2006 (2) TMI 386 - AT - Customs

Imported Rig Classified Under Heading 8905.20; Confiscation Upheld; Redemption Fine and Penalty Imposed

The Tribunal classified the imported rig under Heading 8905.20, granting benefit under Notification No. 196/89 for concessional duty. Confiscation under ... Matdrill - Jack up rig deep sea matdrill - Expert opinion - Binding nature of - Classification - Adjudication - Show cause notice - Redemption fine - Quantum of - Redemption fine - Value of confiscated goods Issues Involved:1. Classification of the imported second-hand jack-up rig deepsea matdrill.2. Eligibility for benefit under Customs Notification No. 196/89.3. Legality of confiscation under Section 111(j) of the Customs Act, 1962.4. Quantum of redemption fine and penalty imposed.Detailed Analysis:1. Classification of the Imported Second-Hand Jack-Up Rig Deepsea Matdrill:The primary issue was whether the imported rig should be classified under Heading 8905.20 or 8905.90 of the Customs Tariff Act, 1975. The appellant initially claimed classification under Heading 8430.49, later amending it to 8905.90. The Customs authorities, however, argued that the rig fell under Heading 8905.20, which covers 'floating or submersible drilling or production platforms.'The Tribunal noted that the rig had characteristics such as self-elevating platform and retractable legs, which fit the description under Heading 8905.20 as per the HSN Explanatory Notes. The Chief Engineer (Drilling) of ONGC initially certified that the rig was not a floating or submersible platform but later retracted this opinion after reviewing the HSN Explanatory Notes. The Tribunal concluded that the rig was correctly classified under Heading 8905.20.2. Eligibility for Benefit under Customs Notification No. 196/89:The appellant claimed the benefit of Notification No. 196/89, which provides a concessional rate of duty for certain goods used in offshore oil exploration or exploitation, provided an 'essentiality certificate' is produced. The Commissioner denied this benefit, citing that the certificate was issued after the notification was rescinded.The Tribunal, however, held that the essentiality certificate, issued in May 1999, was valid for the goods imported under the bill of entry dated 28-4-1993. The rescission of the notification in 1997 did not affect the eligibility for the benefit, as the certificate pertained to goods imported while the notification was in force. Therefore, the appellant was entitled to the concessional rate of duty under Notification No. 196/89.3. Legality of Confiscation under Section 111(j) of the Customs Act, 1962:The goods were confiscated under Section 111(j) for being removed from the customs area without the permission of the proper officer. The appellant argued that the show cause notice did not specifically mention Section 111(j) and that the goods were removed based on a civil court order.The Tribunal found that the appellant removed the rig without approaching the proper officer for assessment and payment of duty, as required under Section 47 of the Customs Act. The civil court order did not absolve the appellant from complying with customs procedures. The show cause notice sufficiently alleged removal without payment of duty, justifying confiscation under Section 111(j).4. Quantum of Redemption Fine and Penalty Imposed:The Commissioner imposed a redemption fine of Rs. 5 crores and a penalty of Rs. 2 crores. The appellant contended that the fine was excessive.The Tribunal held that the fine, being less than half of the CIF value declared by the appellant, was justified. The penalty under Section 112(a) was also upheld as appropriate given the circumstances.Final Order:The Tribunal modified the impugned order by reducing the duty demand to an amount calculated by granting the benefit of Notification No. 196/89. The classification under Heading 8905.20 was upheld, and the appeal was dismissed except for the modification in duty demand. The Tribunal also directed the Registry to send a certified copy of the judgment to the Delhi High Court for administrative review regarding the civil court's jurisdiction in customs matters.Pronounced on 27-2-2006.