keeping in view that the applicability of duty exemption notifications prescribing effective rate of duty and the penalty under Section 112 and 114A to be separately specified, appellant cannot be allowed to raise the issue that they were not importer or person chargeable to duty at this stage as held by Member (Technical).
2. Whether the appellant can be permitted to raise the issue that the goods are ship stores, meant for use beyond the territorial waters of India and thereafter to be re-exported back and hence no duty can be charged as allowed by Member (Judicial) Or The goods imported are not ship stores as per the definition under Section 2(38) of the Customs Act particularly in view of the fact that the appellants are only providing wireline testing, measurement while drilling etc., service to ONGC and spare parts imported are used in the equipments for providing the said service and are not part/fitment of the oil rigs. Moreover, no catalogue, literature or supporting evidence is produced at any stage for the said claim. No details have been provided how and where the goods are used. The provisions of Customs Act are not only applicable to the territorial waters of India but also to Exclusive Economic Zone. Further no details have been provided when the goods were taken on oil rigs, when received back and when re-exported back and no procedure has been followed as prescribed under any Sections of the Customs Act and under the circumstances the appellants cannot claim the benefit as ship stores or that the goods were immediately re-exported back. Even the Tribunal has not remanded the matter to examine this issue. Hence, this issue cannot be raised at this stage, and benefit of ship stores, re-export etc. cannot be extended as held by Member (Technical).
3. Whether in the case of imports through courier, since Bill of Entry is filed by the Courier Agency therefore the courier is the importer and not the appellant as held by Member (Judicial) Or Courier agency acts as an agent of the appellant consignee, while filing a consolidated Bill of Entry for all consignees, and appellant consignee is the importer and person chargeable to duty in respect of his consignments as held by Member (Technical).
4. In case of hand baggage, the passenger who brought the baggage is the importer and hence duty cannot be demanded from appellant as held by Member (Judicial) Or In the case of hand baggage also duty is chargeable from the appellant as goods were brought by appellants employees without declaring or declaring but under-declaring the value, goods were owned by the appellant or their associate, were taken from appellants offices abroad and after passing through Customs in India again handed over to the appellant, which in turn were used by appellant in connection with providing service to ONGC as held by Member (Technical).
5. Whether in case the imports were made through sea, ONGC has to file bill of entry as importer as held by Member (Judicial) Or Appellant has admitted duty liability in respect of 4 consignments of spare parts imported by sea/air, and no evidence is produced that bill of entry was filed by ONGC. Moreover, goods were shipped by appellant, received by appellant and used by appellant for providing the service to ONGC under the circumstance appellant is to be held person chargeable to customs duty as held by Member (Technical).
6. Keeping in view the facts and circumstances, no duty chargeable from the appellant as held by the Member(Judicial) Or keeping in view the facts and circumstances of the case, duty is chargeable and collectable from the appellant as held by Member(Technical).
7. No penalty is imposed by the Member (Judicial) in view of the fact that the appellants are not liable to pay duty but as they are not contesting the confirmation of duty against them.
Or penalty is imposable under Section 112 of the Customs Act in the facts and circumstances of the case on both the appellants irrespective of contesting or not contesting duty liability as held by the Member (Technical).
(P.K. Jain) Member (Technical) (Ashok Jindal) Member (Judicial) nsk ??
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