TaxTMI 
TaxTMI 
TaxTMI 
The Hon'ble CESTAT, Mumbai, in Dolphin Drilling Ltd. Versus Commissioner of Customs (Export-I), Mumbai - 2026 (4) TMI 1237 - CESTAT MUMBAI held that clearing imported capital goods to a Special Economic Zone ('SEZ') unit constitutes 'export' under the Special economic zone act, 2005('the SEZ Act'). Furthermore, since the relevant exemption notification did not stipulate a re-export condition, such a requirement in a certificate issued by the Directorate General of Hydrocarbons ('DGH') could not be used to deny the exemption.
Facts:
- M/s Dolphin Drilling Ltd ('the appellant'), is in the business of drilling oil as a contractor of Oil & Natural Gas Corporation Ltd ('ONGC'), importing goods for petroleum operations ('subject goods') and claimed duty exemption under Notification No. 21/2002-Cus. Dated March 01, 2002('the notification').
- The DGH issued a certificate for the imports but included a condition that the goods must be re-exported by a specific date (later extended to June 30, 2007). Instead of exporting the goods out of the country, the appellant cleared them to a unit in the Visakhapatnam SEZ.
- The Department confirmed a demand for duty, interest, and penalties, arguing that the appellant violated the DGH certificate's re-export condition and that clearing goods to an SEZ did not qualify as an 'export'.
Issues:
- Whether the re-export condition imposed by the DGH is binding if the Notification does not contain such a requirement?
- Whether clearing goods to an SEZ unit fulfils the requirement of 'export' or 're-export'?
Held:
The Hon'ble CESTAT, Mumbai, in Dolphin Drilling Ltd. Versus Commissioner of Customs (Export-I), Mumbai - 2026 (4) TMI 1237 - CESTAT MUMBAIheld as under:
- observed that the subject goods are mentioned at Serial No. 214 of the said Notification. The condition attached to Serial No.214 is that condition No.29 should be satisfied. Under the condition, the appellant should produce a certificate duly authorized by an officer of the DGH to the effect that the goods are required for petroleum operations and have been imported under a licence or mining lease. Condition No.29 does not stipulate that the sub-contractor has to export the goods within a stipulated time.
- Relied on Division Bench of this Tribunal in BJ SERVICES COMPANY MIDDLE EAST LTD. Versus COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI - 2013 (11) TMI 793 - CESTAT MUMBAI, in which the bench noticed that no time period has been stipulated in the Exemption Notification. The Bench also noticed that the appellant had used the capital goods during the period permitted in the certificate and after completing the use, cleared these goods to SEZ unit. The Bench then observed that clearing these goods to a SEZ unit would amount to 'export' under section 2(m) of the SEZ Act and, therefore, there is no failure on the part of the appellant in fulfilling the terms and conditions of the Exemption Notification.
- Noted that in B.J. Services Company Middle East Ltd(Supra) the bench also observed that paragraph 2.21 of the Foreign Trade Policy 2004-2009 provided for importation without a licence of second-hand capital goods on re-export basis on executing a legal undertaking with the Customs authorities. However, paragraph 2.17 of the said Policy provides that the import of second-hand capital goods shall be allowed freely without any condition of re-export.
- Foreign Trade Policy (FTP) Provisions:Paragraph 2.17 of the FTP 2004-2009 allows the free import of second-hand capital goods without any condition of re-export. The Tribunal ruled that even if the appellant initially referenced a different paragraph (Para 2.21) at the time of import, they could not be denied the benefit of Para 2.17.
- Hence, by relyingB.J. Services Company Middle East Ltd(supra), the impugned order was set aside, and the appeal was allowed.
Relevant Sections & Policies:
- Notification No. 21/2002-Cus (Serial No. 214, Condition No. 29): Exemption for goods imported for petroleum operations.
Condition 29: (i) a certificate from a duly authorized 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 referred to in clause (a) and have been imported under the licenses or mining leases, as the case may be, referred to in that clause 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 licensee or lessee, as the case may be,
(iii) an undertaking from such licensee or lessee, as the case may be, binding him to pay any duty, fine or penalty that may become payable, if not of the conditions of this notification are not complied with by such sub-contractor or licensee or lessee, as the case may be, and
(iv) a certificate, in the case of a petroleum exploration license or mining lease, as the case may be, issued or renewed after the 1st of April, 1999, by the Government of India or any State Government on nomination basis, that no foreign exchange remittance is made for the import of such goods undertaken by the sub-contractor on behalf of the licensee or lessee, as the case may be :
Provided that nothing contained in this sub-clause shall apply if such sub-contractor is an Indian Company or Companies
(m) 'export' means- (i) taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or (ii) supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer; or (iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone;
- Paragraph 2.17 of the Foreign Trade Policy (2004-2009): Pertains to the free import of second-hand capital goods without re-export conditions.
- Paragraph 2.21 of the Foreign Trade Policy (2004-2009): Pertains to imports of second-hand capital goods on a re-export basis