Custom, Excise & Service Tax Tribunal
M/S Swiber Construction Pvt.Ltd vs Commissioner Of Customs, Kandla on 15 September, 2015
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.C/11042/2014-DB [Arising out of OIO No.KDL/COMMR/40/2013-14, dt.09.12.2013, passed by Commissioner of Customs, Kandla] M/s Swiber Construction Pvt.Ltd. Appellant Vs Commissioner of Customs, Kandla Respondent
Represented by:
For Appellant: Shri Hardik Modh, Advocate For Respondent: Shri K. Sivakumar, Authorised Representative For approval and signature:
Honble Mr. P.K. Das, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE MR. P.K DAS, MEMBER (JUDICIAL) HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL) Date of Hearing: 29.04.2015 Date of Decision: 15.09.2015 Order No. A/11324 / 2015, dt.15.09.2015 Per: P.K. Das The Appellant filed this appeal against the OIO No.KDL/COMMR/ 40/2013-14, dt.09.12.2013, passed by Commissioner of Customs, Kandla.
2. The relevant facts of the case, in brief, are that the Appellant was awarded a contract for off-shore exploration/exploitation activity of ONGC operation in respect of MAHARD-II Project (in short the said Project) as a sub-contractor. The Appellant entered into a sub-contract agreement for installation, inspection and testing of North Node and Monrel of pipeline and fabrication of bends of the said Project with M/s Jindal Saw Ltd (in short M/s Jindal). Similar agreement was entered with for North Tapti Gas Field Development Project. M/s Jindal, a sub-contractor of the Appellant had imported namely C.S. Seamless Line Pipes from M/s Missui Ltd Japan and filed Warehouse Bills of Entry. M/s Jindal carried out certain processes such as Coating etc on this imported pipes in the warehouse and thereafter, filed ex-bond Bills of Entry and Coastal shipping bills. The goods were removed from Mundra to Mumbai High and claimed exemption from payment of Customs duty under Sr.No.215 read with condition No.30 attached to the Table of Notification No.21/2002-Cus, dt.01.03.2002 for use at ONGC MANHARD-II Oil Exploration Project. After completion of the use of the said pipes at ONGC MANHARD-II Oil Exploration Project, the surplus 410 Coated Pipes were received back by the Appellant. On 09.11.2011, the Central Excise officer, Belapur and Central Intelligence Unit, J.N. Customs House, Nhava Sheva (CIA, JNCH), searched the storage yard of M/s Logistics Enterprises Pvt.Ltd at Taloja, Navi Mumbai, hired by the Appellant and found that the said pipes belonging to the Appellant removed from Mumbai Port to the said place without permission from the Customs and the goods were seized under Panchnama dt.09.11.2011. The officers recorded various statements of the Appellant Company and others and after thorough investigation, a show cause notice dt.26.09.2013 was issued, proposing to deny the benefit of Notification No.21/2002-Cus, dt.01.03.2002 (Sr.No.215) in respect of the said 410 Coated Pipes, demand of duty alongwith interest and to impose penalty and confiscation of the seized goods. By the impugned order, the Adjudicating authority denied the benefit of exemption notification and also confirmed the demand of duty alongwith interest and also imposed penalties. It has also confiscated the goods and imposed redemption fine and also appropriated the amount as deposited during investigation.
3. After hearing both the sides and on perusal of the records, we find that the main issue in this case is whether the Appellant is eligible to avail the benefit of exemption Notification No.21/2002-Cus, dt.01.03.2002 (Sr.No.215) in respect of surplus quantity of 410 Coated Pipes, seized by the Customs authorities. For the purpose of proper appreciation of the case, the relevant portion of the said notification is reproduced below:-
S.No. Chapter or Heading No. or sub-heading No. Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) (The exemption notification Sr.No. and conditions in the present SCN) 215 84 or any other Chapter Parts and raw materials for manufacture of goods to be supplied in connection with the purposes of off-shore oil exploration or exploitation.
Nil Nil 30 30 If, -
(a) the parts and raw materials are used in the manufacture of goods in accordance with the provisions of section 65 of the Customs Act, 1962 (52 of 1962); and
(b) a certificate is produced in each case to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, 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 goods are required for the purposes of off-shore oil exploration or exploitation.
4. On plain reading of the above exemption notification, it is clear that in order to avail the benefit of exemption notification, a certificate is required from authorised officer of Directorate General of Hydro Carbon (DGHC) in the Ministry of Petroleum & Natural Gas, Government of India, to the effect that the goods are required for the purpose of off-shore oil exploration/exploitation. Further, the imported materials are used in the manufacture of goods in accordance with provisions of Section 65 of the Customs Act (i.e. manufacture under warehousing procedure). It has to be satisfied (i) whether the import are in connection with the purpose of off-shore oil exploration / exploitation, (ii) the imported goods are to be used in the manufacture of goods in accordance with the provisions of Section 65 of Customs Act, 1962 (i.e. manufactured under warehousing procedure) and (iii) a certificate is to be produced from a duly authorised officer of Directorate General of Hydro Carbon that the goods are required for the purpose of off-shore exploration/exploitation. In the present case, the Adjudicating authority observed that the surplus quantity of 410 imported pipes had not been used at ONGC MANHARD-II Project and the Appellant had attempted to divert the said imported goods for home consumption without payment of appropriate Customs duty.
5. The learned Advocate on behalf of the Appellant submitted that the Appellant had complied with all the conditions as stipulated in exemption notification, insofar as the goods were imported for use in connection with the ONGC Project. Further, a process of coating on the imported goods was done at the Customs Bonded Warehouse at Taluka-Mundra. DGHC authority issued a certificate that the goods are required for off-shore exploration/exploitation activity of ONGC Project. The disputed 410 coated pipes were taken for use in off-shore oil exploration. It is further submitted that the exemption notification does not provide actual use/end use condition. The present case is covered by the decision of the Tribunal in the case of Clough Engineering Ltd Vs Commissioner of Customs 2006 (198) ETL 457 (Tri.), which is upheld by the Honble Supreme Court as reported in 2006 (202) ELT a 59 (SC). The learned Advocate also relied upon the following decisions:-
a) Ramson Garments Finishing Equip. P. Ltd Vs CCE Bangalore 2007 (211) ELT 44 (Tri-Bang) B) CCE Chennai-I Vs Q Max Test Equipment Pvt.Ltd 2003 (159) ELT 665 (Tri-Che.)
6. The learned Advocate submits that the Adjudicating authority proceeded on the basis of the actual use of the imported material, which is beyond the scope of exemption notification. The Honble Supreme Court in the case of UoI Vs Inter Continental (India) 2008 (226) ELT 16 (SC) held that the Department cannot add a new condition to the notification either restricting the scope of exemption notification or whittling it down.
7. The learned Authorised Representative on behalf of the Revenue reiterates the findings of the Adjudicating authority. He submits that the benefit of exemption notification was extended for use of imported goods in ONGC Project. Admittedly, the Appellant has not used 410 Pipes in ONGC Project, and therefore, they are liable to pay duty for home consumption. The Appellants had cleared the goods without any information to the Customs authority, which amounts to diversion of the goods. So, the confiscation of goods and imposition of penalty are justified. He referred to the various case laws as mentioned in the Adjudication order.
8. We find that the Appellant fulfilled the condition as laid down in Clause (b) of Condition No.30 of the said notification. DGHC authorities had given a certificate that the goods in question are required for off-shore exploration/exploitation activity of M/s ONGC Project. It is certified that the certificate was issued with reference to the Notification No.21/2002-Cus, as amended (Sr.No.215) of the Table. It is also certified that the said certificate was issued subject to fulfillment of Condition No.30 of the notification. The expressions goods are required for the purpose of off-shore oil exploration/exploitation in Clause (b) in Condition No.30 of the said notification, make it clear that at the time of clearance of the goods from the Customs Warehouse, it would be certified that the goods will be cleared for the purpose of off-shore oil exploration. In the present case, there is no dispute that coated pipes were cleared for the purpose of oil exploration. After the use of pipes at Mumbai Project, there was surplus quantity of 410 pipes were returned. It is noticed that the imported pipes were processed by coating etc at the warehouse by M/s Jindal as per the provisions of Section 65 of the Act, 1962. Therefore, in our considered view, the Appellant fulfilled the condition 30 as stipulated in the notification.
9. The Adjudicating authority, observed that the Appellant diverted the goods unathorisedly. We find that the 410 Coated Carbon Steel Pipes were covered under Warehouse Bills of Entry, ex-Bond Bills of Entry as referred in Para 5.2 of the show cause notice. Admittedly, these coated pipes were removed from the bonded warehouse for use in the off-shore under the Bills of Coastal goods. The imported goods were issued for laying the project. It is noted that the imported pipes had lost its identity after processing at warehouse. So, it may be construed that the imported goods were used for the purpose of project.
10. The Adjudicating authority observed that the whole issue of diversion of goods for other than intended purpose is covered by the Boards Circular No.21/2013-Cus, dt.16.05.2013 issued in respect of the difficulties being faced in availing exemption relating to oil exploration sector showing condition to be fulfilled in respect of Notification No.12/2012-Cus, dt.17.03.2012. It has been directed in the case of un-authorised diversion that the action could be initiated in terms of condition of exemption notification. In the present case, it is evident from the records that the imported goods were undertaken the process of coating etc at the Customs Warehouse and thereafter, it was cleared to ONGC Project at Mumbai Port. Hence, there is no material available of unauthorized diversion of the goods from the warehouse. The goods were cleared for use at ONGC Project and the surplus material cannot be treated as unathorised diversion. Hence, the demand of duty and confiscation of the goods cannot be sustained.
11. We find that on the identical issue, the Tribunal in the case of Clough Engineering Ltd (supra) extended the benefit of Notification No.21/2002-Cus (supra) for Seamless C.S. Pipes for intended use in the project for petroleum/gas exploration. In that case, the Appellant imported Seamless C.S. Pipes for execution of the project of petroleum/gas exploration. The Appellant sold excess imported seamless pipes after the project was over. The Customs authorities confiscated the said pipes on the ground that the Appellant violated the Condition No.31 of Serial No.216 of Notification No.21/2002 (supra) which is in question. The Tribunal interpreted the expression required for petroleum operation and held that there is no end use condition in the notification and therefore, excess goods which were intended for use in the project has been sold after the project is over, cannot be said that there was violation of the conditions of the notification.
12. In the present case, the Appellant cleared concrete coated carbon steel pipes by filing various Ex-Bond Bills of Entry for installation, inspection and testing of North Node and Monel on pipelines and fabrications of bends for MANHARD-II Project of ONGC. The imported goods were used for the project and thereafter, surplus pipes which were originally intended for use in the project found to be excess and therefore, the Appellant rightly claimed the benefit of notification. The Adjudicating authority observed that the said decision is not applicable as the serial number and the conditions mentioned in the above decision are different from serial number and conditions mentioned, under which the Appellant claimed the benefit of the notification. We find that the conditions mentioned in both serial numbers of the notification are identical. In the said case, the goods were required for petroleum operations, whereas, in the present case, the goods are required for offshore oil exploration and exploitation.
13. In the case of Clough Engineering Ltd (supra), the Tribunal followed the earlier case of Q Max Test Equipment Pvt.Ltd (supra). The relevant portion of the finding in the case of Clough Engineering Ltd (supra) is reproduced below:-
7.?In the case of Commissioner of Central Excise Chennai v. Q Max Test Equipment Pvt. Ltd. [2003 (159) E.L.T. 665 (Tri. Chennai)] the Tribunal has held in the context of Notification No. 56/88 granting exemption to goods required for use of testing of LSI/VLSI etc. that On my careful consideration of the submissions, as well as the findings recorded by learned Commissioner, I am of the considered opinion that the finding recorded by the Commissioner (Appeals) is just, proper and legal and does not require any interference at our hands. There is no word used for manufacture in the exemption notification. On plain reading of the notification, the exemption is available to the item and it is required for manufacture of goods falling under chapter heading 85.42, namely, Electronic integrated circuits and Micro-assemblies. There is no indication in the notification for production of any end-use certificate. If the item is required for manufacture of goods falling under chapter heading 85.42, then the benefit is required to be extended. In this regard, the assessees contention is that the item being LSI/VLSI tester, it is eligible for the benefit of the concession as the said item is required for the manufacture of goods falling under chapter heading 85.42. The term used in the notification is required for manufacture. The simple interpretation that has to be imported to these words are as to whether they are necessary for the purpose of manufacture of goods falling under chapter heading 85.42. It is not for us to include other meanings than to give a simple meaning of its utility in the manufacture of goods falling under chapter heading 85.42. The importation of the term used in the manufacture of goods is not proper and to hold that it is required to go into the goods to be manufactured by the assessee himself or by the person who are using it. So long as it is shown by the expert opinion, as has been shown in the present case, that it is required for use for testing of LSI/VLSI circuit micro assemblies and printed circuit board, the benefit has to be extended. In the present case, M/s. Electronic Corporation of India Ltd., a Govt. of India Enterprise has certified that the item is for testing of the said LSI/VLSI etc. In view of absence of any end-use condition in the notification, the benefit cannot be denied. It cannot also be included that the goods are required and sold for the manufacture of items falling under chapter heading 85.42 and it is not necessarily required to go into the final product. A plain reading of the notification indicates that it is enough if it is required for the manufacture of goods falling under chapter heading 85.42. The benefit for the testing equipment which are utilized for testing equipment falling under chapter heading 85.42. Therefore the ruling of the Apex Court rendered in the case of Sha Harakchand Dharkaji v. CC, Madras (supra) clearly applies to the facts of the case and is not distinguishable. So also the judgment rendered in the case of Bermalt (India) Pvt. Ltd. v. GOI & Ors., reported in 1986 (23) E.L.T. 411 (Del.) will also apply to the facts and circumstances of the case. It was also brought to our notice that in the present case, the Revenue did not obtain any end-use certificate. Neither there is any condition for production of end-use certificate in the notification. Therefore the key for understanding of this notification is to read the notification in simple terms and not to import any other meaning which is not intended in the notification. The notification exempts the goods specified in the table annexed to the notification falling within Chapter 84 or chapter 85 of Chapter 90 of the First Schedule to the Customs Tariff Act, 1975 and are required for the manufacture of goods, falling under heading No. 85.42 of the said First Schedule. The certificate produced from M/s. Electronic Corporation of India Ltd. clearly indicates that the item is required for manufacture of goods in question which falls under chapter heading 85.42. In that view of the matter, the Commissioners order granting benefit on the simple reading of the notification is justified and correct and there is no infirmity in the same. There is no merit in this appeal and it is rejected.
8.?The above view recorded by ld. Member (Judicial), who disagreed with the order recorded by ld. Member (Technical) that the benefit of the notification was not available to the respondents, has been concurred with by third member, and by majority order, the appeal of the revenue was dismissed. The Tribunal held that the expression for use is on a higher footing than the expression required for use, and in the absence of the expression specifically used for manufacture, has extended the benefit of Notification No. 57/88 to LSI/VSLI tes. equipments falling under Chapter 85.42 and sold to customers other than manufacturers of goods falling under Customs Tariff Heading 85.42 and not actually used for manufacture of electronic Integrated Circuits and Micro assemblies falling under CTH 85.42.
9.?In the light of the above decisions and in the light of the admitted position that the project was completed by the appellants which in turn confirms that the 400 MM dia Seamless C.S. Pipes were intended for use in the project we hold that the appellants are eligible to the benefit of Notification No. 21/2002 and hence confiscation duty demand and penalty are not sustainable, and accordingly set aside the same.
14. In the case of Ramsons Garments Finishing Equipments Pvt.Ltd (supra), the Appellant imported machinery and equipments and claimed the benefit of Notification No.29/1999-Cus, dt.28.02.1999, subject to the condition that the imported machinery and equipments were for use of textile industry. The Appellant, out of the total imported machineries, a few of them sold to hospital/dry cleaners. The Adjudicating authority denied the benefit of the exemption notification on the ground that the imported machineries had not been used in the textile industry. The Tribunal after dealing with various decisions and conditions, held that in absence of condition of actual use in the notification, the benefit of notification cannot be denied merely the goods in dispute were used in hospital and not in the textile industry. Similarly, in the instant case, the Appellant complied with all conditions mentioned in the notification at the time of clearance of the goods for ONGC Project. There is condition for requirement of end use certificate in the notification. There is no dispute that the excess goods were intended for use in the project and therefore, the benefit of the said notification cannot be denied.
15. In view of the above discussion, we find that the demand of duty alongwith interest and penalty and confiscation of the goods cannot be sustained. Accordingly, the impugned order is set aside. The appeal filed by the Appellant is allowed.
(Pronounced in Court on 15.09.2015)
(H.K. Thakur) (P.K. Das)
Member (Technical) Member (Judicial)
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