Custom, Excise & Service Tax Tribunal
M/S. Swiber Offshore Construction Pvt. ... vs Commissioner Of Customs on 27 June, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. I
APPLICATION NO. C/S/96712/13
IN APPEAL NO. C/86874, 87023, 87024, 87025, 87856/13 Mum
Arising out of Order-in-Original/Appeal No. 51/2013/CAC/CC(I)/ AB/Gr.VB dated 30.03.2013 passed by the Commissioner of Customs (Import), Mumbai
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri P.S. Pruthi, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
M/s. Swiber Offshore Construction Pvt. Ltd.
Shri A.V. Ramana Rao
Shri Nitish Gupta
M/s Arya Offshore Services Pvt.Ltd.
Shri Alok Gupta
:
Appellant
Versus
Commissioner of Customs,
(Import), Mumbai
Respondent
Appearance Ms Monali Singhal, Advocate with Shri Sanjay Agarwal, Advocate for appellant Shri K.M. Mondal, Spl Counsel For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.S. Pruthi, Member (Technical) Date of Hearing :27.06.2014 Date of Decision :..2014 ORDER NO.
Per Ashok Jindal M/s. Swiber Offshore Construction Pvt. Ltd., Shri A.V. Ramana Rao, Shri Nitish Gupta, Shri Alok Gupta and M/s Arya Offshore Services Pvt.Ltd. are in appeals against the impugned order wherein the adjudicating authority has rejected the Essentiality Certificate issued by the Directorate General of Hydrocarbons (DGH) claiming benefit of exemption under Notification No.21/2002-Cus. The adjudicating authority has also demanded duty of Rs.22,18,19,208/- and confiscated the vessel which was allowed to be redeemed on payment of redemption fine of Rs.23,00,00,000/-. Equivalent amount of penalty was imposed under Section 114A of the Customs Act, 1962 on the main appellant and penalties of Rs.20 lakhs, Rs.15 lakhs, Rs.15 lakhs and Rs.10 lakhs respectively were also imposed on the co-appellants.
2. M/s Arya Offshore Services Pvt.Ltd. has also filed an application for stay of operation of the impugned order wherein a penalty of Rs.10,00,000/- has been imposed.
3. Considering the fact that the appeals of the impugned parties are listed for final disposal therefore, the stay application as well as the appeal of M/s Arya Offshore Services Pvt.Ltd. have been taken up along with other appeals filed against the same impugned order for final disposal.
4. The facts in brief are that the appellants have imported a vessel namely Swiber Victorious on Charter Hire Basis and cleared duty-free import on re-export basis under valid essentiality certificate dated 12.01.2011 issued by DGH for execution of contractual work of petroleum operations for ONGC by claiming exemption under Sl.214 of table & list 12 of Customs Exemption Notification No.21/2002 dated 01.03.2002. At the time of import, the value shown by the appellants in the bill of entry is US$ 23,533,700 and the same was assessed. After importation, it was revealed by the Revenue that as per the insurance cover under which the vessel was insured, the value of the vessel was USD 42,500,000. During the investigation, it was further revealed that Swiber Engineering Ltd. issued an invoice to their 100% subsidiary, Victorious LLC showing the price at which insurance cover was obtained. Therefore, the Revenue was of the view that while importation of the vessel, the appellant has under-valued the price of the vessel therefore, the said vessel is liable for confiscation and liable to pay duty on the enhanced value denying the benefit of Notification No. 21/2002 dated 01.03.2002. The vessel was seized and the same was allowed to be released provisionally under Section 110 of the Customs Act, 1962, The appellants approached this Tribunal against the order of provisional release. Considering the submissions made by the appellants, this Tribunal came to a conclusion that for provisional release of the vessel, the appellants are required to execute a bond for Rs.2,37,08,76,525/- and to undertake not to use the vessel except for the purpose of executing the contractual work of petroleum operations for ONGC till the final adjudication or on completion of investigation and not re-export the vessel except with the permission of CC (Import), Mumbai. The vessel was provisionally released to the appellants and thereafter on completion of the work assigned to the appellants, the vessel was re-exported with the permission of the Commissioner of Customs (Import), Mumbai. At that time, the bond executed by the appellants was still alive. After re-exportation of the vessel, the adjudication took place and the impugned order was passed by denying the benefit Notification No.21/2002 and demanded duty of Rs.22,18,19,208/- along with interest and various penalties were imposed on all the appellants. The vessel was confiscated and allowed to be redeemed on payment of redemption fine of Rs.23 crore. Aggrieved by the said order, the appellants are before us.
5. Heard both sides.
6. The learned Counsel appearing on behalf of the appellants submits that the Notification 21/2002-Cus dated 01.03.2002 does not make any reference to value. The value of the goods is not a condition governing entitlement to exemption under the said Notification. In fact, what is required to be ascertained to get the exemption is the essentiality of the item in question for the use in petroleum operations referred to therein. For that the DGH certified, unequivocally, that the barge imported by the appellant was essentially required for use in the said petroleum operations and there is no allegation against the appellant that the said barge was not so essentially required. Therefore, the essentiality certificate issued by DGH cannot be disputed. It is further submitted that after completion of the assigned work of petroleum operations the barge was re-exported. The rejection of essentiality certificate issued by DGH by the adjudicating authority merely on the ground that the value shown in the essentiality certificate is not as per the insurance cover. There was no allegation that the value of the goods was one of the considerations which governed issuance of the Essentiality Certificate in the said Notification. Therefore, even if the value shown in the Essentiality Certificate issued by the DGH was less than its true value, the denial of exemption benefit is not justified. As the licencing authority issued the essentiality certificate has not charged against the appellant that they have obtained the Essentiality Certificate by mis-representation. Thus, the learned Counsel submits that the impugned order is without jurisdiction. To support her contention, the learned Counsel relied on the decision of the Honble Supreme Court in the case of Systems Pvt. Ltd. v. C.C. 2003 (151) ELT 254 (SC). It is further submitted that the essentiality certificate pertains to the vessel Swiber Victorious which is mentioned on the face of the essentiality certificate. Therefore, it cannot be said by any stretch of means that the essentiality certificate does not relate to the subject barge. Once the eligibility certificate has been issued to the appellants for exemption, the issue of valuation of barge ceases to have any relevance or significance whatsoever as held by the Honble Apex Court in the case of CCE v. Wander Ltd., - 2003 (157) ELT 3 (SC).
6.1 It is further submitted by the learned Counsel that the Bill of Sale by Swiber Engineering Ltd. (SEL) to VLLC was not a commercial transaction as VLCC being 100% equity holding of SEL. The value declared was only an estimated value as the barge had been taken by the appellants on charter high basis. That US$ 23.5 million was a commercially acceptable value which corroborates the fact the Pacific Crest actually sold the barge to SEL at the said price, the quotation for an identical barge manufactured by the same manufacturer was also for USD 23.5 million and the Chartered Engineer had also certified the said value.
6.2 It is further submitted that the value relied on by the learned adjudicating authority during the course of adjudication was as per the insurance cover and the clause 11.2(b) of Bare Boat Charter Agreement dated 24.3.2009 is erroneous as insurance cover at greater value was as per the agreement and the vale shown in the insurance cover is not market value. To support this contention, the learned Counsel relied on the decision in the case of Orient Enterprises 1986 (23) ELT 507 (T) which was upheld by the Honble Apex Court in CC v. Orient Enterprises - 1997 (92) ELT A69(SC), Anand Mahindra v. CC 2008 (226) ELT 371 upheld by the Honble Bombay High Court in 2009 (244) ELT 340 (Bom) and Nina Chaka Pvt Ltd. v. CC 2004 (163) ELT 464 (T). It is further submitted that the Chartered Engineers Certificate was also produced by the appellant and the same has not been denied by the adjudicating authority. Therefore, the Chartered Engineers Certificate is having evidential value to determine the value as held by the Honble Apex Court in the case of Vareli Weaves Pvt. Ltd. Union of India 1996 (83) ELT 255 (SC). It is further submitted that the value adopted by the adjudicating authority (without admitting) is of March 2009 whereas the import took place in December 2010. Therefore, the said value cannot be adopted to determine the assessable value. It is further submitted that the vessel was imported on re-export basis and was allowed to be re-exported. Therefore, there is no question of demanding the entire duty if the exemption was to be denied in view of the decision of the Honble Bombay High Court in the case of Cipla Ltd. v. Union of India 1995 (80) ELT 17 (Bom). It is further submitted that as per Section 138B of the Act and binding precedents, reliance on statements, without examining the witnesses and thereafter permitting cross-examination of the makers thereof was not permissible. To support his contention the learned Counsel relied on the decision in the case of J & K Ciggarette Ltd. 2009 (242) ELT 189 (Del.), Slotco Steel Products Pvt Ltd. 2012 (281) ELT 193 (Del), Basudev Garg 2013 (294) ELT 353 (Del.) and Vinod Solanki 2009 (233) ELT 157 (SC). With these submissions the learned Counsel prays that the impugned order should be set aside and the appeals be allowed with consequential relief.
7. On the other hand, the learned Spl. Counsel for the Revenue opposed the contentions of the learned Counsel and submits that the controversy in the matter is whether the Essentiality Certificate in question is relates to the Barge or not? The Essentiality Certificate submitted at the time of clearance of Barge was not relatable to the Barge in question inasmuch as the value of US$ 23.5 millions mentioned in the said certificate did not tally with its actual value which is US$ 42.5 millions. To support this contention, the adjudicating authority has relied on the invoice issued on the following evidences:-
(a) As per the Portfolio Overview Second Quarter 2009 report of ICON Leasing Fund Twelve LLC., Singapore, it was found that the Accommodation & Work Berge Swiber Victorious was purchased by Victorious, LLC, a Marshall Island company and controlled by wholly owned subsidiary company ICON Victorious, LLC, from Swiber for USD 42,500,000;
(b) The subject sale was effected by M/s. Swiber Engineering Ltd., Singapore, to Victorious, LLC in March 2009, against the Bill of Sale No. 38399-PEXT-2 dated 17.3.2009 quoting the price of the vessel to be US$ 42,500,000. This fact was also confirmed by Shri Nitish Gupta in his statement dated 14.09.2011.
Therefore, the said value shown in the bill of entry is not acceptable and the essentiality certificate shows the value of US$ 23.5 millions is also not acceptable. The said evidence has been corroborated with the insurance clause of the Bareboat Charter Agreement. Therefore, the insurance cover was also taken by the appellants of the same value. In these circumstances, the value is not acceptable. Accordingly, the learned Commissioner has rightly denied the exemption benefit under Notification 21/2002. It is further submitted that although the appellant has claimed exemption to import the barge in question duty-free and the contention of the appellant is that when there is no duty payable on the goods, value has not significance but in the case of CC v. Pankaj V. Sheth 1997 (90) ELT 31 (Cal) the Honble Calcutta High Court has held that the Customs Officer has no jurisdiction to determine the correct value in terms of Section 2(41) and 14(1) of the Customs Act, 1962 and in the case of Bata Shoe Company (P) Ltd. & Anr. V. CCE & Ors. 1985 (21) ELT 9 (SC) the Honble Apex Court has held that before determining the question of availability of exemption under Notification, the first essential step is to determine the value of the article in the manner prescribed in Section 4 of the Central Excise Act, 1944. To support his contention he placed reliance in the case of Jain Shudh Vanaspati Ltd. & Anr. V/s. UOI & Ors. 1983 (14) ELT 1688 (Del) and CC Bombay v. New India Industries 1985 (21) ELT 159 (Tri.). He also relied on the decision in the case of Naveen Jain v. CC 2001 (134) ELT 32 (Del). In that case the Honble High Court following the Apex Courts judgement in Pine Chemical Suppliers 1993 (67) ELT 25 (SC) wherein it was held that mis-declaration of value of the goods attracts the provisions of Section 111(m) of the Customs Act, 1962. With these submissions, the learned Spl. Counsel submits that the adjudicating authority has rightly rejected the essentiality certificate produced by the appellant at the time of importation. Therefore, they are liable to pay duty on the said barge on enhanced value and as per Section 111(m) of the Customs Act, 1962, the barge is liable for confiscation. In these terms, he submits that the adjudicating authority has rightly passed the impugned order and the same is required to be upheld.
8. Considered the submissions made by both the sides.
9. In this case, the appellant imported one Barge and filed Bill of Entry on 18.01.2011 for import on re-export basis claiming benefit of exemption under Sl.241 of Notification 21/2002-Cus dated 01.03.2002. The said notification gives exemption on production of Essentiality Certificate issued by the DGH certifying the fact that the said barge is required for petroleum operations under petroleum exploration licences issued to the ONGC. The appellant has obtained the said essentiality certificate from the DGH which shows that the name of the barge in question as Swiber Victorious. The learned Commissioner has held that the essentiality certificate produced by the appellant does not pertains to the barge is totally erroneous as the certificate mentioned the Swiber Victorious as barge in question. The only reason for denying the benefit of notification is that the value of the barge as shown in the invoice does not match to the value shown in the Insurance cover and the invoice issued by M/S. SEL on 17.3.2009. The finding of the learned Commissioner in the adjudication order does not say that the certificate does not belong to the impugned barge. Further, we find that the value taken by the learned Commissioner in the impugned order on the basis of invoice issued by Swiber Engineering Ltd. to VLCC on 21.03.2009 showing the value of the impugned barge is USD 42.5 M. In fact, the said price is not a commercial price. It is only an invoice raised in the name of the subsidiary which is having 100% holding, therefore, the transaction between them cannot be considered as assessable value to determine the assessable value under Section 14 of the Customs Act, 1962. Further, the invoice was raised in March 2009 whereas the import of the barge took place by Bill of Entry filed on 18.01.2011. Therefore, the said price have no relevance to the imports made in 2011. Another corroborative evidence adduced by the learned Commissioner in the adjudication order is that the insurance cover showing the price of the barge for insurance parties is 42.5 M. In fact, as per the agreement it is clearly instructed to the appellant that insurance cover has to be obtained on the said value for recovery of risks for other reasons. Moreover, the insured value is not the market value as held by this Tribunal in the case of Orient Enterprises (supra) which has been upheld by the Honble Apex Court. Therefore, reliance on the documents namely invoice issued in 2009 and the insurance cover for insurance of the impugned barge are not the evidences to determine the assessable value. We further find that in this case the adjudicating authority has not relied on any other evidence for enhancing the declared value. Therefore, the value declared by the appellant in their bill of entry is really a transaction value and the same cannot be rejected without any supporting evidence. We also find that the appellant produced a certificate issued by Chartered Engineers dated 31.12.2010 certifying the value of the barge is US $ 23.5 Million. The said evidence has not been discarded by the adjudicating authority. Further, the appellant has also produced a quotation to know the price of new identical barge and it shows that the new barge will cost USD 25 Million from the manufacturer. This evidence has also been discarded by the adjudicating authority. If the new barge is available on US$ 25 Million at relevant time, as the impugned barge is a old one therefore the declared value of US$ 23.5 Million is required to be accepted by all means. We further find that the DGH has not raised the issue of value for issuance of the said essentiality certificate therefore, the certificate issued by DGH cannot be discarded by the adjudicating authority.
10. In view of the above, we observed that the impugned order is without justification as held by the decision in the case of Titan Medical Systems Pvt. Ltd. (supra). We also find that in the case of CCE v. Wander Ltd., (supra) the Honble Apex Court held that the issue of valuation of barge seized have no relevance or significance if the same is exempted and there is no duty liability. The case law relied upon by the learned Spl. Counsel for the Revenue has no relevance to the facts of this case to determine the value of exempted goods. In fact, we are holding that the value declared by the appellant in the bill of entry is true and correct. Therefore, thee impugned proceedings are not warranted.
11. The essentiality certificate issued for the barge in question is for Swiber Victorious therefore, the impugned order quo rejecting the essentiality certificate is set aside. As the value declared by the appellant is USD 23.5 Million is true and correct value therefore, we hold that the appellant is entitled for the benefit of exemption at Sl. No.214 of Notification No. 21/2002 dated 01.03.2002.
12. With these observations, we set aside the impugned order and the appeals are allowed with consequential relief, if any. Stay application is also disposed of in the above terms.
(Order Dictated in open Court) (P.S. Pruthi) Member (Technical) (Ashok Jindal) Member (Judicial) nsk ??
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