Custom, Excise & Service Tax Tribunal
Transocean Discoverer 534 Llc ... vs Commissioner Of Central Excise, ... on 26 September, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order Nos. 21855-21857 / 2014 Appeal(s) Involved: C/20011/2014-DB, C/20012/2014-DB, C/20013/2014-DB [Arising out of Order-in-Appeal Nos. 10-12/2013 dated 11/11/2013 passed by the Commissioner of Customs, Central Excise and Service Tax, Visakhapatnam-II ] Transocean Discoverer 534 LLC Transocean Offshore International Ventures Ltd. Transocean Offshore Deepwater Drilling Inc. Transocean House, Lake Boulevard Road, Hiranandani Business Park, Powai, Mumbai - 400 076 Appellant(s) Versus Commissioner of Central Excise, Service Tax and Customs Visakhapatnam-II Central Excise Building, Port Area, Visakhapatnam 530 035 Andhra Pradesh Respondent(s)
Appearance:
Mr. J.C. Patel, Advocate Jahangir Building, 133 Mahatma Gandhi Road, Fort, Mumbai - 400 023.
For the Appellant Mr. S. Teli, AR For the Respondent CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 26/09/2014 Date of Decision: 26/09/2014 Order Per: B.S.V. MURTHY In all the 3 appeals the issue involved is same and therefore all the 3 appeals are taken together and a common order is being passed. Transocean Discoverer 534 LLC (the appellant) imported Drillship in December 2007 which was converted into coastal run on 16.12.2007 and as per the conversion certificate dated 16.12.2007 quantity of 748.144 KL of Marine Gas Oil was found on board (only Marine Gas Oil is mentioned since the issue involved is the eligibility of the appellant for exemption in respect of Marine Gas Oil). This has been dealt with in Appeal No. C/20011/2014. Transocean Offshore International Ventures Ltd., the appellant in Appeal No. C/20012/2014 imported Drillship Deepwater Expedition at Kakinada Port in August 2008 which was converted from foreign run to coastal run on 12.08.2008. As per the conversion certificate dated 12.08.2008, 568.550 MT of Marine Gas Oil was found on board. Transocean Offshore Deepwater Drilling Inc., the third appellant in Appeal No. C/20013/2014 had imported Drillship (Rig) Discoverer Seven Seas (DSS) at Kakinada Port in July 2006 which was converted from foreign run to coastal run on 28.07.2006. As per the conversion certificate dated 28.07.2006, 644.654 CBM of Marine Gas Oil was found on board.
2. In all the cases samples of the Marine Gas Oil were drawn by the Customs officers and sent for chemical examination. Since it was agreed by both the sides that in all the 3 appeals the issue involved is common and facts are also similar, the issue dealt with by us in this case is based on the facts in Appeal C/20011/2014.
3. The issue involved is eligibility of exemption for Marine Gas Oil as declared by the appellants for exemption under Sl. No. 217 of Notification No. 21/2002 Cus. dated 01.03.2002. For better appreciation, the Notification and the Condition No. 32 subject to which exemption is available and the List 12 which covers the items covered under the Notification are reproduced below:
S. No. Chapter or Heading No. or sub-heading No. Description of goods Standard rate Additional duty rate Condition No. 217 84 or any other Chapter Goods specified in List 12 required in connection with petroleum operations undertaken under specified contracts under the New Exploration Licensing Policy Nil Nil 32
32.
If,-
(a) the goods are imported by an Indian Company or Companies, a Foreign Company or Companies, or a consortium of an Indian Company or Companies and a Foreign Company or Companies (hereinafter referred to as the contractor) or a sub-contractor of such Company or Companies or such consortium and in each case in connection with petroleum operations or coal bed methane operations, as the case may be, to be undertaken under a contract signed with the Government of India, on or after the 1st day of April, 1998, under the New Exploration Licensing Policy, or on or after the 1st day of April, 2001 in terms of the Coal Bed Methane Policy, as the case may be;
(b) where the importer is a contractor, he produces to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, at the time of importation, the following, namely :-
(i) a certificate from a duly authorised officer of the Directorate General of Hydro Carbons in the Ministry of Petroleum and Natural Gas, Government of India, to the effect that the imported goods are required for such petroleum operations or coal bed methane operations, as the case may be, and have been imported under a contract signed under the New Exploration Licensing Policy or the Coal Bed Methane Policy, as the case may be; and
(ii) a certificate, in the case of a contract entered into by the Government of India and a Foreign Company or Companies or, the Government of India and a consortium of an Indian Company or Companies and a Foreign Company or Companies, that no foreign exchange remittance is made for the imports of such goods undertaken by the Foreign Company or Companies;
(c) where the importer is a sub-contractor, he produces to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, at the time of importation, the following, namely:-
(i) a certificate from a duly authorised officer of the Directorate General of Hydro Carbons, in the Ministry of Petroleum and Natural Gas, Government of India, to the effect that the imported goods are required for petroleum operations or coal bed methane operations, as the case may be, referred to in clause (a) and have been imported under a contract signed under the New Exploration Licensing Policy or the Coal Bed Methane Policy, as the case may be, and containing the name of such sub-contractor,
(ii) an affidavit to the effect that such sub-contractor is a bona fide sub-contractor of the contractor,
(iii) an undertaking from such contractor, binding him to pay any duty, fine or penalty that may become payable, if any of the conditions of this notification are not complied with, by such sub-contractor or contractor, as the case may be; and
(iv) a certificate, in the case of a contract entered into by the Government of India and a Foreign Company or Companies or, the Government of India and a consortium of an Indian Company or Companies and a Foreign Company or Companies, that no foreign exchange remittance is made for the import of such goods undertaken by the sub-contractor on behalf of the Foreign Company or Companies:
Provided that nothing contained in this sub-clause shall apply if such sub-contractor is an Indian Company or Companies.
List 12 (See S. No. 214, 216 and 217 of the Table) (1) Land Seismic Survey Equipment and accessories, requisite vehicles including those for carrying the equipment, seismic survey vessels, global positioning system and accessories, and other materials required for seismic work or other types of Geophysical and Geochemical surveys for onshore and offshore activities (2) All types of Drilling rigs, jack up rigs, submersible rigs, semi submersible rigs, drill ships, drilling barges, shot-hole drilling rigs, mobile rigs, work over rigs consisting of various equipment and other drilling equipment required for drilling operations, snubbing units, hydraulic work over units, self elevating work over platforms, Remote Operated Vessel (ROV) (3) Helicopters including assemblies/parts (4) All types of Marine vessels to support petroleum operations including work boats, barges, crew boats, tugs, anchor handling vessels, lay barges and supply boats, Marine ship equipment including water Maker, DP system and Diving system (5) All types of Equipment/units for specialised services like diving, cementing, logging, casing repair, production testing, simulation and mud services, oil field related lab equipment, reservoir engineering, geological equipment, directional drilling, Stimulation, Coil Tubing units, drill stem testing (DST), data acquisition and processing, solids control, fishing (as related to down hole retrieval in oil field operations), well control, blowout prevention (BOP), pipe inspection including Non Destructive Testing, coring, gravel pack, well completion and work over for oil/gas wells including wire line and down hole equipment (6) All types of casing pipes, drill pipes, production tubing, pup joints, connections, coupling, kelly, cross overs and swages, Drive Pipes (7) All types of drilling bits, including nozzles, breakers and related tools (8) All types of oil field chemicals including synthetic products used in petroleum operations, oil well cement and cement additives, required for drilling, production and transportation of oil or gas (9) Process, production and well platforms for oil, gas and water injection including items forming part of the platforms and equipment required like process equipment, turbines, pumps, generators, compressors, prime movers, water makers, filters and filtering equipment, Telemetry, Telecommunication, Tele-Control and other material required for platforms (10) Line pipes for flow lines and trunk pipelines including weight-coating and wrapping (11) Derrick barges, Mobile and stationary cranes, trenchers, pipe lay barges, cargo barges and the like required in the construction/installation of platforms and laying of pipelines (12) Single buoy mooring systems, mooring ropes, fittings like chains, shackles, couplings marine hoses and oil tankers to be used for oil storage and connected equipment, Tanks used for storage of oil, condensate, water, mud, chemicals and related materials (13) All types of fully equipped vessels and other units/equipment required for pollution control, fire prevention, fire fighting, safety items like Survival Craft, Life Raft, fire and gas detection equipment, including H2S monitoring equipment. (14) Mobile and skid mounted pipe laying, pipe testing and pipe inspection equipment (15) All types of valves including high pressure valves (16) Communication equipment required for Petroleum operations including synthesized VHF Aero and VHF Marine multi channel sets (17) Non-directional radio beacons, intrinsically safe walkie-talkies, directional finders, EPIRV, electronic individual security devices including electronic access control system (18) Specialized antenna system, simplex telex over radio terminals, channel micro wave systems, test and measurement equipment (19) X-band radar transponders, area surveillance system (20) Common depth point (CDP) cable, logging cable, connectors, geo-phone strings, perforation equipment and explosives (21) Wellhead and Christmas trees, including valves, chokes, heads spools, hangers and actuators, flexible connections like chick sons and high pressure hoses, shut down panels (22) Cathodic Protection Systems including anodes (23) Technical drawings, maps, literature, Data tapes, Operational and Maintenance Manuals required for petroleum operations (24) Sub-assemblies, tools, accessories, stores, spares, materials, supplies, consumables for running, repairing or maintenance of the goods specified in this List.
The appellant is apparently a sub-contractor and therefore the condition No. 32 (c) (i) would be applicable to them. There is no dispute that such a certificate has been produced. In the essentiality certificate issued by DGHS, the quantity as well as the name of the product has been mentioned as Marine Gas Oil along with name and description of the assessee. Therefore the only question that arises in this case is whether the product imported by the appellant can be considered as Marine Gas Oil or not.
4. The report of the chemical examiner is the basis for coming to the conclusion that appellant is not eligible for the exemption. It is seen that in the Test Memo No. 4/2008, while forwarding the samples, the Customs officers had asked to ascertain whether the sample is Marine Gas Oil or not. The Chemical Examiner in his Test Memo No. 1890-27-I-KKD dated 04.02.2008 endorsed below the Test Memo itself as under:
The sample is in the form of Dark Mineral Hydrocarbon Oil. It has the following characteristics.
1. Flash point = 850C
2. Kinematic Viscosity At 400C = 4.6 cst
3. Density at 150C = .8440 gm/ml
4. % of Sulphur = .880 The sample has the characteristics of (LDO) Light Diesel Oil.
5. Learned AR submitted that the Chemical Examiners report is very clear and unambiguous and specifically states that the product is LDO. Therefore it cannot be considered as MGO. DGHS has given the essentiality certificate only for MGO. Since the product is LDO according to the Chemical Examiner, no benefit of exemption can be extended to MGO.
6. The learned counsel on behalf of the appellant draws our attention to the specifications of Marine Gas Oil as per ISO 8217 Grade DMA, 2010. According to the specifications of ISO, Density at 150C, has to be maximum 0.8900 whereas the sample tested at the Density of 0.8440 which is within the limits as per the ISO.
7. As regards Sulfur content he submits that according to the standards it should be 1.5% maximum whereas in the present case Chemical Examiner has found the percentage of Sulfur to be .880 which is again within the limits for MGO. As regards Flash point, he submits that 850C is the Flash point according to the Chemical Examiner and according to ISO 61.50C is the minimum. Therefore the sample fulfilled the requirement of MGO as far as combustion ash is concerned.
8. Lastly he submits that Fluidity at 400C has to be between 2.000-6.000 mm2 and in this case which is 4.6 which is again between 2-6 and therefore within the norms prescribed for MGO. Prima facie we find these submissions to be correct. Further he takes us through the specifications according to Indian Standard for LDO also. He submits that according to the specifications for LDO, the requirements are fulfilled by the product imported by them. However he submits that just because the product fulfills the requirements of standards/parameters for LDO in respect of 4 characteristics, it cannot be said that the product is LDO and not MGO. The only conclusion that can be reached from the Test Memo is that the product imported by the appellants can be either MGO or LDO.
9. We find considerable force in the arguments advanced by the learned counsel. There was a specific query from the Custom House asking the Chemical Examiner to state specifically whether the product is MGO or not. Instead of specifically stating whether the product is MGO or not, the Chemical Examiner has chosen to show us that the product is LDO. In the absence of a specific report from the Chemical Examiner that the product is not MGO which was what required by the Custom House, it cannot be said that the Chemical Examiners report supports the case of the Custom House. There is no evidence to show that the product is not MGO. The Chemical Examiners report also as observed by us does not support the case of the appellant. At this juncture, the learned AR submitted that the appellants have not challenged the test report at all. In fact even though the tests were conducted much earlier the results of the samples were communicated to the appellants only in 2012, the learned counsel drew our attention to a letter written by the appellants to the Customs saying that the sample may be referred to CRCL for reexamination. Further no action was taken on this letter probably because by the time the letter was written a number of years have already passed. Since it is not the case of the Revenue that the product imported by the appellant does not fulfill the parameters for MGO as per the Indian Standards, we are not in a position to uphold the impugned order taking a stand that what is imported is LDO and not MGO and therefore the benefit of exemption is not available.
10. In fact the learned counsel went one step further and submitted that even going by the r.p.m. of the Drillship imported by them it can be said that what is imported is MGO. In fact LDO can be used only when the r.p.m of the engine is less than 750 r.p.m. whereas in all the 3 Drillship units imported by the appellant in the cases before us, the r.p.m. of the engines were more than 750 r.p.m. and therefore LDO could not have been used for the engines.
11. The discussion above would show that the appellant is eligible for the benefit of the notification as claimed by them and accordingly the impugned order is set aside and all the appeals are allowed with consequential relief, if any, to the appellants.
(Operative portion of the order has been pronounced in open court on 26.09.2014) (S.K. MOHANTY) JUDICIAL MEMBER (B.S.V. MURTHY) TECHNICAL MEMBER iss