TaxTMI 
TaxTMI 
2015 (2) TMI 553
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....ools and spares required on hire basis for oil well drilling operations. There was no outright sale of such goods either to the appellant or to ONGC and the title of the imported tools and spares remained with the overseas vendor. As per contract, the CIF value of any tools which were lost in the sea during operations was recovered from ONGC and in most cases the said tools and spares were re-exported after being used for the ONGC work. In the year 1998, the DRI initiated investigations and asked certain information from the appellant regarding the import of logging tools and spares for ONGC contract. The appellant produced the documents and the statement of Shri Sudhir Pai was recorded. After scrutiny of the documents, it was revealed that in a few instances, there was a difference between the values declared to the Customs in the invoices submitted to the Customs at the time of import vis-`-vis the values stated in the documents available in the appellant s file. Thereafter a show-cause notice was issued on 29.9.1991 demanding customs duty on imports made through courier/hand baggage and in three cases by sea along with interest and penalties were also proposed. The appellant als....
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....ONGC work most of the goods were re-exported back to the overseas owners of the goods and consequently even if any duty was payable, most of it is eligible for refund as draw back. If this contention was not taken as correct then also the appellants are liable to pay a small amount of duty as the appellant has already paid Rs. 2 crores during the course of investigation. It is also submitted that the difference in value declared to the customs and reflected in the documents were explained by Shri Sudhir Pai during the course of investigation as the values declared to the Customs were the depreciated value of the old and used equipment actually imported for ONGC work, whereas the values shown in the documents from the possession shows the value of new parts. Therefore, the value of new parts cannot be considered as true value for the importation of used and old parts. The said explanation has not been considered by the adjudicating authority. Except from the documents reflected from the possession of the appellant, no other evidence or material has been adduced by the Revenue to prove the under-valuation of the imported goods. Therefore, the charge of under-valuation has been confir....
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....brought the baggage is the importer. In case the imports were made through sea, ONGC has to file bill of entry as importer. This position has not been disputed by the Revenue. Therefore, the liability of payment of duty cannot be fastened on the appellants as the appellants are neither the importer of the goods nor the owner of the imported goods as per the agreement between the ONGC and the foreign supplier which read as under:- "d) M/s. SASL Imports logging tools and spares required for rendering the services towards the oil well drilling operation either on its own name or in the name of the contracting agency. Majority of the imports are from their parent or associated firms located in Dubai, France, Canada and United States. There is no outright sale of the imported goods to M/s. SASL, Mumbai or the contracting agency. The service charges are paid by the contracting agency to the parent firm directly. The title of the imported tools and spares remains with the parent firm even though M/s. SASL or the contracting agency as the case may be, are the importer and the invoices for Customs purposes are raised in either of their name. However, the CIF value of any tool which is lo....
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....rd rigs which were rendering services to ONGC in the Mumbai Offshore area beyond the territorial waters of India therefore, once goods are being imported in India and are being cross the territorial waters, they are said to be exported from the country as held by the Hon ble Apex Court in the case of CC v. Sun Industries 1988 (35) ELT 241 (SC). 8. With these observations, we hold that as the appellants are neither importers nor they claim to be owner of the goods therefore the appellants are not liable to pay duty. Further, as per Section 85 of the Customs Act, 1962 the goods are entitled for exemption of duty. 9. But we find that vide letter dated 29.9.2005 the appellants have admitted that the appellants were not opposed the confirmation of duty to the extent of Rs. 1,84,08,757/- if the penalties on the appellants are waived which is reproduced here-in-under:- "In response to a query raised by Your Honour, it was stated on behalf of our clients that our clients would not oppose a confirmation of customs duty to the extent of Rs. 1,84,03,780.37 which has been computed in Annexure F to our clients earlier appeal to the CESTAT, a copy of which is Annexure 1 to their written....
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....ugh courier service or import through sea/air was mis-declared and the value declared was much much lower than the actual value of the spare parts. In case of hand baggage, it was found that the employees of the appellant-Company did not declare the said parts or declared very very low value. After passing through the Customs, the same were handed over to the appellant. Investigation also revealed that they got two sets of invoices, one indicating correct value and the other indicating a very low value and the second invoice was presented to the Customs at the time of clearance. Investigation also revealed that the appellant has written to their counter-parts in their own offices abroad to make two sets of invoices and mis-declaration in value was done at the instance of officials in the project office of the appellant. In certain correspondence they have also indicated that the value should be 25% of the actual value and in some cases they indicated the invoice value should be only 10 US $. At time they directed the supplier to mis-declare the description as mechanical spares instead of indicating the correct and specific description. 12. During the investigation the appellants....
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....bing effective of duty from time to time. We also observe that penalties have been imposed both under Section 112 and under Section 114A which are mutually exclusive. The Commissioner has also not quantified the amount of penalty under Section 114A and has merely stated that the appellants are liable to pay mandatory penalty as envisaged under Section 114A. In view of the foregoing, we have no option but to set aside the order-in-original and remand the same for re-adjudication with the direction that appropriate effective rates of duty should be applied, the appellants should be heard and while determining the penal liability due consideration should be given to the fact that the appellants have paid the duty amount even before the issue of show-cause notices. 4. The appeal is allowed by way of remand. 13. It would thus be seen from the said order of the Tribunal the purpose of remand was two fold. The first was to correctly assess the quantum of duty after applying the exemption notification and the second direction of the Tribunal was to separately quantify the penalties under Section 112 and Section 144A as the two sections are mutually exclusive. The Tribunal also ordere....
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....ng officer did not note details on these aspects.. Remand direction was only relating to quantification of duty and penalty. I also find that in the appeal the re-quantified amount has not been questioned by them and, therefore, appellant seems to be satisfied with the re-quantification. 16. Even if for some reasons it is accepted that appellant is entitled to raise such a plea even at this stage, I proceed to examine on merit. My learned Brother has relied upon the decision of the Hon ble Bombay High Court in the case of Union of India v. Jupiter Exports ((supra). I have gone through the said judgment. The fact in that case was that the appellant obtained an advance licence by manipulating certain export documents. This manipulation led to higher entitlement of duty-free goods. Later-on they sold/transferred the said licence to some other parties. Certain goods were imported duty-free by the said transferee. Commissioner in the adjudication order has taken a view that such transferees are not liable to pay customs duty as they have purchased the said licence in accordance with law and duty should be recovered from the appellant as he has done the manipulation in the advance lic....
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....ion 28 of the Customs Act under which demands were raised stipulates serving notice on the person chargeable with duty. Further Section 2(26) of the Customs Act, 1962, defines the importer in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. In the present case it is not in dispute the spare parts have been sent by the appellant s offices abroad or appellant s associate s offices abroad and were to be received by their project office in India. ONGC was to pay the rent charges for such spare parts/equipment that were being used for their work. Ownership of the goods was with the appellant alone. Even the goods were in physical possession of the appellant. All the spare parts received by the courier were in the name of the appellant. Spare parts received through baggage were again sent by the appellant s office abroad and were delivered to the appellant s project office in India. The carriers of such goods were the appellants employees. Even the goods which had come through sea/air were sent by the appellant s offices abroad and received by the a....
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.... in Chapter VI and Chapter VII respectively of the Export and Import Policy (1st April 1992 31st March, 1997) published under the Ministry of Commerce Public Notice No. 1-ITC(PN)/92-97, dated the 31st March, 1992 as amended from time to time; (c) goods imported against any other licence issued under the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992); (d) goods imported by or on behalf of a person who is related to the consignor within the meaning of Rule 2 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988; and (e) goods in respect of which the proper officer directs filing of a bill of entry in such form. Thus the said regulation provides that the assessment and clearance of goods is on behalf of consignees. Thus consignee is importer. Regulation provides that the courier shall present a Bill of Entry in form V. It would be seen from the said Bill of Entry it is a common Bill of Entry for assessment of all the parcels received by the courier agency in one flight/bunch. The value and description is filled by the courier agency as per the declaration provided by the consignor/consignee. It is seen from the said courier Bill....
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....the owner of goods. 19. As far as hand baggage is concerned, the spare parts were supplied by the appellant s offices abroad, were brought by the appellant s employees and after passing through the Customs were handed over to the project office of the appellants and the ownership of the goods as also effective control remained with the appellants. By non-declaring or under declaring the value of spare parts, during baggage clearance individual employees have committed irregularities and are also liable to penalties. However, if such employees would have declared the correct value/description at the time of passing through the Customs, they would have paid the duty and in turn they would have collected from the appellant, as they were only carrier and their role was nothing more than the carrier. During initial investigation itself the appellant has accepted the duty and other liabilities on behalf of their employees and it is for this reason that the Customs did not investigate further and did not issue notices to individuals by finding out the name and other details of such employees.. After more than a decade, the appellant now cannot turn back and say that he is not required ....
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....and measurement services to the ONGC. These services may be provided while carrying out the operation based upon oil rigs. However the same are not part of oil rigs. Spare parts imported are parts of certain equipments used by the appellant while providing earlier mentioned services viz. wireline testing and measurement service. Thus prima facie spare parts cannot be considered as ship stores. I also note that the appellants have not produced any catalogue or literature either at the time of original investigation nor at the time of adjudication or at the time of first round of litigation or 2nd round of litigation before this Tribunal to establish that a particular spare part is meant for a particular equipment and that equipment can be considered as ship stores as defined in Section 2(38) of the Customs Act. The said section defines stores means goods for use in a vessel or aircraft and included fuel and spare parts and other articles of equipment, whether or not for immediate fittings. In the absence of such details, goods in question cannot be considered as ship stores. 23. Section 85 reads as under:- Stores may be allowed to be warehoused without assessment to duty.- Whe....
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....e purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory re....
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....that even now the authorities can verify the necessary records which are audited and submitted to the authorities and find out whether the material was used in its own undertaking or not. We do not think we can accede to this contention. Having failed to file the necessary declaration he cannot now turn around and ask the authorities to make a verification of some records. The verification at the time when the raw material was still there is entirely different from a verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification. 7. In Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Calcutta and Ors. the appellant which was a Public Limited Company, sought exemption under the provisions of the Bengal Finance (Sales Tax) Act, 1941 in respect of certain sales but did not produce before the Officer the declaration forms from the purchaser dealers required to be produced under the proviso to that sub-clause granting exe....
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....hout filing a declaration, can later prove his case by producing other evidence, is also rejected. This ratio applies on all fours to the case before us. As already mentioned the concession can be granted only if the raw material is used in the industrial undertaking seeking such concession. For that a verification was necessary and that is why in the rule itself it is mentioned that a declaration has to be filed in Form 14 facilitating verification. Failure to file the same would automatically disentitle the Company from claiming any such concession. In the present case, appellant has not even clearly told under which provision he is claiming the benefit. 24. I have gone through the judgement of Amership Management Pvt. Ltd. (supra). In the said judgement the Hon ble Bombay High Court held that oil rigs are to be considered to be vessels/ships. There is no doubt or dispute of this fact in the present case. The spare parts are not parts of oil rigs or ship but require in the equipment for wireline testing and measurement. Section 85 was not an issue before the Hon ble Bombay High Court and the Hon ble High Court has said as per Section 85 any stores imported in a vessel or ai....
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....dgement. The said judgement is in the context of CENVAT credit taken as inputs used in the manufacture of printed books and export thereof. The issue was relating to Rule 6(6)(v) vs. Rule 6(1) of the CENVAT Credit Rules, and liability created under Rule 6 (3)(6. In this context Hon ble Bombay High Court observed that only if petitioner does not export the printed goods and do not maintain the account as contemplated by Rule 6(2) ibid he petitioner would be required to pay 10% on the sale price of printed goods not so exported. The facts of present case are totally different. The issue is relating to Customs duty on imported goods which were clandestinely smuggled through Baggage or cleared through courier/sea/air by misdeclaring the value and description. No procedure whatsoever stipulated under Customs Act was followed, even after getting caught and two rounds of litigation no details like when goods transferred to which rig, where the said rig was located whether in territorial waters of India or exclusive economic Zone (where Customs Act is applicable) where the goods were used and for what purpose, when the goods were received back and details of re-export, movement of goods is....
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..... There are hundreds of consignments in the present demand. No correspondence or any evidence has been brought on record to establish that even a single consignment was that of old part. On the contrary, e-mail/correspondence establishes directions to mis-declare the value. Employees not declaring the goods in the baggage and hence the contention needs to be out-rightly rejected. 28. A penalty of Rs. 1 lakh is imposed on Shri Sudhir Pai, second appellant. Correspondence recovered clearly establishes his role in the whole episode of misdeclaration/smuggling. Penalty on him is correctly imposed and is not excessive. Impugned order is this regard is upheld. 29. In view of above, we dismiss both the appeals. (P.K. Jain) Member (Technical) Difference of Opinion In view of Difference of Opinion between Mumber (Judicial) and Member (Technical), the matter may be referred to the President to nominate a 3rd Member to resolve the following issues:- 1. Whether in the facts and circumstances of the case appellants can at this belated stage raise the issue that they are neither importer nor person claimed themselves to be the owner of goods and hence no duty can be confirme....
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....urier, since Bill of Entry is filed by the Courier Agency therefore the courier is the importer and not the appellant as held by Member (Judicial) Or Courier agency acts as an agent of the appellant consignee, while filing a consolidated Bill of Entry for all consignees, and appellant consignee is the importer and person chargeable to duty in respect of his consignments as held by Member (Technical). 4. In case of hand baggage, the passenger who brought the baggage is the importer and hence duty cannot be demanded from appellant as held by Member (Judicial) Or In the case of hand baggage also duty is chargeable from the appellant as goods were brought by appellant s employees without declaring or declaring but under-declaring the value, goods were owned by the appellant or their associate, were taken from appellant s offices abroad and after passing through Customs in India again handed over to the appellant, which in turn were used by appellant in connection with providing service to ONGC as held by Member (Technical). 5. Whether in case the imports were made through sea, ONGC has to file bill of entry as importer as held by Member (Judicial) Or Appellant h....