Export treatment for offshore pipe supplies can extend to goods laid beyond territorial waters, limiting customs liability and interest.

Supply of coated pipes to ONGC for laying beyond territorial waters was treated as export for customs exemption purposes, because the evidence showed actual delivery and laying in non-designated areas outside India for the relevant maritime law purpose. The exemption was not available only to the limited extent of pipes laid within 12 nautical miles, which required factual verification against the permitted domestic clearance limit. The customs duty demand on ONGC-imported pipes could not be fastened on the appellant, who was not the importer, and confiscation and penalty were not made out on a provisional assessment record where the department knew the facts. Interest was also held inapplicable, as the relevant provision did not govern these provisional assessments and had not yet operated for the imports.

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Issues: (i) whether supply of coated pipes to ONGC for laying beyond the territorial waters of India constituted export so as to entitle the importer to exemption under the relevant customs notifications; (ii) whether the demand of customs duty on the imported pipes and allied goods, along with confiscation and penalty, was sustainable; and (iii) whether interest under the customs provisions was leviable.

Issue (i): whether supply of coated pipes to ONGC for laying beyond the territorial waters of India constituted export so as to entitle the importer to exemption under the relevant customs notifications.

Analysis: The evidence placed through unrebutted affidavits of ONGC showed that substantial quantities of the coated pipes were delivered through the nominated laying contractor and were actually laid beyond the territorial waters in non-designated areas. The legal framework under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 and the notifications issued thereunder treated areas outside the notified designated areas as outside India for the relevant purpose. The exemption notification allowed clearance of goods in accordance with the export-import policy and also recognised permissible clearances within the policy limits. The supply to ONGC installations beyond territorial waters was, therefore, to be treated as export for the purpose of the exemption, except to the extent of 25.746 kms. of pipes laid within 12 nautical miles, which required factual verification against the permitted DTA limit.

Conclusion: The supply was held to be export for exemption purposes, except for the limited quantity laid within 12 nautical miles, which was remanded for verification.

Issue (ii): whether the demand of customs duty on the imported pipes and allied goods, along with confiscation and penalty, was sustainable.

Analysis: The demand based on the show cause notice relating to pipes imported by ONGC itself could not be fastened on the appellant, as the appellant was not the importer. As to confiscation and penalty, the goods were under provisional assessment, the department had full knowledge of the factual matrix, and the case was one of denial of exemption at the assessment stage rather than breach of a post-import condition. On that footing, the ingredients for confiscation and penalty were not made out.

Conclusion: The demand against the appellant in respect of ONGC-imported pipes was unsustainable, and confiscation and penalty were not warranted.

Issue (iii): whether interest under the customs provisions was leviable.

Analysis: Interest under the cited provision applied only to duty determined under the relevant post-assessment mechanism, whereas the present case arose from provisional assessments to be finalised under the assessment provision. Further, the provision invoked for interest came into force after the relevant imports. On both grounds, interest was not attracted.

Conclusion: Interest was held to be inapplicable.

Final Conclusion: The appeals succeeded in substantial part on the principal exemption and liability questions, with only a limited factual verification left open as to whether the quantity laid within 12 nautical miles fell within the permissible DTA clearance limit; the matter was remanded for that restricted purpose.

Ratio Decidendi: Supplies to ONGC actually laid in non-designated areas beyond the territorial waters constitute export for the purpose of customs exemption, and where the assessment is provisional and the importer is not the person chargeable to duty, confiscation, penalty, and interest cannot be sustained on the same footing.

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