2011 (10) TMI 148 - AT - Customs

Tribunal modifies release order for vessel 'Swiber Victorious,' waiving duty payment and bank guarantee.

M/s SWIBER OFFSHORE CONSTRUCTION PTE LTD Versus COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI

The Tribunal, by majority decision, modified the provisional release order for the vessel 'Swiber Victorious,' waiving the conditions of duty payment and ... Provisional release of seized vessel 'old and used Swiber Victorious' - Held that:- Once the end use of the vessel is for ONGC petroleum recognized by Department of Hydro-carbon, to which exemption is available, prima facie, the decision of Apex Court in the case of Wander Ltd. (2003 (8) TMI 48 - SUPREME COURT OF INDIA) is squarely applicable to the this case. The insurance at higher value as per para 11.2 of the contract, hence prima facie the same would not be relevant for arriving at assessable value. Therefore, we found that there is no reason to impose condition of payment of duty, as also of submitting the bank guarantee for provisional release in respect of such exempted goods. - in the interest of justice, revenue will be fully protected, if the bond as required by the learned Commissioner is executed and the appellant is put to the conditions such as not to use the vessel except to intended use for executing the contractual work of petroleum operations for ONGC till final adjudication on completion of investigation and shall not re-export the vessel, except with the permission of the Customs authority. Issues Involved:1. Provisional release of seized vessel.2. Conditions imposed for provisional release.3. Alleged undervaluation and misdeclaration.4. Applicability of duty exemption under Notification No. 21/2002.5. Jurisdiction and maintainability of appeal against provisional release order.Detailed Analysis:Issue 1: Provisional Release of Seized VesselThe appellant sought the provisional release of the vessel 'Swiber Victorious,' which was seized by customs authorities. The vessel was initially imported duty-free under a valid Essentiality Certificate for petroleum operations for ONGC. The customs authorities allowed provisional release upon execution of a bond, payment of duty, and a bank guarantee.Issue 2: Conditions Imposed for Provisional ReleaseThe conditions for provisional release included:- Execution of a bond of Rs. 237,08,76,525/-.- Payment of duty amounting to Rs. 22,18,19,288/-.- Execution of a bank guarantee for 25% of the duty amount with a self-renewal clause.The appellant contended that conditions (b) and (c) were onerous and caused significant financial loss, requesting a modification of these conditions.Issue 3: Alleged Undervaluation and MisdeclarationThe vessel was seized on allegations of undervaluation. The customs authorities based their higher valuation on the Charter Hire agreement and an ICON leasing report, which listed the vessel's value significantly higher than declared. The appellant argued that the declared value was accurate and supported by a surveyor's valuation certificate and a new barge quotation.Issue 4: Applicability of Duty Exemption under Notification No. 21/2002The appellant argued that the vessel was exempt from duty under Notification No. 21/2002, as it was imported for petroleum operations for ONGC. The appellant cited precedents where the Supreme Court held that valuation disputes do not arise if the goods are exempt from duty.Issue 5: Jurisdiction and Maintainability of Appeal Against Provisional Release OrderThe Tribunal examined whether the appeal against the provisional release order was maintainable. It was noted that orders under Section 110A of the Customs Act, 1962, are interim and not adjudicatory, typically making such appeals non-maintainable. However, both parties agreed to proceed without addressing this issue.Judgment by Member (Judicial):The Member (Judicial) found that:- There was no prima facie evidence of misuse under Section 111(o) of the Customs Act.- The insurance value should not influence the assessable value.- The conditions of payment of duty and bank guarantee were deemed unnecessary for provisional release.- The vessel should be released upon execution of a bond and an undertaking not to re-export without permission, ensuring compliance with ONGC project requirements.Judgment by Member (Technical):The Member (Technical) disagreed, emphasizing:- The need to secure the interest of revenue through provisional release conditions.- The importance of reassessment by the Commissioner of Customs considering the submissions made by the appellant.Final Order by Third Member (Vice President):The Vice President agreed with the Member (Judicial), noting:- Both Members agreed on the unsustainability of the duty demand for provisional release.- The conditions imposed by the Member (Judicial) were sufficient to safeguard revenue interests.- The vessel should be released under the conditions specified by the Member (Judicial).Conclusion:The Tribunal, by majority, modified the provisional release order, waiving the conditions of duty payment and bank guarantee, and imposed conditions ensuring the vessel's use for ONGC operations and compliance with customs authority permissions. The appeal was disposed of accordingly.