2014 (10) TMI 270 - AT - Customs

Tribunal Upholds Duty Demand on Line Pipes, Rejects Apportionment Argument

LARSEN & TOUBRO LTD. Versus COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI

The Tribunal upheld the duty demand on the entire length of line pipes, rejecting arguments on apportionment and export. The penalty was set aside due to ... Import of pre-casted line pipes - The said pipes were required to be installed for water injection to augment oil production. - revenue of the view that even if part of the goods remained outside India since use of the goods is in India, has held that the goods are liable to import duty on the entire length - Confiscation under Sections 111(f), 111(l) and 111(m) - Penalty u/s 112(a) and (b) - Held that:- as the goods were being taken to a territory which would be deemed to be a part of the territory of India though the goods have left the territorial waters, the same would be exigible to levy of duty when they are taken and consumed within the deemed territory of India. There would be no customs duty or any other duty levied while the goods are in transit to the deemed territory of India by any other country although they have gone out of the territorial waters of India. it is clear that the Customs Act, 1962 and the Customs Tariff act, 1975 extends to the Continental Shelf Life and Exclusive Economic Zone of India as notified in the Notifications issued under the Maritime Zone act, 1976 and merely because the goods are the pipelines passing through a non-designated area, it does not mean that they cannot be subject to levy of customs duty. Since the goods are not in transit to any other country but are in transit to the deemed territory of India, they are liable to customs duty in India and we hold accordingly. There are many situations where the goods are used/consumed in India even though they may not be physically present in India. Consider the case of a telecommunication satellite which beams communication signals for viewing/hearing in India. The satellite is physically situated in the outer space but its use is in India and when such satellites are brought to India for launching in outer space customs duty will apply. Similarly, in the case of ships or aircrafts brought to India for registration in India, they are subjected to Customs duties even though most of the time, they may not be physically present in India but might be plying outside India. Therefore, in the present case, since the pipe lines are used/consumed in India, they are liable to customs duty and we hold accordingly - Decided in favour of assessee. Issues Involved:1. Liability to pay customs duty on line pipes imported for use in designated and non-designated areas.2. Legality of confiscation of line pipes and imposition of penalties under the Customs Act, 1962.3. Applicability of the principle of apportionment for customs duty.4. Interpretation of 'export' under the Customs Act and its applicability to the case.5. Relevance of international laws and judgments to the case.6. Applicability of customs duty to pipelines laid in the Exclusive Economic Zone (EEZ) and Continental Shelf of India.Issue-wise Detailed Analysis:1. Liability to Pay Customs Duty on Line Pipes Imported for Use in Designated and Non-Designated Areas:The adjudicating authority confirmed a customs duty demand on 30,127 meters of line pipes imported by the appellant, holding that the entire length was liable for duty as it was meant for home consumption. The appellant contended that only the length of pipes used in designated areas should be dutiable. The Tribunal, however, noted that the pipes were imported into India and used for connecting designated platforms, thus liable for customs duty on the entire length.2. Legality of Confiscation of Line Pipes and Imposition of Penalties:The adjudicating authority held that the line pipes were liable to confiscation under Sections 111(f), 111(l), and 111(m) of the Customs Act, 1962, and imposed a penalty of Rs. 3 crore under Section 112(a) and (b). The Tribunal found that the appellant had misrepresented facts to evade duty and upheld the confiscation. However, it set aside the penalty, considering the matter related to the interpretation of law.3. Applicability of the Principle of Apportionment for Customs Duty:The appellant argued for the principle of apportionment, suggesting that duty should only be levied on the portion of line pipes used within designated areas. The Tribunal rejected this argument, stating that the entire consignment was imported into India and used for home consumption, thus liable for customs duty on the whole length.4. Interpretation of 'Export' Under the Customs Act and Its Applicability to the Case:The appellant contended that taking the line pipes to high seas amounted to export, relying on the Supreme Court's decision in Sun Industries. The Tribunal distinguished the facts of the present case, noting that the pipes were not taken to a foreign country but to designated areas within India's jurisdiction. Therefore, the concept of export did not apply.5. Relevance of International Laws and Judgments to the Case:The appellant cited international laws and judgments, including the United Nations Convention on the Law of the Sea (UNCLOS) and a European Court of Justice decision. The Tribunal held that these were not applicable, emphasizing that the Customs Act and the Maritime Zones Act, 1976, extended India's customs jurisdiction to the EEZ and Continental Shelf. Thus, the entire length of the pipelines was subject to customs duty.6. Applicability of Customs Duty to Pipelines Laid in the EEZ and Continental Shelf of India:The Tribunal referred to the Supreme Court's decision in Aban Lloyd Chiles Offshore Ltd., which upheld the extension of the Customs Act to designated areas in the EEZ and Continental Shelf. It concluded that the pipelines, even if laid in non-designated areas, were liable for customs duty as they were used for conveyance within India's jurisdiction.Conclusion:The Tribunal upheld the duty demand on the entire length of line pipes, rejecting the appellant's arguments on apportionment and export. It set aside the penalty, recognizing the matter's complexity. The appeal was rejected, affirming the applicability of customs duty to the pipelines used within India's designated and non-designated areas.