Customs, Excise and Gold Tribunal - Mumbai
Noble Asset Co. Ltd. And Ors. vs Commissioner Of Customs (Preventive) on 5 April, 2006
Equivalent citations: 2006(112)ECC457, 2006ECR457(TRI.-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1 These appeals are emanating out of a common Order in original No.CCP/KPM/ADJN/R&I/2/2005 dated 23rd March 2005 of the Commissioner of Customs preventive), New Custom House, Mumbai, in relation to an offshore second hand rig named 'Essar Noble Jimmy Puckett', in which the following liabilities have been arrived on various appellants, before us:
Appeal No. Appellant Order of the Respondent C/392/05 ' M/s.
Noble Asset Company Limited (hereinafter referred to as Noble).
(i) Rig Noble Jimmy Puckett/Essar Explorer confiscated under Section 111(d), (f),(g),(h) and (o) and under Section 113(d), (f), (g) and (h) of the Customs Act,1962 and was allowed to be released on a fine of Rs. 15 Crores under Section 125(2) of the Customs Act, 1962.
(ii) Customs duty of Rs. 75,54,22,673/-
under Section 12 read with Section 125(2) of Customs Act, 1962 confirmed along with interest for import in December, 1997.
(iii) Customs duty of Rs. 86,14,64,958/- under Section 12 read with Section 28, read with Section 125(2) of the Customs Act,1962 confirmed along with interest, for import in April,1999 this duty was to be paid if duty at Sl.No. (ii) was not paid.
(iii) Penalty of Rs. 2,00,00,000/-
Under Section 112 and or Under Section 114 of Customs Act, 1962.
C/606/05 M/s.
Neptune Exploration and Industries Limited (hereinafter referred to as Neptune.
Penalty of Rs. 50,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962.
C/607/05 Mr. Mohan Ramanathan, Authorized Signatory, M/s. Neptune Exploration and Industries Limited.
Penalty of Rs. 2,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962.
C/614/05 Mr. Naresh Kumar, Director, M/s. Exploration and Industries Limited. Penalty of Rs. 1,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962. C/608/05 Mr. R.A. Agrawal, Director, M/s. Exploration and Industries Limited. Penalty of Rs. 2,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962. C/632/05 M/s.
Modest Shipping Agency Private Limited (hereinafter referred to as Modest Shipping).
Penalty of Rs. 5,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962.
C/631/05 ShriKishoreGambani, Director, M/s. Modest Shipping Agency Private Limited.
Penany of Rs.
2,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962.
C/634/05 Essar Oil Limited [hereinafter referred to as Essar].
(i) Customs duty of Rs.
7,89,53,162/- was confirmed under Section 12 read with Section 125(2) of the Customs Act, 1962, for import of rig (Essar Explorer) in 1992.
(ii) Penalty of Rs. 2,00,00,000/- under Section 112 and or under Section 114, of Customs Act, 1962.
C/635/05 Mr. S.R. Agrawal, Chief Executive, Drilling Division, Essar Oil Lid.
Penalty of Rs. 25,00,000/- Under Section 112 and/or Under Section 114 of Customs Act, 1962.
C/637/05 Mr. A.D. Amladi, General Manager (Commercial), Essar Oil Ltd.
Penalty of Rs. 1,00,000/- Under Section112 and/or Under Section 114 of Customs Act, 1962.
C/638/05 Mr.N. Ramesh, Chief Executive, Engineering Division, Essar Oil Ltd.
Penalty of Rs. 2,00,000/- Under Section112 and/or Under Section 114 of Customs Act, 1962.
C/656/05 M/s.
J.M. Baxi and Co.
Penalty of Rs. 2,00,000/-u/s.112 and/or Under Section 114 of Customs Act, 1962.
C/655/05 Mr. NareshKotak, Partner J.M. Baxi and Co.
Penalty of Rs. 1,00,000/- Under Section 112 and/or Under Section114 of Customs Act, 1962.
C/659/05 Mr. Deepinder Singh Bharara, General Manager, J.M. Baxi and Co.
Penalty of Rs. 1,00,000/- Under Section 12 and/or Under Section 114 of Customs Act, 1962.
C/654/05 M/scary Offshore Services Private Limited.
Penalty of Rs. 2,00,000/- Under Section112 and/or Under Section 114 of Customs Act, 1962.
C/ 657/ 05 Mr. Suvarna, Senior Executive, M/s. Arya Offshore Services Private Limited.
Penalty of Rs. 1,00,000/- Under Section 112 and/or Under Section114 of Customs Act, 1962.
C/658/05 Mr. Siddharth Roy, Chief Executive Officer, M/s. Arya Offshore Services Private Limited.
Penalty of Rs. 1,00,000/- Under Section 112 and/or Under Section114 of Customs Act, 1962.
2. The factual background briefly stated necessary for deciding the issues, is as follows:
a) Sometime in December, 1986, Essar was awarded, a letter of indent, by ONGC for carrying out offshore drilling in Bombay High. Based on this letter, Essar applied for an Import licence which was issued to it, by the CCI & E in March 1987, permitting import of a second hand offshore rig.
b) In May, 1987, Essar filed a Bill of Entry No. 010586, seeking clearance of the second hand rig "Essar Explorer", claiming exemption from the whole of dune of customs in terms of Notification 516/86 dated 30th December, 1986. Along with the bill of entry, Essar also filed the requisite certificates, from the Ministry of Petroleum as also from DGTD, as required under the said Notification along with the Import licence.
c) In June, 1987, a contract was executed between ONGC and Essar for offshore drilling. The rig, as per this agreement, was to be used for conducting drilling operations at various off-shore locations situated in the Exclusive Economic Zone for ONGC
d) Sometime in April/May, 1992, the rig "Essar Explorer" developed some damage, to 'spud can,' necessitating repairs for which the rig was moved from its location at Platform NQ, a designated area, to the Nhava channel for inspection and repairs. Thereafter a dry dock was booked in Bahrain and the rig was towed using vessel "MV Sea Teal". This was done as per the existing practice of treating the rig as a vessel. On 31st May 1992, an Import General Manifest (IGM) was filed for both, the rig 'Essar Explorer" as well as for the tow Vessel "MV Sea Teal".
e) On 1st June 1992, an Export General Manifest (EGM) was filed for the rig "Essar Explorer", as well as for the Tow Vessel "MV Sea Teal" and port clearance obtained from proper officer of customs, on stating that the rig was being cleared outwards from the port of Bombay to Bahrain. The EGM for "MV Sea Teal" was endorsed by the Customs official stating that the export had been permitted under Customs Preventive supervision.
f) In September, 1992, the rig was brought back from Bahrain under tow Vessel "MV Sea Tern", which dropped the rig at a non-designated location, situated 130 miles away from Platform SM, where the rig was to be deployed. The rig was subsequently towed to Platform SM using ONGC's Tug boats.
g) In January, 1993, an addendum to the contract of 1987 between ONGC and Essar was entered into. As per this addendum, the contract between the two parties was extended for a period of 6 months. It was provided that for a period when the rig was under repair, there would be zero rate charge applicable. This addendum formalized understanding contained in telex dated 26/8/1992.
h) On 23rd December, 1996, Essar sold the rig to Noble. It simultaneously entered into another agreement with Noble in terms of which the rig was hired back by Essar under bare boat charter to fulfill its drilling contract with ONGC. When the agreements were entered into, the rig was stationed at Platform IF a non designated area. After purchase of rig by Noble, it was renamed as "Noble Jimmy Puckett".
i) In February, 1997, Essar made applications to DGFT, New Delhi, informing DGFT of its intentions to sell the rig and simultaneously executing bare board charter. These letters sought no-objection from DGFT to export the said rig. Essar wrote several reminders thereafter to the DGFI
j) On 12"1 November, 1997, Noble entered into an agreement with Neptune, to give Neptune, the said rig on hire for carrying on ONGC operations after its bare board charter with Essar expired. On 6th December, 1997, Essar's contract with ONGC came to an end. On this day, the rig was working at "HY Platform", a non designated area. On 11th December 1997, Essar delivered the rig to Noble in international waters at the location RB 199A (non-designated area).
k) On 30th December 1997, the rig was deployed by Neptune for ONGC at Platform NE which is a designated area. In October 1993, ONGC renewed its contract with Neptune, for a period of 2 years, in terms of the agreement between them, the rig required certain repairs before commencement of the new contract. Accordingly the rig was sent to Sharjah for repairs. In December 1998, Noble informed the Customs about Neptune's contract with ONGC and of the fact that the rig needed repairs and the same had to be exported to Sharjah for repairs and was to be imported after its repairs. Accordingly, on 10th December, 1998, shipping bill was filed for export of the rig to Sharjah. At the time of export, the rig was at location "HX" platform and was inspected by Customs authorities at that location, noting of tin's inspection was made on reverse of the Shipping Bill.
l) In April, 1999, Noble, by a letter informed the Customs about the repairs having been completed and vessel being towed to Bombay offshore. It was also mentioned in the said letter that after the repairs the rig would be deployed at ONGC location, in terms of the contract between ONGC and Neptune. On 9th April 1999, Neptune filed a Bill of Entry No. 11081/1 seeking the clearance of the rig after repairs. In the said bill of entry, Noble chimed benefit of Notification No. 94/96 dated 16/12/1996 and paid duty on the cost of repairs, insurance and freight,
m) In February, 2001, Noble informed the customs that Neptune's contract with ONGC, was to complete on 25th April 2001, and that thereafter it intended to take the rig out of India. On 12th May 2001, the rig was seized by officers from the office of Commissioner of Customs (Preventive), Mumbai at 19o 38' 28" and 7 to 17' 31" under Section 110 of Customs Act, 1952, and the rig was handed over to Noble under supratnama.
3. After seizure of the rig by the officers of the Preventive wing of the custom House, appellants mentioned above were issued show cause notice F. No. SE/INT/INV/28/2001/S/14-4/38/ 2001 dated 18.7.2003 by the Commissioner of Customs (Preventive). The said notice was adjudicated by the Commissioner of Customs (Preventive), who upheld the allegations leveled and confirmed a demand for customs duty on Essar and Noble besides holding the rig liable to confiscation and also imposing penalties.
4. These appeals challenge the correctness of the order passed by the respondent on several counts, which we will deal in the subsequent paragraphs. The matter was argued at great length by counsels Appearing on behalf of the appellant's and the special-counsel appointed by the revenue. Broadly speaking the submissions made by the appellant and the revenue are as under:
A) In so far as the demand for duty is concerned the following arguments were advanced on behalf on the appellant's.
i) that the scheme of the Customs Act, 1962 was so designed that only rigs which are brought into the country for first time require filing of a bill of entry and can be considered as goods. Once cleared as goods, they cease to be imported goods and are to be treated as a vessel and no bill of entry or shipping bill is required to be filed for their subsequent movements. Also no IGM/EGM is required to be filed for the movements in and out of India as such IGM/EGM is required to be filed when vessel is carrying goods on it. In support of this contention reliance was placed on the decision of the Bombay High court in the case of Amarship Management Pvt. Ltd. v Union of India 1996 (86) ELT 15. It was also submitted that even the show cause notice as well as the adjudication order in para 63(ii) and 149 respectively accept that at the relevant time there was a practice in the customs to treat a rig as a vessel.
ii) the demand for duty was unsustainable as according to the practice of the Customs with regard to oil rigs (as recorded in the decision of the Tribunal in the case of Sedco Forex International Drilling Inc. v Commissioner of Customs, Mumbai, reported in 2001 (135) ELT 625 (Tri-Mumbai), affirmed by Supreme Court in 2005 (179) HLT-439, no duly was payable on movement of the rig to or fro the designated areas (in the EEZ), after the rig had been once cleared on a Bill of Entry for home consumption. It was submitted that Essar had filed a Bill of Entry for the import of rig in the year 1987 and had cleared the same for home consumption against a bill of entry on & after payment of applicable duty. Therefore, as per Customs' own established practice, appellants were under no obligation to file any import or export documents for the subsequent movement in and out of the designated areas.
iii) that the act of taking the rig to Bahrain and bringing it back to India and similar movement in 1999 could not be considered as an act of export or import, as the case may be, in view of the decision of the Tribunal in the case of Aban Lloyds Chiles offshore Ltd. v. Commissioner of Customs and on such movement no duty could be demanded.
iv) that assuming duty was recoverable for such movement after repairs or from a designated area to non designated area, the same to be an import, appellants would have been entitled to Drawback of almost the entire amount of duty immediately on such movement of rig to a non-designated areas. According in the case of Essar if duty was recoverable for the movement of the rig in September 1992, almost the entire amount of such duty would have become refundable or payable as Drawback to the appellant by 11.5.1993 when the rig moved from designated area to a non- designated area in the High Sea. Same wwould be the case in respect of the demand made on Noble in 1997 and 1999.
v) that in any case, demand for duty has been incorrectly computed as the rate of duty applied in the order ignored notification No. 196/89 dated 30.6.1989 and notification No. 11/97 dated 1.3.1997 in terms of which duty leviable on rig would have been 20% Basic and Nil CVD. The Certificates of Essentiality, which the Essar had obtained in 1987, were valid and applicable even subsequently in view of Supreme Court judgment in the case of Auto Tractors 1989 (39) ELT 494. The levy of auxiliary duty, surcharge or Customs duty of Special duty of Customs was also incorrect, as the Finance Acts under which such duties are leviable have not been made applicable and extended to the Exclusive Economic Zone, as in the case of Customs Acts, 1962.
vi) that the notice was barred by limitation and demands were even beyond the extended period of limitation of Section 28 of Customs Act, 1962.
vii) In addition to the aforesaid submission, on behalf of Essar it was submitted that the demand for duty against it was unsustainable as, in terms of Section 125(2) of the Customs Act, 1962, Customs duty could be demanded only from the owner or from the person from whose possession goods are seized. Since Essar was neither the owner nor the person from whose possession the rig was seized, the provisions of Section 125(2) in terms of which demand has been compared against it was not sustainable.
viii) In so far as December 97 demand on Noble was concerned, it was contended when the rig was re-delivered by Essar to Noble, the same was working at "Hy Platform" a non designated area and was from the said platform moved to a location 'RB 199A' a non- designated area for delivery. It was submitted that as the delivery of the rig took place in international waters and that at the lime the rig was under ONGC operation. Neptune had entered into agreement with Noble for chartering and had been awarded a contract by ONGC. The rig was there was after deployed as per ONGC's direction. In this view of the matter, it was submitted, no duty could be demanded in respect of December 1997 movement as there was neither import nor export of the rig, the same being in international waters.
ix) In so far as the December 99 demand on Noble was concerned it was further submitted that the demand was hopelessly barred by limitation in as much as it had filed bill of entry no 11108/dated 19/9/99 and had paid duty on the repair charges. It was submitted that all relevant facts were within the knowledge of the department and consequently the longer period of limitation was clearly not invocable. That the assessment of the Bill of Entry 1108/1 dated 19/9/99 had not been challenged and consequently demand under Section 28 was not sustainable B) Insofar as the liability to confiscation and penalty is concerned it was submitted that
a) confiscation of the rig and consequent imposition of penalty on the ground that there was a breach of the 'No sale' condition by Essar was not sustainable for the following reasons
(i) that in the Exim Policy 1992-97, the condition relating to 'No sale' which existed under the earlier Hand Book of Procedures was specifically done away with in relation to such items which were freely importable under the said EXIM Policy 1992. Para 85 (2) of the Handbook of Procedures (1992-97) read with para 25 of the said EXIM Policy and Appendix III made it clear that second-hand capital goods meant for use in oil field service sector were freely importable without actual User condition under 1992-97 Exim Policy.
(ii) In any case, at the time of sale, the 10-year no sale period had been reduced to 5 years as per para 41 of the EXIM Policy, which stated that second hand capital goods shall not be transferred, sold or otherwise disposed of within a period of 5 years from the date of import except with the prior permission of the DGFT. In view of the relaxation granted in the EXIM Policy, the period of 5 years was applicable and not the period of 10 years which existed earlier.
(iii) The finding that the rig has become liable for confiscation on account of its sale in 1996 also overlooks the fact that the Import Control Act, 1947 had not been extended to the Exclusive Economic Zone of India as required vide The Territorial waters Continental Shelf Economic Exclusive Zone & Other Maritime Zones Act, 1976 and, therefore, insofar as the EXIM Policy is concerned, the said zone in the High Seas EEZ was not a part of India and consequently the act of bringing the rig into EEZ and its movement within the EEZ or even its movement to international waters did not amount to import or export so as to require any import licence or any permission from the Licensing authority.
(iv) The finding regarding confiscation of the rig is also unsustainable in view of the fact that the Import Control Act, 1947, in terms of which the Handbook of Procedures (1985-88) was issued, had been repealed in 1992. As a result of such repeal, action for any alleged violation of the Handbook of Procedures under the repealed Act could be taken.
(v) In any case, the violation alleged is purely technical in nature in view of the fact that the rig continued to be deployed for offshore exploration work for another one year after its sale, and had in essence satisfied the 10 years condition of the earlier Hand book of procedures. Even otherwise the sale took place after the rig had been used for 9 1/2 years instead of the stipulated 10 years, and even without taking into account the fact that the rig was hired back on a bare boat charter immediately on the date of sale itself by Essar, the default, if any, was a mere technical one for which no confiscation or penalty was attracted.
b) The confiscation of the rig on the ground that appellant's had failed to file Shipping Bill and Bill of Entry for the outward and inward movement of the rig in 1992, 1997 and 1999, the same was unsustainable as it is an accepted position in the order and the show cause notice that at the relevant time it was the Customs practice to treat a rig as vessel and therefore no S/B or B/E were being insisted upon. In fact both the order as well as the show cause notice accept that the existence of such a practice. In view of the same there was no justification for the Commissioner to hold appellant liable for penalty for non-filing of S/B / B/E for the outward/inward movement of the rig. In support of the proposition that the rig is a vessel, appellant relied upon the Bombay High Court judgment in the case of Amership Management Pvt. Ltd. v. Union of India .
c) Insofar as the confiscation on the ground that Essar had failed to file a Shipping Bill for the rig at the time of its delivery to Noble admittedly, the movement of the rig for the purpose of deliver in December 1997 took place from one non-designated area in the EEZ (Platform IF) to another non-designated area in the EWZ (Location RB-199A). Since both these locations were outside India, Essar could not be expected to file a Shipping Bill as the movement of rig between these locations did not amount to export.
C) It was further contended that the seizure of the rig as well as the issue of the show-cause notice by the Commissioner (Preventive) lacked jurisdiction as the Commissioner (Prev) did not have territorial jurisdiction over the Exclusive Economic Zone of India. As per notification issued under Section 4 of the Customs Act, the territorial jurisdiction of the Commissioner (Prev) is confined to districts of Mumbai, Thane and Raigad. The Exclusive Economic Zone of India does not fall in any of these districts. As per the said notification, it is only the Commissioner of Customs (Imports), Mumbai who has jurisdiction over the Exclusive Economic Zone of India.
D) Shri K.M. Mondal, Consultant appearing for the Revenue submitted as under:
a) That a rig cannot be held to be an ocean going vessel. In support of this contention he relied upon the decision of the Bombay High Court in the case of Pride Former-2004 (148) ELT 19 (Bom).
b) The decision in the case of Sedco Forex International Drilling Inc. v. Commissioner of Customs, Mumbai, reported in 2001 (135) ELT 625 (Tri-Mumbai) was not applicable to the facts the instant case, as the movement of the rig was between a designated and a non designated area in the EEZ unlike in the instant case where the rig had come into India from a place even beyond the EEZ, i.e. beyond India.
c) The licence in terms of which Essar has imported the rig is subject, to actual user condition and the said condition could not be relaxed by mere fact that when the rig was sold the actual user condition had been done away with.
d) That the rig was liable to confiscation for non filing of bill of entry/shipping bill for various movements in and out of the designated area in the EEZ.
e) That the EEZ is a part of India and consequently the submission made on behalf of the appellant that the Import Control Order 1947 and the Exim Policy issued there under will not be applicable was incorrect.
f) That the jurisdiction of Commissioner of Customs (Import) is concurrent with that of Commissioner of Customs (Preventive) and consequently argument of the appellant that the order was without jurisdiction is incorrect.
5. After hearing both sides at length, we find that the issues for determination are as follows:
a) Whether the Commissioner of Customs (Preventive) was the proper officer having jurisdiction to seize the rig in the EEZ and whether he was competent to issue a show cause notice and adjudicate the same to demand duties on goods imported assessed and cleared on assessment orders of the proper officer of Customs working in the Bombay Custom House.
b) Whether there was any liability for payment of Customs duly on the repair cost/full value of the rig at the time of return of the rig from repairs from Bahrain / Sharjah?
c) Whether, in view of the established practice followed by the Customs for assessment of rigs in particular and all conveyance in general, duty could be demanded on the disputed movements of the rig from a place outside India to the various designated locations in the EEZ?
d) From whom, duty could be demanded under Section 125(2) i.e. a person other than the owner or the person from whose possession the rig had been seized?
e) Whether, after customs clearance of the rig in 1987, there was any obligation on the part of Noble and Essar to file Shipping Bills and Bills of Entry for inward and outward movements of the rig by considering the said rig as goods?
f) Whether the said rig having acquired the characteristic of a vessel was only required to file IGM and EGM for such movements?
g) Whether Essar had contravened the provisions of the Import Policy / Handbook of Procedures by selling the rig to Noble prior to the expiry of 10-year period from the date of import and whether the rig consequently became liable for confiscation?
h) Whether the rig had become liable for confiscation under any of the clauses of Sections 111 or 113 of the Customs Act?
i) Whether any of the appellants were liable for penalties?
6. We now proceed to deal with the issues raised before us.
(a) The first, and preliminary issue would be to determine if the entire proceedings are vitiated for want of jurisdiction. It is submitted that the Commissioner of Customs (Preventive), whose officers seized the rig on 12-5-2001, while it was outside the territorial waters of India, but within the Exclusive Economic Zone (EEZ) did not have the jurisdiction either to seize the rig or issue a notice or to adjudicate the case. It was submitted that under Section 110 as well as under Sections 28 and 125 of the Customs Act, it is only the 'proper officer' of the Customs who could have either seized the goods or issued a notice for demanding duty on the said rig. The territorial jurisdictions of different officers of Customs are prescribed by notification issued under Section 4 of the Customs Act, 1962. The territorial jurisdiction of the Commissioner of Customs (Preventive) is confined to the districts of Mumbai, Thane and Raigad. Only the jurisdiction of the Commissioner of Customs (Imports), Mumbai, on the other hand is extended specifically to the Port of Mumbai as well as the designated areas in the EEZ of the cost of India. It has been contended for the appellants that India, as per definition, refers to the land mass of India and territorial waters of India upto 12 nautical miles from the coast. The waters beyond 12 nautical miles are not part of India though, under the Territorial Waters Continental Shelf Economic Exclusive Zone and Other Maritime Zones Act, Government of India can exercise limited sovereignty over the EEZ and continental shelf for certain specified purposes only. That Act lays down that such exercise of power can be made only by issue of notifications specifically making certain enactments applicable to certain areas of the EEZ and continental shelf. The effect of this Territorial Waters Continental Shelf Economic Exclusive Zone and Other Maritime Zones Act, is not to extend the definition of India beyond the Indians territorial waters. The only effect of the said enactment is that for the purposes of certain specified enactments, the provisions of those specified enactments would apply as if the specified areas in the EEZ and continental shelf as if part of India. It is not in dispute that the rig was seized when not operating in a designated area in the EEZ & this was not consequent to 'hot pursuit'. The said non designated location was not a part of India even by virtue of the provisions introduced by the Territorial Waters Continental Shelf Economic Exclusive Zone and Other Maritime Zones Act, 1986. The question with regard to jurisdiction would be whether the Commissioner of Customs (Preventive), Mumbai or his officers were the 'proper officers' having jurisdiction in the High Seas, over such non-designated areas outside India. The second question which would be relevant, for other purposes, would be whether such Commissioner of Customs (Preventive) was the 'proper officer' for the designated areas co-ordinates within EEZs which are located in the High Sea outside the territorial waters of India. In our view, the answer to both questions is in the negative. We find, according to Notification No. 15/2002-Cus (NT) dated 7-3-2002, issued under Section 4 of the Customs Act, the territorial jurisdiction of the Commissioner of Customs (Preventive) is confined to three districts of Maharashtra, i.e. Mumbai, Thane and Raigad. The territory of a district of Maharashtra State would extend upto the low tide water mark and jurisdiction may extend upto 12 nautical miles at Sea Coast i.e. Territorial waters of India from the base line of tide mark coast line of the said district. The territory of a district of a State of India cannot extend beyond the territorial waters of India. Nothing has been shown to us that the territory of districts of Maharashtra State and jurisdiction of such Districts extends to and cover the co-ordinates where the seizure was effected in this case and that the said location would thus be within the jurisdiction as notified for Commissioner of Customs Preventive, Mumbai. The deeming fiction prescribed in the Territorial Waters Continental Shelf applies for the purpose of territorial jurisdiction of India, and it is only the Union Government which is empowered to extend the laws of such locations, not the Slate of Maharashtra or the territory of any particular district. We therefore hold that the EEZ, i.e. both designated as well as non designated areas not established to be within the notified territorial jurisdiction of the Commissioner of Customs (Preventive). Such being the position, seizure of the rig on 12-5-2001, as well as the subsequent issue of the show cause notice and the adjudication thereof, are all, without jurisdiction, therefore, null and void. We also rely upon the decision of the Supreme Court in Ramnarain Bishwanath v. Union of India to arrive at our finding that the Commissioner (Preventive) Mumbai had no jurisdiction to take cognizance of this matter in any manner.
b) The objection with regard to lack of jurisdiction is found to be rejected by the Commissioner (Preventive) on the ground that as per certain decisions of the Tribunal the jurisdiction of the Commissioner of Customs (Imports), Mumbai and that of the Commissioner of Customs (Preventive), Mumbai was concurrent and therefore whatever the Commissioner of Customs (Imports), Mumbai could do could also be done by Commissioner of Customs (Preventive). We do not accept this reasoning as the concurrent jurisdiction of Customs (Preventive) and Commissioner of Customs (Imports) would be confined to areas of the Port of Mumbai & districts of Maharashtra as notified, over which both the Commissioner of Customs (Imports) as well as the Commissioner of Customs (Preventive) had jurisdiction, the former by virtue of specific jurisdiction being given and the latter by virtue of Port of Mumbai being a part of district of Mumbai. However, in respect of the designated locations in EEZ, no such concurrent jurisdiction exists of conferred as seen from the said notification under the Customs Act, 1962. Therefore the reasoning by the respondent in the order is incorrect and unsustainable.
c) Had it not been for the fact that detailed arguments have been advanced on several other issues, we would have been persuaded & allowed the appeals only on the point of jurisdiction alone. However, since both sides have made detailed submissions on the merits of issues, we are proceeding with recording of our findings also on them.
d) As regards Demands of duty, it is found:
(i) In respect of the demand for duty, on the movement of rigs into India, the practice of assessment followed by the Customs is of particular significance. The decision of the Tribunal in Sedco Forex's records, the said practice, in the following words:
...In case of oil rigs, once cleared as bill of entry for home consumption the Department is not insisting on filing import or export documents for movement to or from the designated area since they are no more imported goods....
It has been argued by the appellants that in the present case, the rig was imported by Essar in the year 1987. A Bill of Entry was filed for seeking its clearance. The rig was cleared for home consumption after due assessment of the said Bill of Entry. Thereafter, the said rig has been deployed on various locations and wells where ONGC had been carrying on oil exploration work. Some of these High Seas off-shore locations were falling within the designated areas and some others were outside such areas (non designated areas). It is on record that during the period 1987 to 1996 as many as 59 movements took place from non designated areas to designated areas and vice versa. These movements all took place as per the instruction? of ONGC even though technically each such act of the rig entering into designated area from a non designated area could have amounted to an act of import & levy of duty as per the Revenue's contention and consequent Drawback eligibility which would arise under Section 74 of Customs Act, 1962.
(ii) However, no duty has been demanded in respect of all such movements ostensibly, on the basis of the practice referred to above in the above case. Demands are restricted on three such movements. Viz-
(i) The first demand is for the year 1992 when the rig came back from Bahrain after repairs, while it was owned by Essar;
(ii) The second is when the rig was brought back from international waters by Noble and deployed at platform NE on 13-12-1997;
(iii) the third when the said rig was brought back after repairs from Sharjah by Noble in the year 1999.
While importers claim that the practice as mentioned above should have been equally applicable to these movements also and therefore no duty can be recovered, when Bill of Entry had already been once filed in the year 1987, the Revenue contends that the practice as admitted in Sedcos case has no application, when either the rig moves out of India to another country or when the rig ceases to be operating under the contract with ONGC. In the course of the arguments, the counsel also referred to the expression "foreign going vessel" defined in Section 2 (21) of the Customs Act, 1962 and submitted that the rig satisfied, the definition of a vessel, and therefore once a vessel is assessed to duty, it ceases to be goods and becomes a conveyance, which was then not liable for payment of duty for movements in and out of India. It was submitted that this was the reason why ships and vessels, imported by various shipping companies in India were only liable to duty once when they were brought to India for the first time and were thereafter not liable to suffer duties for each voyage of movement in and out of the port/country. It was further submitted that after such conversion & acceptance as conveyance, their repairs abroad and subsequent movements in and out of India would not render them liable for payment of duly, as the nature of the vessel did not change, as a result of the repair & the repaired components/parts would become permanent ship stores. In any case, it is not the Customs to recover duties on such repair charges on vessels nor has been shown that Customs even made an attempt to recover such duty in other cases. We find merits in the submission. The practice, if the Customs as extracted in the case of Sedco Forex's case is the one which flows out of the scheme of the Customs Act as understood by the Department. Under the Customs Act, the expression 'goods' includes vessels. Therefore, when the vessel is brought into the country for the first time, the same are liable for payment of duty as any other goods. Once such goods have been assessed to duty & cleared, they are no longer remain imported goods by virtue of the definition of imported goods in Section 2(25) which states that imported goods means goods brought into India from a place outside but does not include goods which have been cleared for home consumption. Therefore, once any vessel eg the rig in the present case, is brought into India and assessed to duty and cleared for home consumption it would cease to be imported goods. Subsequently, if it acquires the characteristic of foreign going vessel, is not liable for payment of customs duly for the movements in and out of the country. In this regard, the definition of 'foreign going vessel' is relevant. The definition states that foreign going vessel includes inter alia any vessel engaged in fishing or any other operation outside the territorial waters of India. The Bombay High Court in the case of Amarship Management Pvt. Ltd. v. Union of India has already held that rig is a foreign going vessel. This Judgment of the Bombay High Court has not been over-ruled in the case of Pride Forma v. Union of India 2002 (148) ELT 19 (Bom), as was contended by the Ld. Counsel appearing on behalf of the revenue. The Hon'ble Bombay High Court in the case of Pride Forma was only concerned with the interpretation of the provisions of Section 86 & 87 of the Customs Act and had accordingly, in para 32 of its Judgment, noted that the definition of foreign going vessel in Section 2(21) of the Act qualified words 'unless the context otherwise required.' The Court took a view of the matter in Pride Forma's case, while construing the provisions of Section 86 & 87 of the Customs Act in view of this opening sentence of the definition. This decision does not hold that a rig is not a vessel at all. This being the position, no duty could be demanded on the movement of vessels in and out of India once it has been assessed to duty and cleared for home consumption. The question of duty on ship stores being only different. To take a contrary view would be to unsettle, practice of last 100 years or more, as ships and vessels have been arriving in and going out of India without suffering duties of Customs from time immemorial. Many such ships, also under goes repair just before their arrival in India. None of these vessels or the addition made to such vessels on account of repairs have been shown to be held liable to duty. To take a contrary view in the present case, would be clearly against the scheme of the Customs as well as the well settled practice of the Customs. In any case demands of duty by changing such practice can be only prospective, & bar of limitation under Section 28 to demand such duty would apply in this case.
(iii) We now come to the question whether the practice followed by the Customs would need a departure in case a rig travels to another country outside India and then returns back to India. To our mind, the answer to this question also is in the negative. In law as well as in practice, teere can be no difference between a non designated area outside territorial waters of India and visit to a foreign country since both locations are, for Customs purpose, situated outside India. The distance of a non designated area in the High Seas from the coast of India cannot ipso facto call for a separate interpretation. In the normal course, movement of the rig into the designated area from a non-designated area / area beyond EEZ could be liable to import duty, but for the scheme of the Customs Act, as discussed above, as well as the established practice followed by the Customs, there can be no demand for duty for the said movements. In our view, the nature of the rig as a vessel as well as a foreign going vessel, does not change by the extent of distance by its movement out from the territorial waters of India. It is not disputed by Revenue that non designated areas are no different from a foreign country, as they are both places situated outside India for Customs purpose. The practice which has been referred to in Sedco Forex's case and which applies to all conveyance and vessels is not a practice which has evolved on account of off-shore oil exploration in the FEZ. This practice is much older and has existed much prior to discovery of oil and gas in High Seas termed locally as Bombay High. We therefore do not accept the contention of the Revenue that the practice referred to Sedco Forex's case applies only if movement of the rig was within the FEZ (i.e. between a designated and non designated area) and not when such movement was from a different place of country into India.
iv) The other argument of the Revenue was that the practice referred to in Sedco Forex's case would not apply if the movement of the rig took place during the period when the rig was under the contract with the ONGC. Duty has been demanded on this basis on all the movements as, according to the Revenue, the rig was no longer under contract with ONGC during the periods when they were sent for repairs or when the rig was de-hired from Essar and rehired by Neptune from Noble. Firstly we are unable to agree with the contention of the Revenue that during the period when the vessel was sent for repairs the same had been de-hired and was outside the contract of ONGC. We have been shown the relevant clauses of the agreement with ONGC and we find that rig continues to be under contract with ONGC, but at zero rate of hire, for the period during such repairs. The fact that the rate of hire was zero will not imply that the rig was outside the hiring contract. The lest for determination whether the rig was still under contract with ONGC was that whether the owner was entitled to deploy such a rig elsewhere other than for the purpose of repairs and its return back to the ONGC site. The answer to this is clearly in the negative. The rig continues to be under contract to ONGC. Therefore we do not find any basis for departing from the established practice on Revenue's plea itself. Apart from this, we do not see how ONGC contract should be treated or have any relevance to the established practice. The practice which has been referred hereinabove, with regard to the rig in question is equally applicable to all conveyance and vessels even when such conveyance and vessels are not deployed by ONGC for oil exploration work in EEZ/High Sea. We therefore hold that the Customs practice established, has no exclusive relevance or bearing to a ONGC contract. That ONGC contracts should determine, non levy/levy of Customs Duties cannot be accepted.
(v) There is another reason to justify the practice which has existed for non levy of duty on every inward movement of foreign going vessel. This is for the reason that if import duty was payable on every inward movement of a vessel, it would have to be then refunded back by way of Drawback payments, whenever the vessel went to a non designated location/out of India. Therefore, if a vessel carrying cargo arriving into Bombay Port say on May 01,2006, would be liable to pay duty on the full value of that ship and the Shipping Company would then become entitled to refund of the said amount as Draw Back, on May 06, 2006, under Section 74 of the Act, of the duty paid, when it left the Port & goes back to international waters/foreign port The entire course of international trade would be unnecessarily hampered and the Customs department would be only busy in collecting the duty on day one and refunding the same on day five or earlier. It is possibly for this reason that the practice of non levy of duty on vessels on their subsequent movements in and out of India evolved, i.e., once such vessel had been assessed to duty and cleared for home consumption, further levy & Drawback liabilities not called for.
(vi) The question whether the change of ownership of a vessel, after its first import and clearance from Customs, would render the subsequent owner liable for payment of duty once again. This question assumes relevance as the rig was imported first in the year 1987 by Essar when a Bill of Entry was filed and the rig was cleared for home consumption. Thereafter, in the year 1996 the ownership of the rig changed the hands and when the rig came back to India in December, 1997, duty has been demanded from Noble on the premise that Noble had not discharged duty on the rig as owners of the rig and that they could not take shelter in the fact that appropriate duty had earlier been discharged on the rig by its previous owner (Essar). We are unable to agree with this contention of the Revenue, as ownership of goods or a vessel, is irrelevant in determining its duty liability under the Customs Act. It is the act of Import, which renders goods liable for duty & no owners. Once an entity I as been imported and assessed to duty and cleared for Home Consumption, they cease to be imported goods. The subsequent change of ownership of such goods will not render them again liable for duty. The liability for payment of Customs duty is independent of the ownership of goods and therefore we are of the view that Noble cannot be held liable for payment of duty, merely because they became the owners of the rig. The other reasons on which duty liability has been fastened on Noble for the movement of rig in December 1997 and when it came back from repairs in 1999 is not called for have already been dealt with above.
(vii) We therefore hold that in view of the Scheme of the Customs Act and the practice being followed by the Customs, the rig having already assessed to duty once in 1987, could not be held liable for payment of duty either in 1992, or in 1997 or in 1999 for its various movement in and out of India.
(viii) Apart from contesting the demand for duty on merits, Essar and Noble have also contended that the demands are also barred by limitation as, in the case of Essar the demand relates to movement of rig more than 10 years back while in the case of Noble, the said movement was also more than 5 years before the date of issue of show cause notice. The notice does not seek to invoke the provisions of Section 28, as the said demands are clearly found to be barred by limitation. Instead it seeks to demand duty from Essar and Noble under Section 125(2) of the Customs Act, which provides that where any fine in lieu of confiscation of goods is imposed under Sub-section (1), the owner of such goods or the person referred to in Sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods. In the present case, the rig was seized from the possession of Noble, the owners of the rig at the time of the seizure. The order passed by the Commissioner demands duly in respect of the 1992 movement of the rig from Bahrain from Essar and in respect of 1997 and 1999 movements of rig from Noble. Assuming that the provisions of Section 125(2) can be invoked for the purpose of demanding duty on the above mentioned movement of the rig, we do not see how such a demand can be directed against Essar who were neither the owner nor the person in possession of the rig at the time of seizure. Under Section 125(2), the liability to pay duty in addition to fine can only be that of the owner or the person from whose possession the goods are seized. We therefore hold that even if the rig is liable for confiscation and a redemption fine is imposed on such confiscation, the demand for duty against Essar by invocation of the provisions of Section 125(2) is clearly misdirected.
(ix) We also find substance in the submissions made by the counsels for Essar that in any view of the matter, even if duty was payable on the rig, no auxiliary duties, surcharge on customs duty or special duty of customs could be levied or recovered on the rig as these duties are not levied in terms of the Customs Act but under different Finance Acts which had been expressly made applicable by issue of a notification to the EEZ. On a reading of Sections 6(6) and 7(7) of the Maritime Zones Act, it is clear that only such duties whose provisions are specifically made applicable to EEZ and continental shelf are applicable in these areas. We find that even though the provisions of Customs Act have been made applicable to certain designated areas in the EEZ and the continental shelf. The provisions of the Finance Act have not been made applicable at all and consequently the duties leviable under the said Finance Act could not have been demanded.
(e) In respect of the movement of rig in 1997 and 1599, for which duty has been demanded from Noble, the question of examining the applicability of Section 125 will apply only after we have examined whether or not the rig was liable for confiscation under Section 111 or Section 113 of the Customs Act.
(f) We will now deal with this aspect in the following paragraphs. It is found:
(i) as per the order, the rig has been confiscated under various clauses of Sections 111 and 113 of the Customs Act on the ground that the various movements of the said rig in and out of designated areas took place in contravention of various provisions of the Customs Act. For better understanding, it will be necessary to deal with separately with each of the relevant movements and events for which the rig has been held liable for confiscation. These are:
ii) the clandestine / unauthorized export of the rig in June 1992 without filing a Shipping bill and other declarations to the Customs;
(iii) unauthorized import of the same rig in September 1992 after its repairs at Bahrain without filing Bills of Entry and by not following other Customs formalities;
(iv) unauthorized sale of the rig in 1996 in violation of the no sale for 10 years condition, which existed in the Handbook of Procedures, 1985-1988;
(v) unauthorized export of the rig in December 1997 when it moved from a location in EEZ to international waters without filing of any shipping bill or other documents;
(vi) unauthorized import of the rig by Noble for deployment at platform NE in December 1997 without filing bill of entry and other documents;
(vii) unauthorized import of the rig again in 1999 after the rig had undergone repairs at Sharjah;
(viii) mis-declaration of value and other contraventions at the time of import of the rig from Sharjah after repairs in the year 1999.
The confiscation has been ordered by invoking Clauses (d), (f) (g), (h) and (i) of Section 111 and Clauses (d), (f), (g) and (h) of Section 113 of the Customs Act.
(g) In respect of liability to confiscation for export of rig in June 1992, the Commissioner holds in para 172 of order, that there was violation of Section 50 as no Shipping Bill was filed by Essar while taking the rig out of India. In para 173 of the order, the Commissioner also holds that there was also violation of Sections 34, 40 and 50 for non filing of shipping bill and for not declaring the rig as goods. On this basis, confiscation has been ordered under Sections 113(d), (f), (g) and (h) of the Customs Act. It is an accepted position & in the order that the IGM and EGM were filed in respect of the rig at the time of bringing in and taking out from Nhava channel for the purpose of repairs. The order in para 63(2) acknowledges that at the relevant time there was a practice in the Custom Houses of treating the rig as a vessel at the time of its importation and exportation. This contention in the order, as to the practice of treating the rig as a vessel, is corroborated by the fact that the Customs themselves had accepted filing of IGM and EGM in respect of Essar Explorer, the rig by treating the said rig as a vessel. These IGMs and EGMs were filed in addition to the IGMs and EGMs for towing the vessel M.V. Sea Teal which was tugging the said rig. It is on record that in the relevant manifest filed by Essar, the nature of the vessel was also declared as a rig operating in Bombay High. It is also clear from the relevant manifest that export was permitted by the proper officer under preventive supervision. The necessary port clearance was also issued for the rig by treating the same as a vessel. This port clearance permit signed by an Assistant Collector of Customs in terms of Section 42of the Customs Act 1962 is issued after complying with stringent provisions there under. The proper officer who issued the port clearance is required to verify the due compliance of all provisions of law & discharge of duty, if any. Once Port clearance is issued, Revenue can then not turn around & find infringement of procedural non compliance to call for confiscation of valuable property. In view of the fact that necessary manifest, was filed and port clearance was granted, that too under preventive supervision, we do not see any violation whatsoever of any sections of the Customs Act, 1962, as arrived, for this movement of the rig. Since the Customs themselves were treating the rig as vessel, it could now not insist on a Shipping Bill being presented for the vessel in addition to the EGM. The Shipping Bill is only filed for goods meant for export and not for conveyance to leave port on obtaining port clearance, for which only an EGM is required to be filed. Having accepted the rig as a vessel and having also accepted filing of EGM for the same, & granting a Port clearance, the Customs could not insist on the filing of a Sipping Bill for the said rig & consequent liabilities thereafter. The alleged violation under Sections 34, 40 and 50 of the Customs Act are therefore not sustainable. We also note that in the present case, even an EGM was not required to be filed, as according to Section 41 of the Customs Act, the requirement of filing export manifest arise only if a conveyance is carrying export goods. Such an export manifest is not required to be filed for the carriage and movement of the conveyance itself. Since there is no allegation that any export goods (other than the rig itself) as Cargo was carried out of India no June, 1092 movement in violation of Section 41 can be found in the present case.
(h) As regards the liability of the rig to confiscation for the movement of the rig from Bahrain in September 1992, the Commissioner has found that Essar had not followed the Customs formalities by filing Bills of Entry and had also not discharged duty liability on the value of repairs. As we have observed above, no duty liability was attracted on the repair charges in view of the fact that the rig had already been assessed for duty once in 1987 and had thereafter ceased to be imported goods having acquired the characteristic & Port clearance for foreign going vessel. Since the rig had ceased to be goods and would be a vessel, there could be no requirement for filing of a Bill of Entry for inward movement of such vessel. At the highest, the only requirement under the Customs law could have been to file an import manifest under Section 30 of the Customs Act and thereafter take necessary approval from the proper officer for unloading of the cargo, if any, on such rig However, such Manifest is required on calling at a Port. The rig did not call at Bombay Port but went & operated in EEZ location which are not notified/declred to be Port Areas of Bombay. Therefore, IGM & BE presentation was not called. It is not the case of the Revenue that at the time of arrival of the rig into EEZ from Bahrain, the rig contained cargo which needed to be declared and disclosed in the import manifest. Essar would be correct in pleading that even after certain parts and components had been replaced in the rig, such parts and components would become a part of the rig and cannot be treated as if they were being separately imported on board a rig as cargo. This is also not the case made out by Revenue As such, in the absence of any dutiable cargo on board the rig, Essar could not be required to file an 1GM at the time of its re-entry into the EEZ from Bahrain. The Commissioner finds in para 192 that there was violation of Sections 30, 31, 34, 35 and 46 of the Customs Act, 1962 and therefore the rig was liable for confiscation under various clauses of Section 111. As we have already held, no violation of Section 30 and no dutiable cargo is alleged to have been imported on board the rig. Violation of Section 31 has been found on the finding that the rig being imported goods was offloaded from vessel prior to entry inward being granted. We do not agree with this finding. The rig was not imported goods but a vessel. Likewise, alleged violation of Sections 34, 35 and 46, which proceed on the assumption that the rig was goods and not a vessel cannot be sustained. We, therefore, hold that the movement of the rig in September 1992 did not violate any of the provisions cited in the order and therefore the rig can not be held liable for confiscation under the clauses of Section 111 as arrived.
(i) The third and most significant violation which has been alleged in the show cause notice is violation of the no sale condition by Essar in the year 1996 when it sold the rig to Noble before the expiry of the 10 years from the date of import. Para 114 of the Handbook of Procedures has been cited, which reads thus:
114. (1) No permission of the licensing authority will be necessary for the transfer of imported Capital Goods, including spares, accessories (or attachment) thereof in favour of actual user only after a period of ten years has elapsed from the date of their import. An intimation should, however, be sent by Registered Post to the sponsoring authority as well as the licensing authority concerned within 30 days of the sale. It will be for the buyer to ensure that by purchasing the goods in question he will not exceed the licensed/ authorized capacity.
The contention of Essar in this regard are:
(1) It had applied for an obtained a specific permission from the DGFT on 3-3-1998;
(2) that in the new EXIM Policy which was introduced in 1992, a specific provision had been made in para 85 (2) of the Handbook of Procedures, by which transfer of second hand capital goods imported under the earlier policy was permitted, provided that such goods were also freely importable without actual user condition under the policy. Para 85(2) reads thus:
85(2) - Prior permission of the licensing authority, shall not, however, be necessary for transfer or disposal of goods which were imported with Actual User condition either under Open General Licence or against specific import licences in accordance with the provisions of the Import & Export Policy, 1990-93 or earlier Policies provided such goods are freely importable without Actual User condition under this Policy.
It is found that para 25 of the new EXIM Policy permit import of second hand capital goods for-use in 'oil field services sector' without any licence. Such second hand rig was thus clearly importable under the EXIM Policy, the requirement of para 85 (2) of the Handbook of Procedures stood satisfied and therefore the restriction against transfer of such rig which existed in the old policy, was deemed to be relaxed in the new policy. In other words, the rig became freely transferable in the new policy introduced in 1992. In any case, the period of 10 years which existed in the earlier policy was reduced to 5 years in the EXIM Policy as existing on 30-4-1995. Since the period of 10 years for sale of the rig has been reduced to 5 years and more than 5 years had already, elapsed, no violation could be alleged for the sale;
Since we agree with the submission made on behalf of Essar that at the time when the rig was sold in 1996, the policy had done away with the no sale restriction by virtue of para 85 (2) of the Handbook of Procedures read with para 25 of the EXIM Policy. We, therefore, hold that there has been no contravention whatsoever of the provisions of the licence or the policy as a result of the sale of the rig in 1996. There is also another interesting issue which was raised i.e., since the provisions of the Foreign Trade (Development & regulation)Act 1992 and the orders issued thereunder were not applicable to the EEZ and continental shelf by issue of necessary notifications under Sections 6(6) and 7(7) of the Maritime Act, 1976. The designated areas in the EEZ and the continental shelf could not be considered to be within India for the purposes of the said Import Control Act and the orders issued thereunder including the EXIM Policy. Since, according to applicants, the rig was never brought into the territorial waters of India (within 12 nautical miles from the shore), there was never an act of import insofar as the Foreign Trade (Development & Regulation) Act 1992 & rules thereunder are concerned. Therefore no confiscation under the provision of Section 111(d) of the Customs Act,1962 read with the provisions of Exim Policy/Import Licence conditions can be upheld. As no licence at all was required by Essar for bringing & using a rig in the said EEZ and continental shelf. Confiscation of the rig under Section 111 (d) of the Customs Act, 1962 is not therefore upheld. Therefore, no duty as determined & demanded under Section 125 (2) can be upheld.
(j) Insofar as the movenrent of the rig from EEZ to the international waters in December 1997 is concerned, we find that the said movement took place from one non-designated area in the EEZ (platform IF) to another non-designated area (location RB 199A). The further movement of the rig in international waters was also outside India just as the previous two non-designated areas are. Since all these locations were outside India, Essar was not be expected to file either an Export Manifest or a Shipping Bill, the said movements being movement outside India and were not amounting to export. The Commissioner, however, records the finding that as per the agreement between Noble and Essar, Essar was required to complete export formalities by filing Shipping Bills etc. In our view, not much can be read into this agreement as such export formalities would have been required to be followed only if they were otherwise warranted under the Customs Act. An obligation to file a Shipping Bill or Export Manifest is a statutory one which must flow from the provisions of the Customs Act and not from the terms of a contract between two parties. We, therefore, hold that there was no violation in not complying with export formalities in December 1997 at the time of re-delivery in international waters. As we have already held, the rig being a vessel therefore its movement out of India did not call for any Shipping Bill to be filed. Only an export general manifest was required to be filed and that too only if the rig was carrying export cargo. Since, in the present case, there is no allegation that any export cargo was laden on the rig, no EGM was required even if the rig had mover from a designated area, deemed within India to a place outside India.
k) The next movement of rig on which duty has been demanded and violation alleged is one effected in December 1997 when Noble brought the rig back into Indian waters for the purposes of deploying the same at platform NE (a designated area), for which a contract had been awarded by ONGC to Neptune, who had hired the rig from Noble. The order of the Commissioner proceeds on the premise that the rig was goods, for import of which a Bill of Entry was required to be filed and other formalities relating to unloading etc. had to be complied with. For reasons recorded above, we hold that the rig ceased to be imported goods after its assessment and clearance in the year 1987 and thereafter it acquired the characteristic of a foreign going vessel and therefore it did not require any Shipping Bill or Bill of Entry to be filed for its inward or outward movement from India. The requirement of IGM or EGM are not attracted as admittedly no export or import cargo was being carried on board the rig. We find that the reasons assigned by the Commissioner for ordering confiscation of the rig under Section 111 are similar to the ones assigned by him in respect of the movement of the rig in September 1992. These reasons have already been held to be unsustainable in our findings above confiscation arrived cannot be thus upheld.
(l) Another reason assigned by the Commissioner for holding the import of December 1997 as illegal is to be found in para 274 of the order wherein the Commissioner holds that in between 6-12-1997 and 29-12-1997 the rig was not under ONGC contract and had under gone a change in the ownership, a reason for departing from the established practice. As we have already held, above, the practice referred to in Sedco Forex's case has no connection or relevance to a contact with ONGC or ownership of the rig. We therefore hold that the findings in para 274 have no relevance and would not make any difference to the case or be reasons to upheld any liability under the Customs Act, 1962.
(m) The next movement in respect of which violation is alleged is the outward movement of the rig in 1998 when Noble sent the rig for repairs to Sharjah. The Commissioner in his order holds that the rig became liable for confiscation even though a Shipping Bill admitted has been filed for such a movement. No reasons, are forthcoming in the order for holding the rig for confiscation for this outward movement. Be that as it may, we held that the Shipping Bill which Noble had filed was not necessary as, for reasons already mentioned above, the rig was not goods but a vessel if it has been filed and accepted that could not be a cause to visit of a liability under the Customs Act. We also hold that a vessel does not lose its characteristics merely because the owner decides to file a Shipping Bill by treating the same as goods.
(n) The last movement in respect of which violations have been alleged is the one in 1999 when the rig was brought back to India from Sharjah, after carrying out repairs. At this point of time, Noble filed a Bill of Entry and even paid duty on the repair charges. The Commissioner has, however, demanded duty on the full value of the rig and has refused to grant benefit of exemption available to goods which are re-imported after repairs abroad, subject to payment of duty on the repair charges accepted by the proper Officer of the Mumbai Customs House. In view of our findings that the rig, after its clearance from the Customs in 1987, had ceased to be goods and had acquired the characteristics of a vessel, we hold that the said vessel was not required to be once again cleared under a Bill of Entry nor was any July required to be paid on repair charges. The duty which Noble had paid on the repair charges was not required. Also, no Bill of Entry was required to be filed by Noble. It is in this movement, in 1999, where Noble preceed on an erroneous premise, that the rig was goods and therefore paid duty albeit by claiming the benefit of partial exemption applicable to goods re-imported after repairs abroad.
(o) On the question whether fines and penalties could be imposed on the appellants, even if the rig was considered as 'goods' and not as 'vessels', and if the movements in question were considered as acts of imports/experts, we find that it is an accepted position that there was a practice prevailing in the Customs to treat the rig as a vessel. This practice has been acknowledged and accepted in the show cause notice as well as in the order of the Commissioner. The statement made by Ld. Counsel Mr. Sethna in Sedco Forex' case corroborate the existence of such practice. Now, if the revenue chooses to depart from the said practice and start treating the rig as goods (even after their customs clearance) and not as vessels inspite of insisting & granting Port clearances under Customs Act, 1962 applicable to vessels & not goods as has been hitherto done, we cannot hold that such a change in practice will have the effect of rendering the past imports liable for confiscation or the importer liable for penalties. A change in view & practice does not permit the department to confiscate goods and impose penalties for past consignments. Such a change can have the effect only prospectively after the change in practice is made known to the public after due notice. The plea of established practice and precedent treatment to the appellants herein cannot be denied as we find that in the case of Gauri Enterprises 2002 (145) ELT 706 (Tri) has recorded as regards binding effect of their own precedent treatment in administration of Taxing Statutes:
(d) Examining the plea of established practice and precedent treatment to imports of such goods, we find:
(i) PB Mukherjee in the case of Mercantile Express Co. Ltd. reported at -1978 (E.L.T.) J552 had held:
8. The Customs now say that they are not bound by their previous decisions whether the doctrine of precedents applies in its full rigor to Administrative Agencies and officers, and whether a reasonable latitude should be given to them or administrative tribunals to correct or modify their previous decisions may still remain a debatable controversy in the world of law; nevertheless I am clearly of the opinion that neither the Appraiser nor the Collector of Customs can change his mind from time to time in respect of the same article by assessing them in the case of one importer under one section and the assessing item for another custom to do so will lead to utter confusion in the very basis and principles of taxations and grave uncertainty in business and foreign trade. Its more serious result will be the most unfair discrimination of taxes in respect of the same goods with regard to different importers. That cannot be permitted by the Constitution which insists on the equality of law as one of its fundamental guarantees. I am therefore inclined to hold that the Customs are bound by their own precedents in administration taxing statutes involving the very basis of taxation in respect of a particular article and not leave it to them to modify their own previous decisions but to leave it to them to apply to Courts or Parliament or Legislatures as the case may be to put the law beyond doubt....
This view of binding effect of precedent treatment of their own precedents in administration of Taxing Statutes has been approved in subsequent decisions.
(ii) In the case of S.S. Kothari 1987 (30) E.L.T. 156 the Calcutta High Court while examining the conduct of the Commissioner as Adjudicating, and ordering absolute confiscation, of a Motor Car imported without a licence, when the practice was to allow the import of similar cars on Redemption fine, upheld the view of the Calcutta High Court in Para 8 (extracted herein, above) in the case of Mercantile Express Co. (supra) by holding:
15. No doubt the Court was concerned with the interpretation of the tariff item, but the principles laid down therein are equally applicable in the case like this. The issue involved here relates to the taxing statute or the fiscal enactments and the Customs Authorities are bound by their previous decisions. If the authorities have on previous occasions allowed the importer to release the imported car upon payment of the fine in lieu of confiscation, they cannot unless there are compelling reasons, depart from the previous decisions....
(iii) This view of binding nature of Administrative Precedent Treatment of imports, has been considered by the Division Bench of Calcutta High Court in the case of C.C., Calcutta v. Uday Engineering Enterprises and Ors. upheld the decision in the case of Mercantile Express Co. (supra) and distinguished it by holding 'this decision is clearly distinguishable for the simple reason that, in that case unlike the present one there was no dispute about the nature of goods,' and upheld that 'a factual error could always be corrected.' In the case before us there is no factual dispute brought on record, regarding the nature of goods under import herein and in the earlier 37 consignments during 1998-99 allowed clearance on redemption fine at CFS, Pune. No contrary decision has come to our notice. Therefore, being bound by the Calcutta High Court decisions, we cannot approve the following finding/ground arrived at by the learned Adjudicator to order absolute confiscation:
11. I observe that during the period 1998-99 alone, at least 37 consignments of used diesel engines have been imported by various importers through CFS, Pune alone in contravention of the import policy of the Government, and that imposition of redemption fine has not deterred the unauthorised imports of second hand diesel engines without obtaining specific import licence. Such engines continue to be imported in deliberate contravention of the Import Policy of Government of India and the importers cannot be allowed to have the impression that they can get away with such contravention in a routine manner by paying redemption fine and getting the offending goods redeemed.
The learned Advocate took us through the case (e) of Pioneer International 1999 (107) E.L.T. 476 and Nanak Trading 1998 (24) RLT 792 and submitted that the 'Reasonable Expectation' of the present first time SSI importers, could not be frustrated by the 'Absolute Confiscation' ordered. Considering the same, we find the principle of legitimate expectation as laid down in Halisburry Law of England 4th Edition Vol. I (1) Para 81 has been relied upon by the Madras High Court and referred to as:
...A person may have a legitimate expectation of being treated in a certain way by an administrative authority though he has no legal right in private law to receive such treatment the legitimate expectation arises either from a representation or promise made by the authority including and implied representation or from consistent past practice.
(undertaking supplied)
Ref. Sunshine International and Anr.
v.
Collector of Customs, Madras
1993 (42)ECC 282 (Mad.).
The Hon'ble Court held in this case, has also held
...The Customs authority cannot take a different view, in my view, at different times, with regard, to imports of same goods as to whether to confiscate completely or pass an order of confiscation giving an option to the Bill (SIC) by paying a fine. It is true that it is the discretion of the authority Under Section 125 of the Customs Act. But that discretion is to be applied fairly. There is no doubt that, with regard to cassia, orders were passed by the department earlier only ordering release on payment of redemption fine or penalty only, in lieu of confiscation. It has to be followed in these cases also.
and thereafter allowed the appeal, on the doctrine of ''The reasonable Expectations. In the case before us, no notices of any kind have been issued/show to us of change in age old admitted practice. We find therefore that we cannot ignore "the reasonable expectations" of the appellants herein to be treated as "others" and discharge them of all liabilities of confiscation, duties and penalties as arrived, more so when we do not uphold the confiscation, duty & penalty liabilities as arrived cannot to be upheld.
7. In view of the above finding, we hold:
a) that seizure of the rig in 2001, issue of the show cause notice and its adjudication by the Commissioner of Customs (Preventive) are all without jurisdiction as the said officer did not have territorial jurisdiction over the EEZ and were not the proper officers for the purpose of seizing the goods and issuing the demand notice;
b) that in view of the established practice of Customs, as recorded in Sedco Forex case, which has since been affirmed by Supreme Court, the rig in question having been cleared by the Customs against the bill of entry in 1987, could not be held liable for payment of any duty on its subsequent inward movement into India or out of India & or liable to confiscation.
c) that in view of the statutory definition of 'goods', 'imported goods' and 'foreign going vessel' and the scheme of the Customs Act, the rig was goods liable for duty only at the time of its initial import in 1987 and once it has been cleared for home consumption in that year, it ceased to be 'goods' and acquired the characteristics of a 'vessel' which ceased to be 'imported goods'. By virtue of being a vessel, it was no longer liable for duty of customs on any of its subsequent movements in and out of India;
d) if any duty of customs is demanded on any of the inward movement of the rig into India, it would be necessary for the Customs to refund almost entire amount of such duty as Drawback, whenever the rig moved out of India. Since the frequency of these inward and outward movements within months of each other, we hold that no duty of Customs can today be demanded or Drawback granted on rig in question;
e) that the demands of duty are barred by limitation under Section 28 of the Customs Act, 1962.
f) that the alleged violations of the provisions of the Customs Act, which proceed on the premise that the rig was 'goods' and therefore required filing of bill of entry or shipping bill for their inward and outward movements is unsustainable and the rig was a vessel as held by the Bombay High Court in Amership Management Pvt. Ltd. and therefore require only the filing of an IGM or EGM, if the vessel was carrying any export or import cargo. In the absence of any such cargo being carried on board the rig, there was also no violation of the provisions of Sections 30 and 41 of the Customs Act, which requires filing of IGM and EGM respectively. Consequently, the rig was not liable to confiscation under any of the clauses of Sections 111 or 113 if the customs Act as found by the Commissioner;
g) that there was no violation of no sale condition or any condition of Import Licence or & Import Policy by Essar or any one else as specific permission had in fact been obtained from the licensing authorities for sale of the said rig and, in any case, the rig had become freely transferable as per the amendments brought about in the Policy in the year 1992; Confiscation of rig for violation of Exim Policy/Licence condition is not upheld.
h) Since confiscation liability is not being upheld, consequent duty demands under Section 125 (2) of Customs Act, 1962 are not called for; there is no case or cause for any penalty liability on any person/appellant for the reasons as arrived in the order impugned.
i) Since, in our view, neither duty nor penalty nor confiscation is sustainable, in view of the findings arrived, the duty demands and redemption find are to be set aside, appeals filed by Essar and Noble are allowed and also penalties imposed upon various individuals and all noticees are also to be set aside.
8. All the appeals are to be allowed, with consequential relief.
9. ordered accordingly.
(Pronounced in Court.)