Custom, Excise & Service Tax Tribunal
Jagson International Limited vs Jamnagar(Prev) on 9 May, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
REGIONAL BENCH -COURT NO. 03
Customs (ors) Misc. Application No. 10135 of 2019
in
Customs Appeal No. 10329 of 2019
[Arising out of OIO-VIII-10-418-COMMR-O-A-2015 passed by Commissioner (Appeals)
Commissioner of Central Excise, Customs and Service Tax-JAMNAGAR (PREV)]
M/s Jagson International Ltd ......Appellant
3rd Floor, Vandana Building 11 Tolstoy Marg
New Delhi-110001.
VERSUS
C.C.-Jamnagar(prev) .....Respondent
SHARDA HOUSE...BEDI BANDAR ROAD, OPP. PANCHAVATI, JAMNAGAR, GUJARAT APPEARANCE:
Sh. Vishal Agarwal & Ms. Dimple Gohil, Advocate for the Appellant Sh. Sameer Chitkara, Authorized Representative for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) FINAL ORDER NO. A/ 10827 /2019 DATE OF HEARING: 07.03.2019 DATE OF DECISION: 09.05.2019 PER: RAMESH NAIR The present appeal has been filed against impugned order dated 04.10.2018 passed by the Commissioner, Customs (Preventive), wherein the appellant's application to allow re-export of goods has been denied on the ground that the appellant has not paid the duty on the imported goods.
2. The brief facts of the case are that the appellant are engaged in Off-shore drilling for exploration of Oil and Gas and are owners of 4 Mobile Offshore Drilling Rigs, which are used for exploration of oil and gas. The appellant, in anticipation of new contract from ONGC Ltd had
2|Page C/10329/2019-DB purchased 4thRig "Deep Sea Treasure" and carried out necessary refurbishment. They were awarded contract vide letter of award dated 13.6.2013 from ONGC for exploration of Oil & Gas. The Appellant imported the Rig vide Bill of Entry No. 4083823 dated 16.12.2013 at Pipavav Port and Spare Parts were also imported under 10 bills of entry filed by them. The Appellant while importing and clearance of the said goods claimed exemption under Sl. No. 356 of Notification No. 12/2012- Cus dated 17.3.2012 under which the goods imported in connection with Petroleum Operations undertaken in pursuance of licence granted by the Govt of India or any State Government to the ONGC Ltd are exempted subject to certain conditions one of which is procurement of "Essentiality Certificate". However, before the initiation of the contract work, the ONGC Ltd terminated the contract vide e-mail dated 7.5.2014 and therefore, the imported goods could not be put to use by the appellant. On the intelligence that the imported goods were never put to use by the Appellant, the same were placed under seizure by the Department. After issuing show cause notice for seizure and confiscation of the same, vide OIO dated 23.11.2016 duty demand on the Rig and Spare parts was confirmed as well as confiscation of the said goods were ordered. The adjudicating authority also imposed redemption fine and penalty upon the appellant. The Appellant filed appeal before Tribunal who vide Final Order No. A/11652-653 of 2018 dated 31.07.2018, dismissed the Appellant's appeal and held that the imported goods have never been put to use and, therefore, duty exemption would not be available and the Appellant would be required to pay appropriate duty under Section 125 (2) of the Customs Act, 1964. The Tribunal in the said order also held that in case of request for ex-export of the Rig and spare parts, as made by the appellant, the same shall be considered. The appellant
3|Page C/10329/2019-DB filed appeal against the order of the CESTAT which is pending before the Hon'ble Apex Court.
3. The appellant thereafter made application dated 28.8.2018 before the Commissioner of Customs (Preventive) seeking permission to re- export the impugned goods on payment of redemption fine and penalty. They also requested for parking of Rigs to nearby dock for repair and maintenance outside India as the rig was parked at same place for last four years and some repairing work would be required on its spud cans. The Appellant thereafter vide challan dated 26.9.2018 paid redemption fine and penalty and also book custody of the impugned imported goods The Commissioner of Customs (Preventive) vide impugned order rejected the appellant's request for re-export of the goods on the ground that the duty on the imported goods along with interest has not been paid. Aggrieved, the Appellant are in appeal before us.
4. Heard both the sides and perused the records. We find that the appellant has already made payment of redemption fine and penalty and is requesting for re-export of the goods. Even if the Appellant is made to make payment of duty on such imported goods but he is eligible for drawback of 98% of the duty payable on the importation of the goods in terms of Section 74 of the Customs Act. The facts of importation of goods due to awarding of contract by ONGC and cancellation of same which led to seizure of goods is not in dispute. It is not a deliberate intention case of non payment of duty on imported goods and the Appellant after payment of redemption fine and penalty has option either to pay duty if he wants to keep the goods in India or to re-export the same. In case of re-export for which he is eligible, the net effect of duty payable by him would be 2% i.e. difference between the duty payable and drawback amount under Section 74 of the Customs Act. It
4|Page C/10329/2019-DB is also clear that he is eligible for 98% duty drawback of the duty paid by them. The Hon'ble Bombay High Court in case of Cipla Ltd - 1995 (80) ELT 17 (Bom) has allowed the assessee to re-export the goods on payment of differential duty of 2% after adjusting the drawback of 98% of duty admissible to them in terms of Section 74 of the Customs Act, 1962. The Hon'ble court held as under:-
"Para 4. We find considerable merit in the contentions advanced on behalf of the petitioners. In the present case, petitioners were allowed to re-export the goods by the Customs on the footing that they were the same goods, which were imported. The petitioners also obtained permission to re-export from R.B.I. The Collector of Customs (Appeals) (vide) order dated April 10, 1986 came to the conclusion that identity of goods stood established. The Collector of Customs (Appeals) also came to the conclusion that it was not possible for the petitioners to obtain end use certificate and that there was only technical fault on the part of the petitioners who re-exported the goods under free shipping bills whereas petitioners were required to re-export the goods under duty drawback shipping bills. In the circumstances, the Collector came to the conclusion that there was a technical lapse on the part of the petitioners. Actually, the Collector of Customs (Appeals) should have decided the matter. There was no need to remand the matter. In any event, the matter stood remanded. Respondent No. 3, after remand, has only proceeded on the footing that conditions mentioned in the bonds should be complied with and since end use certificate has not been produced, respondent No. 3 directed petitioners to pay Rs. 22,99,044/-. We are in agreement with the contention advanced on behalf of the petitioners that in the present case the view taken by respondent No. 3 operates harshly on the petitioners. If the findings of respondent No. 3 as contained in the impugned order dated August 14, 1986 are to be accepted, then one fails to understand on what basis the Customs permitted petitioners to re-export the goods in 1984. Further, petitioners have shown their bona fides by agreeing to pay differential duty at the rate of 2% because under Section 74 of the Customs Act, petitioners were entitled to re-export the goods as a matter of right under the cover of duty drawback shipping bills. Under Section 74, petitioners were entitled to take back duty to the extent of 98%.
Petitioners have deposited the differential duty with the Customs at the rate of 2% under the interim order passed by this Court at the time of admission. In fact they have deposited Rs. 66,000/- whereas according to the petitioners 2% of Rs. 22,99,044/- comes to Rs. 45,980.88. In the circumstances, we find merit in the petition. However, before concluding, we would like to mention that our view is based only on the facts and circumstances of this case."
5. Similarly, in case of Shipping Corporation of India - 2014 (312) ELT 305 (Tri, Mum), the CESTAT has allowed adjustment of duty payment against drawback admissible to the appellant. The Tribunal held, as under:
"Para 6.13 The appellants have alternatively argued that drawback of the duty would be available under Section 74 of the Customs Act inasmuch as the vessels have gone back after the salvage operations, within a period 3 months from the date of their importation. There is merit in this argument. The ld. consultant for the Revenue has not contested this point and has left the issue for appropriate decision by this
5|Page C/10329/2019-DB Tribunal. We find that under Section 74(2) read with Notification No. 19/65-Cus., dated 16-2-1965 as amended, if the imported goods are re- exported as such within a period of 3 months from the date of importation, 95% of the import duty paid is eligible as drawback to the exporter. In the present case, there is no dispute that the vessels have been re-exported within a period of 3 months from their date of importation. In the case of Sedco Forex International Drilling Inc. v. CC, Mumbai [2001 (135) E.L.T. 625], in a similar situation, this Tribunal directed the Revenue to re-compute the duty liability after taking into the drawback. Following the said decision, in the present appeals also, we direct the Revenue to work out the duty liability after taking into account the drawback that the appellants would be entitled to, after completing the necessary formalities, if any required."
We also find that in case of Joseph Eye Hospital - 2006 (193) ELT 91, the request for re-export without payment of duty was allowed by the Tribunal by holding as under:
"Para 3. After examining the records and submissions, we find that it is not in dispute that the year of make of any of the imported items was not discernible from the goods and that specific import licence was necessary for import of second-hand goods less than 10 years old. The subject goods were certified by the Chartered Engineer to be 6 to 7 years old. This certificate has not been contested by the appellant. The goods were rightly held to be liable for confiscation, in the absence of specific import licence. We do not find any serious challenge in this appeal, against the confiscation either. Where the goods are indisputably liable for confiscation under Section 111 of the Customs Act, a penalty on the importer under Section 112 cannot be resisted. In this appeal, the grievance seems to be against the quanta of redemption fine and penalty. However, the relief mainly prayed for by the appellant is for permission to re-export the goods without imposition of fine and penalty. In support of the prayer for permission for re-export of the goods, ld. Counsel has relied on two Final Orders of this Bench. In the case of M.V. Marketing and Supplies considered in Final Order No. 861/2004, dated 8-10-2004, [2004 (178) E.L.T. 1034 (T)] the importer had requested for re-export of the goods viz. assorted readymade garments which had been imported by them by resorting to mis-declaration of quantity, value etc. In that case, the supplier of the goods had also agreed for reshipment of the goods. But the importer's prayer for permission to re-export the goods was turned down by the Commissioner on the ground that re-export of 'tainted' goods [i.e., goods liable to confiscation] was not permissible. When the matter came up before the Tribunal, the issue arose as to whether the prayer for re-export could be allowed and, if so, whether duty was payable in addition to redemption fine and penalty. This issue was considered in the light of the Supreme Court's decision in the case of Commissioner v. Grand Prime Ltd. [2003 (155) E.L.T. 417 (S.C.)] and Commissioner v. Elephanta Oil and Industries [2003 (152) E.L.T. 257 (S.C.)]. Accordingly, it was held that the importer was entitled to re- export the goods on payment of fine and penalty. The fine (Rs. 5.75 lacs) and penalty (Rs. 2 lacs) imposed by the Commissioner were reduced to Rs. 1 lakh and Rs. 25,000/- respectively. In the case of Ashtalakshmi Marketing considered in Final Order Nos. 986 & 987/2004, dated 2-11- 2004, the said party had filed a Bill of Entry under DEPB scheme for clearance of goods declared as 'rubber slippers and cotton towels'. Inspection of the goods by the Customs authorities revealed that the consignment also contained undeclared items such as men's woven shirts and other garments concealed behind the packages of rubber slippers and cotton towels. After the mis-declaration was noticed, certain correspondences between the importer and the foreign supplier were produced by the CHA to show that the shipment of the undeclared items was occasioned by inadvertent mix-up of containers. The importer then
6|Page C/10329/2019-DB chose to abandon the garments found in the containers. The show-cause notice issued by the Department to the party for confiscation, penalty etc., was adjudicated upon by the Commissioner, who ordered confiscation of the goods under Section 111 with option for redemption thereof on payment of fine of Rs. 3 lakhs and also imposed a penalty of Rs. 1 lakh on the importer under Section 112(a) of the Act. When the matter came up before the Tribunal, the party requested for re-export of the goods. The Tribunal, following its earlier order in M.V. Marketing (Supra), allowed re-export of the goods without payment of duty but on payment of a fine of Rs. 1.5 lakhs. The penalty imposed on the party by the Commissioner was set aside in the facts and circumstances of the case.
Para 4. In the instant case, it has been pleaded before us that the appellant was not in a position to clear the goods and has no option other than seeking permission for re-export to the foreign supplier who is willing to take back the goods. Following the above precedent, we are inclined to allow this request for re-export in the facts and circumstances of this case. Accordingly, it is ordered that the appellant be allowed to re- export the goods without payment of duty, but on payment of redemption fine of Rupees Twenty-five thousands and penalty of Rs. Five thousands. The impugned order will stand modified accordingly." Going by the facts of the present case and settled legal position as cited above, we are of the view that the Appellant is eligible for re-export of impugned goods on payment of 2% differential duty as above.
6. The Ld. Counsel for the appellant has also pleaded that at the time of filing of appeal against the order dated 23.11.2016 under which duty payment against the said imports were confirmed against the appellant, they had deposited an amount of 7.5% of the total duty as mandatory pre-deposit for filing the appeal before this tribunal. since now the said appeal has been disposed of the said pre-deposit is lying with the department. He prays that the said amount be adjusted against the differential duty of 2% in terms of Section 74 of the Customs Act, 1962. We find that the said pre - deposit is against the duty payment itself which is being demanded from the Appellant. Since the goods are being exported we are of the view that the 2% differential duty payment is sufficient and the same may be adjusted from the amount of pre-deposit made by the Appellant while filing appeal against Order dated 23.11.2016. The Appellant has also pleaded that since the duty is payable by them under Section 125(2) in terms of Tribunal order dated
7|Page C/10329/2019-DB 31.7.2018, therefore, in such case, there should not be a demand for interest as the same is payable only when the demand is made u/s 28. We find that in case of Armaity S. Patel - 2014 (310) ELT 313, the Tribunal has held that no interest is payable when duty is payable u/s 125 (2) of the Customs Act. Following the ratio of said Tribunal order we hold that the Appellant is not liable for interest as the duty demand has not been confirmed against them in terms of Section 28.
7. In view of our above discussions and observations, we hold that the impugned order is not sustainable and the appellants are allowed to re-export the impugned imported goods on payment of 2% differential duty, which shall be adjusted against the pre-deposit of 7.5% which was made by them as mandatory pre-deposit while filing the appeal before the Tribunal against the OIO dated 23.11.2016.
8. We therefore, set aside the impugned order and allow the appeal with consequential reliefs, as above. MA (ors) also stand disposed of.
(Pronounced in the open court on 09.05.2019) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) Seema