Gujarat High Court
M/S Gail (India) Limited vs Union Of India on 9 August, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 7238 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ? No
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy
of the judgment ? No
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution No
of India or any order made thereunder ?
==========================================================
M/S GAIL (INDIA) LIMITED
Versus
UNION OF INDIA & ORS.
==========================================================
Appearance:
MOSON LE EXPARTS(11071) for the Petitioner(s) No. 1
MR SN SOPARKAR, SR. ADVOCATE WITH MR AKSHAT KHARE(5912) for
the Petitioner(s) No. 1
MR CB GUPTA(1685) for the Respondent(s) No. 1,2,3
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 09/08/2024
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned senior advocate Mr.S.N. Page 1 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined Soparkar with learned advocate Mr.Akshat Khare for the petitioner and learned advocate Mr.C.B. Gupta for the respondents.
1.1 Rule, returnable forthwith. Learned advocate Mr.C.B. Gupta waives service of notice of Rule on behalf of the respondents.
2. Having regard to the controversy in narrow compass, with consent of learned advocates for the respective parties, the petition is taken up for final consideration today.
3. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs.
"A. Your lordship may be pleased to allow and admit this petition.
B. Your lordship may be pleased to quash and set aside the impugned common Order- in-Original No. AHA-Custm-000- COM-021- 022-21 dated 20.01.2022 passed by Respondent No.2 Principal Commissioner Page 2 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined of Custom, Ahmedabad against Show Cause Notice No. VIII/10-12/Pr.Commr/O&A/2019 dated 19.06.2020 and Show Cause Notice No.SCN/01/CH- Dahej/2021-22 dated 23.08.2021 issued u/s. 28(4) of the Customs Act, 1962...."
4. Brief facts of the case are as under. 4.1 The petitioner is a Government company under section 617 of Companies Act, 1956 read with section 2(45) of Companies Act, 2013. As per the "Memorandum of Association" (MOA) of the petitioner, one of the objects under clause-5 of MOA is to act as an agent of Government of India and to implement its scheme in the country. 4.2 The petitioner is availing customs duty exemption under Notification No.12/2012-custom dated 17th March, 2012 under Entry No.139. Subsequently, Notification 12/2012 was amended by Notification No.36/2013 dated 22nd July, 2013 and further amended by Notification No.30/2014 dated 20th October, 2014. Under the said amendments in Page 3 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined the Notification, period for submission of certificates were extended to twelve months from the date of import.
4.3 Thereafter, the said Notification of the year 2012 was amended by Notification No.31/2015- custom dated 07th May, 2015 by inserting Entry No.139B and by inserting Condition No.102. For claiming exemptions under Notification of the year 2015, one of the conditions under Condition No.102 was that the importer was required to furnish firstly the invoices of sale of Re- gasified LNG (for short "RLNG") to power generating company as defined under Section 2(28) of the Electricity Act, 2003 and secondly, utilization certificate from such power generating companies. The said documents were to be submitted before the concerned customs authorities within a period of three months from the date of import or such extended period not Page 4 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined more than six months as allowed by the Commissioner of Customs.
4.4 The Government of India had circulated a scheme for utilization of gas-based power generation capacity to encourage utilization of Gas. The petitioner has been nominated as E-bid RLNG Operator by Government of India under said scheme. As per Clause No.5(i) of the said scheme, Union of India had granted waiver of custom duty on imported LNG for the use by a power generating company and the procedure for claiming exemption under said Scheme has been made out in Annexure- III thereof. In view of the above Scheme, respondent custom authority has granted exemption from custom duty vide Notification No.31/2015- Custom dated 07th May, 2015. The said scheme was for the period of two years, i.e. for F.Y. 2015- 2016 and F.Y. 2016-2017.
4.5 Subsequently, after the end of the scheme in March 2017, the respondent authorities Page 5 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined have continued the exemption on imported LNG by Notification No.52/2017-customs dated 30th June, 2017. The said Notification came into effect from 01st July, 2017 and under Sr. No.10 thereof, the earlier exemption on imported LNG was continued with condition No.3. The said prescribed condition No.3 was akin to earlier condition No.102 introduced under Notification of the year 2015 with only deviation that importer was required to provide only utilization certificate within a period of twelve months from the date of import which was further extendable up to six months as per the order of Commissioner of Customs. Thus, the exemption on LNG continued to be in place since Notification 12/2012. 4.6 Thereafter, the Principal Commissioner of Customs, Ahmedabad had issued a show-cause notice No.VIII/10-12/Pr.Commr/O&A/2019 dated 19th June, 2020 to the petitioner under Section 28(4) of the Customs Act, 1962 (for short 'the Act') Page 6 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined for the import period from 27th May, 2015 to 12th December, 2018 alleging following issues;
(i) Raising a demand of custom duty of Rs. 1,66,62,050/-on 0.66% conversion/transit loss during re-gasification process.
(ii) Raising a demand of custom duty of Rs.2,01,71,06,450/- alleging non-submission of utilization certificate within necessary time limits by correlating with Bills of Entry. 4.7 Subsequently, another show cause notice was issued on 23rd August, 2021 under Section 28(4) of Act for raising a demand of Rs.03,01,376/- for the period September, 2019 to August, 2020 on account of transit loss claimed by the petitioner during conversation of LNG into RLNG.
4.8 The petitioner, filed reply to the first show-cause notice on 25th August, 2020 along with all documentary evidences. Subsequently, the Page 7 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined petitioner had also filed reply to the second show-cause notice by letter dated 09th November, 2021.
4.9 Under the said replies, the petitioner had mainly raised the question of maintainability of show-cause notices under Section 28(4) of the Act as on 19th June, 2020 (first show-cause notice) and 23rd August, 2021 (second show-cause notice) as there has been no satisfaction of the respondents before the issuance of such show- cause notices about any willful mis-statement or collusion or suppression of fact by the petitioner. The petitioner also placed on record the evidence about the issue for claiming exemption on conversation loss from LNG into RLNG settled by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and by Commissioner of Customs, Pune which had been accepted by the respondent No.1. The petitioner has also placed on record the evidences on record confirming that Page 8 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined the alleged delay in submission of utilization certificate is factually incorrect except one Bill of Entry No.3636240 and the same was never objected any time prior to first show-cause notice.
4.10 The respondent No.2 had accorded personal hearing with respect to the first show- cause notice on 09th September 2020 and 21st December, 2021, whereas no personal hearing was provided by respondent No.3 with respect to second show-cause notice though the same was sought in the reply filed by the petitioner. 4.11 Subsequently, the Commissioner of Customs had passed common Order-in-Original dated 20th January, 2022 by rejecting all contentions of the petitioner and passing an order with respect to both the show-cause notices by confirming the respective demands along with interest under Section 28AA of the Act and 100% penalty under Page 9 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined Section 114A of the Act under both the show-cause notices.
5. Learned senior advocate Mr. Soparkar for the petitioner submitted that the impugned Order- in-Original is without jurisdiction as the show- cause notice dated 19th January, 2020 issued under Section 28(4) of the Act is not tenable as there is no willful misstatement or suppression of material facts by the petitioner for the alleged non-compliance of the Notification No.12/2012- Customs dated 17th March, 2012 and the subsequent Notifications for granting exemption from payment of the customs duty on import of Liquid Natural Gas (LNG) and Natural Gas (NG) for supply of Re- gasified LNG to power generating companies as defined in clause of Section 2(28) of the Electricity Act, 2003.
5.1 It was submitted that the respondent authorities could not have assumed the jurisdiction to issue notice invoking the Page 10 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined extended period of limitation as the impugned show-cause notice dated 19th June, 2020 is for the period from 27th May, 2015 to 12th December, 2018 which is admittedly beyond the period of two years as provided in the said Section. 5.2 It was submitted that the respondent authorities have misinterpreted the provisions of the Notifications granting exemption from payment of duty by the petitioner for importing LNG without taking into consideration the submissions of the petitioner made along with documentary evidence placed on record to show the reconciliation of the imported LNG and supply of RLNG to the power generating companies. 5.3 It was submitted that the respondent authorities have failed to consider the fact that modalities for claiming customs duty exemption for LNG cargos imported for supply to power plants were discussed with Deputy Commissioner of Customs, Surat on 18th June, 2015 and the same was Page 11 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined communicated to the petitioner vide letter dated 20th June, 2015 and emails dated 15 th June, 2015 and 10th July, 2015. The petitioner has also submitted month-wise reconciliation of imported cargo along with utilisation certificates and invoices as per the Notification issued in the year 2015.
5.4 Learned senior advocate Mr.Soparkar submitted that the scheme of the Notification issued by the respondent authorities only requires submission of utilisation certificate, however co-relation with the utilisation of RLNG with Bills of Entry is not technically possible for any importer as the LNG is imported in liquid form, whereas supply to the power generating companies is Re-gasified Natural Gas and therefore, the respondent authorities could not have alleged that there has been any misstatement or suppression of material facts on part of the petitioner. Learned senior advocate further Page 12 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined submitted that supply of RLNG to the generating companies is on continuous basis from the plant of the petitioner by pipeline and therefore, it would be impossible to co-relate it in any manner with the quantity of LNG imported by the petitioner as per the Bills of Entry which could have been termed as suppression of material facts or misstatement of the petitioner. 5.5 With regard to the allegation of delay in submission of utilisation certificate or non- submission of utilisation certificate for the total 27 Bills of Entry from 27th May, 2015 to 12th May, 2017, it was submitted that such allegation and finding by the Adjudicating Authority are factually incorrect inasmuch as utilisation certificate submitted against the Bills of Entry from Serial Nos.1 to 25 at Annexure-C to the first show-cause notice were submitted within the prescribed period of three months as required under the Notification and Bills of Entry for Page 13 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined Serial Nos.26 and 27 of the Annexure-C of the first show-cause notice, cargos were imported under the Notification of the year 2012 which was amended by Notification of the year 2013 and 2014 and the petitioner has submitted the requisite documents by letter dated 21st November, 2017 within the stipulated period of 12 months. 5.6 It was, therefore, submitted that assuming for a while that there was delay in submitting utilisation certificate by the petitioner, the same would result in technical or lineal breach, since the petitioner has submitted reconciliation statement of supply of RNLG to the power generating companies which is not doubted by the Adjudicating Authority. It was submitted that the impugned order is passed only on literal application of the Notification granting exemption from duty to the petitioner company for import of LNG for supply of the RNLG to the generating companies.
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NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined 5.7 It was further submitted in the alternatively that as there was delay of about four-months-thirteen-days in submission of the utilisation certificate by the petitioner, the same was within the extendable period of six months and the Respondent-Department had never objected while accepting the submitted documents on the date of submission, meaning thereby that the time for submission was deemed to have been extended.
5.8 Learned senior advocate Mr.Soparkar thereafter submitted that the impugned order is passed only on the alleged violation of conditions of the Notification for non-submission of utilisation certificate and for not considering the fact that there was conversion loss of 0.66% in RLNG which is also not disputed by the respondent authorities.
5.9 Learned senior advocate Mr.Soparkar referred to and relied upon the order passed by Page 15 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined the CESTAT, New Delhi in Service Tax Appeal No.52946 of 2016 and Service Tax Appeal No.52980 of 2016 wherein the claim of exemption by M/s.Petronet LNG Limited which converts LNG into RNLG has been upheld on the ground that the said quantum had not been utilised for any commercial gain and it is technologically impossible to convert 100% LNG of RNLG. Reliance was also placed on the decision of the Commissioner (Appeals), Pune while deciding the appeal of the petitioner by order dated 21st July, 2017 by allowing loss of 0.66% by holding that it is technologically impossible for regasification of 100% LNG into RLNG and the respective Revenue Department had also completed final assessment under Section 18(2) of the Customs Act, 1962. 5.10 It was, therefore, submitted that adjudicating both the show-cause notices on account of 0.66% conversion loss is nothing but reopening of the issue which has been settled by Page 16 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined the competent forum and accepted by the Department.
5.11 Learned senior advocate therefore submitted that the impugned Order-in-Original passed by the Adjudicating Authority is, therefore, liable to be quashed and set aside on the face of it as the same is without jurisdiction as well as merits.
6. On the other hand, learned advocate Mr. C. B. Gupta for the respondents submitted that the Adjudicating Authority has applied the conditions prescribed in the exemption Notification and considering the facts of the case, it was found that conditions of the Notification are not complied with and as such the petitioner was not entitled to get the benefit of exemption of the customs duty on the import of the cargo.
6.1 It was submitted by learned advocate Mr.Gupta that the Adjudicating Authority, after Page 17 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined scrutinising of the documents, has stated in paras-2.6 of the Order-in-Original as under.
"2.6 Scrutiny of the documents submitted by the Noticee revealed that:
1) The invoices issued by the Noticee to the power generating companies did not contain any reference of Bill of Entry, thereby preventing the Customs official to establish the co-relation between goods Imported and their utilisation. In absence of such vital information on the Invoices, it became difficult to ascertain whether the Noticee was issuing invoices for sale of RLNG to the generating companies within a period of three months/twelve months from the date of import. ... ... ...
ii) The power companies submitted utilization certificates in different formats which did not contain any reference to the corresponding Bill. of Entry or the Invoices, thereby, making it impossible to ascertain whether the Utilisation Certificates had been produced within period of three Page 18 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined months/twelve months from the date of import or otherwise. ... ... ..."
6.2 It was submitted that as per the Notification applicable for exemption of the custom duty for import of LNG is subjected to the condition that the importer produces the invoices for sale RLNG to the generating companies before the customs authority within the period of three months from the date of import or such extended period not exceeding further period of six months and also produces utilisation certificates from the generating companies to the effect that RLNG has been utilised for generating and supplying electrical energy before the customs authority within a period of three months from the date of import. It was pointed out by learned advocate Mr. Gupta that petitioner has failed to adhere to the conditions of the Notification to avail the benefit of exemption of customs duty. By inviting attention of the Court to the details in the show-cause notice pertaining to 28 Bills of Page 19 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined Entries wherein it is found that the petitioner has not produced utilisation certificate and the certificates which are produced are beyond the specified time limit of three months and that some certificates were not appropriate as there is no co-relation with the quantity stated in the Bill of Entry and the utilisation certificate produced by the petitioner.
6.3 It was, therefore, submitted that after considering the reply of the petitioner in detail, the Adjudicating Authority has rightly concluded that there is violation of the conditions prescribed in the Notification of exemption and the petitioner is, therefore, liable to pay the demand of customs duty determined in the impugned order. 6.4 Learned advocate Mr.Gupta further submitted that the impugned Order-in-Original is an appealable order and the petitioner having alternative efficacious remedy, this Court should Page 20 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined not interfere at this stage and the petitioner should be relegated to file appeal before the appellate authority raising the grievances which are made in this petition.
7. This Court (Coram: Hon'ble Mr.Justice J.B. Pardiwala as His Lordship was then and Hon'ble Ms. Justice Nisha M. Thakore) by order dated 21st April, 2022 after considering the Order-in-Original dated 20th January, 2022 passed by the Commissioner of Customs which is an appealable order, issued notice considering the issue raised in the petition by observing as under.
"3. We take notice of the fact that the impugned order is an appealable order. Ordinarily, when a statutory remedy of filing an appeal is available to a litigant, the Writ - Court should be loath to exercise its extra-ordinary jurisdiction under Article-226 of the Constitution of India. However, having regard to the issues raised in the present writ-application, we have been persuaded to issue notice to the respondents. If we would have relegated Page 21 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined the writ applicant to avail the statutory remedy of filing appeal, then the appellate authority would have asked the writ-applicant to make a pre-deposit of 7.5% of the total demand. The total demand is of approximately Rs.400 Crore. 7.5% of the total demand comes to around Rs.30 Crore.
4. We are also inclined to grant ad- interim relief in terms of Para-8(C) on the condition that the writ-applicant shall deposit an amount of Rs.10 Crore with the respondent no.2 within a period of eight days from today.
5. Let Notice be issued to the respondents, returnable on 23.06.2022."
8. Considering the submissions made by learned advocates of the respective parties as well as the facts and documents placed on record, in view of the above observations made by the coordinate Bench while issuing the notice in this petition, preliminary objection of alternative remedy need not be sustained, and the petition is considered on merits.
8.1 On perusal of the impugned show-cause Page 22 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined notices issued by the Commissioner of Customs, it appears that the same could not have been issued on the ground of suppression of material facts on part of the petitioner by invoking Section 28(4) of the Act which reads as under.
"28. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
xxxxx (4) Where any duty has not been levied or not paid or has been short-levied or short-paid or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,--
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been so levied or not paid or which has been so short-levied or short-
paid or to whom the refund has erroneously been made, requiring him to Page 23 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined show cause why he should not pay the amount specified in the notice."
9. Considering the contents of the show- cause notice, there is no allegation made against the petitioner for suppression of facts. The show-cause notice and the impugned Order-in- Original is passed only based on alleged breach of conditions of the exemption notification by the petitioner for not submitting utilisation certificate within the prescribed time limit or non-production of such certificates from the power generating companies or the certificates produced were not proper certificates in respect of the quantity supplied to the generating companies during the relevant period. 9.1 It would therefore be germane to refer to the conditions of the Exemption Notification No.31/2015 dated 07th May, 2015 which has amended the Notification No.12/2012-Cus dated 17th March, 2012 as under.
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NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined "(a) in the Table, after serial number 139A and the entries relating thereto, the following serial number and the entries shall be inserted, namely:-
"139B 2711 11 00 Liquefied natural gas (LNG) and natural gas (NG) Nil - 102"
2711 21 00 when imported by GAIL for supply to a generating company as defined in clause (28) of section 2 of the Electricity Act, 2003 (36 of 2003) to supply electrical energy or to engage in the business of supplying electrical energy, for generation of electrical energy:
Provided that the exemption shall not be available if such liquefied natural gas (LNG) and natural gas (NG), is used for generation of electrical energy by captive generating plant as defined in clause (8) of section 2 of the Electricity Act, 2003 (36 of 2003).
(b) after the Table, in the proviso, after clause (bc), the following clause shall be inserted, namely:-
"(ca) the goods specified against serial number 1398 of the said Table on or after the 1st day of April 2017;";
(c) in the ANNEXURE, after condition number 101 and the entries relating thereto, the following shall be inserted, namely: -
"102 If,-
(1) the importer furnishes a self-declaration at the time of import to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, indicating the quantity of LNG being imported for supply as Regasified Liquefied natural gas (RLNG) to generating companies as defined in clause (28) of section 2 of Electricity Act 2003;
(ii) the importer produces the invoice for sale of RLNG to the generating companies before the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, within a period of three months from the date of import, or such extended period not exceeding à further period of six months as the Commissioner of Customs may allow;
(iii) the importer also produces utilisation certificates from the generating companies to the effect that the RLNG has been utilised for generating and supplying electrical energy by the said generating companies before the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, and such utilisation certificates shall be produced within a period of three months from the date of import, or such extended period not exceeding a further period of six months as the Page 25 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined Commissioner of Customs may allow;
(iv) GAIL furnishes a corporate guarantee backed by it's Board resolution, of an amount equal to the difference between the Customs duty leviable on such goods but for the exemption contained therein and the duty levied at the time of import, to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be;
(v) the importer furnishes an undertaking to pay, on demand, in the event of his failure to comply with any of the aforesaid conditions, an amount equal to the difference between the Customs duty leviable on such goods but for the exemption contained therein and the duty levied at the time of import, along with the applicable interest thereon;
(vi) the importer furnishes the invoices and utilisation certificates for a quantity greater than the quantity indicated in self-declaration furnished under (i) above, then the importer shall be allowed to adjust the duty paid on such additional.
9.2 Thereafter, it appears that Notification No.52/2017 dated 30th June, 2017 was issued prescribing the effective rate of duty on goods specified in Notification being LNG and NG. The condition No.3 of the said Notification reads as under.
"(a) The importer furnishes security by way of bank guarantee of an amount equal to the difference between the duty leviable on such goods but for the exemption contained therein and the duty levied at the time of impart, to the Deputy Commissioner or the Assistant Commissioner of Customs, as the case may be;
(b) The importer produces a certificate from the jurisdictional Deputy Commissioner or the Assistant Commissioner of Central Excise, as the Page 26 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined case may be, of the generating company within a period of twelve months from the date of import, or such extended period not exceeding a further period of six months as the Commissioner of Customs may allow, to the effect that the said Liquefied natural gas (LNG) and natural gas (NG) so imported and supplied has been utilised for generating and supplying electrical energy by the said generating company,
(c) The importer furnishes an undertaking to pay, on demand, in the event of his failure to comply with any of the aforesaid conditions, an amount equal to the difference between the duty leviable on such goods but for the exemption contained therein and the duty levied at the time of import, along with the applicable interest thereon."
9.3 It appears that in course of the audit conducted by the Respondent-Department, following issues were noticed.
"(a) The Noticee imported LNG under Sr. No. 139B of Customs Notification 31/2015- Customs dated 07.05.2015.
(b) They followed a practice of submitting sale invoice and utilization certificate on completion of the period of three month from the month of import.Page 27 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024
NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined
(c) There was difference between quantity imported shown in the Bill of Entry and quantity received by the importer and the reason for difference was not forth coming from the records.
Revenue foregone on the said differential quantity was calculated by CRA as Rs. 2,03,57,456/-
(d) Utilization Certificate submitted was also short of actual quantity sold. Rs. 11,93,29,989/- was revenue involved on such quantity of LNG for which utilization certificate was pending.
(e) There was no evidence of any sale of LNG of 68,21,849 MMBTU of Value Rs.2,86,05,99,588/- involving duty forgone Rs. 14,73,20,888/-
(f) The Noticee claimed transit loss of 0.66% of LNG actually received. However, provision under which such loss had been claimed was not on record. The revenue forgone on such transit loss is Rs.41,07,145/-."
9.4 The said issues were taken up with the petitioner by various communications dated 27th November, 2017, 12th December, 2017, 04th February, 2019 and 11th February, 2019, which were replied by the petitioner by letters dated 15th February, 2018, 13th April, 2018 and 05th March, 2019 by Page 28 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined submitting various documents. Thereafter inquiry was initiated by the Preventive Section and statements of the responsible/authorised persons of the petitioner and M/s.Petrone LNG were recorded.
9.5 Considering the documents made available on record and statements recorded during inquiry, it was prima facie observed in the impugned order that the petitioner failed to comply with the conditions stipulated under the Exemption Notification as under.
"(a) They failed to produce the utilisation certificates from the Power generating companies to the effect that the RLNG has been utilised for generating and supplying electrical energy by the said Power generating companies before the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be. within a period of three months/twelve months from the date of import, or such extended period not exceeding a further period of six months as the Principal Commissioner or Commissioner of Customs may allow.
Page 29 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined (b) They failed to produce any
documentary evidence to ascertain the quantity lost during gasification and any statutory provisions allowing exemption from customs duty claimed on 0.66% of LNG imported during gasification of liquid LNG before its supply to Power generating companies."
10. From the above alleged failure on part of the petitioner, it was concluded that petitioner was not eligible for exemption from custom duty under the Exemption Notification more particularly to reconcile conditions of Exemption Notification as the invoices issued by the petitioner to the power generating companies towards sell of RLNG and utilisation certificate issued by the generating companies did not contain any reference to the corresponding entry to the Bills of Entry.
11. The Respondent-Department therefore invoked provision of Section 28(4) of the Act on the alleged breach of the conditions by the petitioner on the ground that the utilisation Page 30 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined certificate was not produced within the time limit of three months and twelve months and the transit loss of LNG not supplied to the power generating companies during the gasification during the relevant period.
12. Thus, in view of the alleged allegation levelled against the petitioner, it is clear that there is no suppression or failure to disclose of the material facts on part of the petitioner because the petitioner has submitted all the documents during the course of the inquiry along with reconciliation statement and it was also made clear that it is technically impossible for the petitioner to reconcile the LNG as shown in the Bills of Entry with the quantity of regasification Natural Gas supplied to the generating companies through pipeline in a continuous manner.
13. The impugned notice and the Order-in- Original therefore are contrary to the facts Page 31 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined available on record. The Commissioner (Appeals) in the impugned oil dated 20th January, 2022 with regard to invoking of Section 28(4) of the Act has observed as under.
"14. It has been contended that the extended period of limitation was not applicable since there was no wilful mis-statement or suppression of facts in the case. In this regard it is to mention that the entire demand has been raised in light of the non- fulfilment of the conditions of relevant Notifications. Both the Notifications clearly spell out that the exemption to import of LNG is for the specific purpose of supply to generating company as defined in clause (28) of Section 2 of the Electricity Act, 2003 and generation of electrical energy. In the instant case, it was in the knowledge of the Noticee that 0.66% of the Imported LNG was neither supplied to the generating company nor used for generation of electrical energy in as much as such quantity was claimed as loss even before the act of supply to the generating company i.e. process loss during conversion from LNG to RLNG. Despite this specific knowledge, the Noticee claimed the exemption under the relevant Notifications in respect of such quantity of LNG which was claimed Page 32 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined as transit loss. This fact pertaining to the transit loss was suppressed from the Revenue and the benefit of exemption was availed by resorting to suppression of such material facts. Further, both the Notifications clearly specify that the requisite certificates are to be produced before the competent authority within the prescribed time frame. However, the Noticee chose to maintain silence in respect of the quantity of imported LNG for which they had failed to submit the requisite certificate in the event that the Noticee are not in receipt of the requisite certificate within the prescribed time frame, it was incumbent upon them to either apply for extension of time limit or forthwith pay the applicable Customs Duty on such quantity for failure to fulfill the condition of the Notifications. However, it is observed that the Noticee have neither applied for extension of time limit nor have paid the applicable Customs Duty on such quantity of imported LNG. These facts came to light only when the audit was undertaken. Had it not been for the audit, the above facts would never have seen the light of the day. Thus, I find that the Noticee have failed to discharge the onus cast upon them to fulfill the conditions of the exemption Notifications and yet chose not to pay the Customs Duty by resorting to suppression of material facts. Further, the Noticee has failed Page 33 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024 NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined to submit the details of supply and utilisation of RLNG despite being repeatedly called for vide letters dated 27.11.2017, 12.12.2017, 11.12018, 6.4.2018, 4.2.2019 and 11.2.2019 and such act tantamount to suppression of facts with an intent to evade payment of Duty. Thus, the argument of the Noticee is not maintainable and I find that the extended period of limitation is applicable to the facts of the case."
14. From the above observations, it is apparent that the allegation levelled against the petitioner for suppression of material facts are not born out from in findings arrived at in the impugned Order-in-Original to invoke provision of section 28(4) of the Act for extended period of limitation to assume jurisdiction by the respondent authorities to issue show cause notices and pass the impugned order.
15. In view of the above facts, we are of the opinion that the Adjudicating Authority could not have assumed the jurisdiction to issue show- cause notice under Section 28(4) of the Act and the entire proceedings pursuant to such show- Page 34 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024
NEUTRAL CITATION C/SCA/7238/2022 JUDGMENT DATED: 09/08/2024 undefined cause notice are vitiated. As the show-cause notices are held to be without jurisdiction, no further analysis on merits of the case is required. Therefore, both the show-cause notices as well as the impugned Order-in-Original are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) ANUP Page 35 of 35 Uploaded by ANUP V PARIKH(HC00956) on Fri Aug 30 2024 Downloaded on : Fri Aug 30 21:31:06 IST 2024