TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 22
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....taking petroleum operations; The Appellants brought a Jack - Up Rig "Mercury Focus" (previously known as "Trans-Ocean Mercury") from Egypt (flying Panama Flag), required for undertaking petroleum operations in the Block allotted to them under the PSC; the Rig can be used only for undertaking petroleum operations; From Egypt, the rig was carried by a larger dry-dock vessel named M.V. Talisman. An Anchor Handler Cum Supply Vessel (AHTS) was also brought to Cochin, for towing the rig from the port to the shipyard; the rig was not in an operable state, it was necessary that repairs be undertaken on it before it could be deployed for petroleum operations. Accordingly, the rig was brought to Cochin outer anchorage, so that it could be repaired in the customs bonded shipyard of Cochin Shipyard Ltd; the Shipyard is a customs bonded warehouse where the ship-building as well as ship repairs are undertaken in terms of the provisions of Section 65 of the Customs Act; Therefrom, an anchor handling tug-cum-supply vessel by the name "M.V. Shunter" (a support vessel for the rig and previously known as C.S. Safe) to tow and push the rig for repairs to the Cochin Shipyard was also brought to India. ....
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....20th January 2014, confirming a duty of Rs. 11, 48, 43,512 on the Rig 'Transocean Mercury'; Rs. 1,32,13,016 on the tug AHTS C.S.SAFE; Rs. 13,29,790 on the fuel and consumables used by the Rig Transocean Mercury and Rs. 39,08,893 on the fuel/ consumables used by the AHTS C.S. Safe. Commissioner confiscated the Rig and the Tug and imposed redemption fine of Rs. 50, 00,000 and Rs. 8, 00,000 respectively. Commissioner imposed a penalty of Rs. 13, 32, 95,211 and appropriated an amount of Rs. 43, 23,515 AND Bank Guarantee of Rs. 3.75 Crores. He also imposed penalties on others involved. The appeals filed are as below. Appeal No. Appellant Duty/ Penalty appealed against C/20890/2014 M/s. Devshi Bhanji Khona (D B Khona) Shipping Clearing and Forwarding Agents Penalty of Rs. 50,000 C/21052/2014 Focus Energy Ltd Duty Rs. 13,32,95,211/-Penalty Rs. 13,32,95,211& RF Rs. 50,00,000/- C/21066/2014 Nicolas Singhal Master Tug M. V. Shunter, Authorization Holder Mr. Prateek Sisodia Penalty of Rs. 1,00,000 C/21399/2014 GAC Shipping (India) Pvt. Ltd Penalty of Rs. 10,00,000 C/21269/2018 Focus Energy Ltd Appeal against Commissioner (Appeals) order allowing Department's ap....
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....rcury"; * States that Rigs will be released at Cochin Shipyard for repairs; * Contain request for completing boarding formalities on 27.3.2011. * Counter verified by Customs Department. 25.03.2011 Application for entry inward filed for the Rig * Entry inward sought for the Rig 30.03.2011 Cargo Declaration filed * The position of the Rig is mentioned as 'CSL Shipyard'. 30.03.2011 IGM for the rig filed vide an application * IGM No.9583/2011 * The IGM mentioned 'calling for repairs'. * Indicated that the Rig TRANSOCEAN MERCURY is towed by the AHTS CS safe * Indicated "Import Cargo to Cochin" * Counter verified by Import and Bond Department, Cochin Customs House. Letter written by Focus Energy to the Flag Officer Commanding, Southern Naval Area, Cochin. * Mentions that the rig is being brought for repairs; * It is also mentioned that the rig will further be deployed for petroleum operations. 27.03.2011 Rig arrived at Cochin Anchorage 29.03.2011 Application for Entry Inward and granted * Indicates that the entry inward for the vessel was given on 29.03.2011. 30.03.2011 Certificate number E11030125 given by Cochin Port Tr....
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....here does it state that a bill of entry is to be filed for the vessel also; it was only clarified by the Board in 2010; a detailed procedure taking into account numerous scenarios was issued in 2012. Therefore, the appellants cannot be faulted with for not filing a bill of entry when the same was never insisted upon by the department and in the circumstances the Customs cannot demand duty in the present case. Placing reliance on the decision of Hede Ferrominas Pvt. Ltd. v. Commissioner of Cus, (Import, Mumbai) 2016 (334) ELT 540, learned counsel submits that Customs could have very well advised the appellant/ Shipping Agency to file Bill of Entry in respect of vessel also. 5. Learned Counsel submits that extended period of limitation is not invokable in terms of Section 28(4) of the Customs Act.; all facts pertaining to the rig and the tug were disclosed to the customs at all points of time; that the rig was being brought into India was clearly mentioned in all the documents; Customs officers have even boarded the rig and the AHTS before at the time it reached Cochin Port; documents evidencing the payment of boarding charges and lighterage dues are on record; the entire activity o....
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....t the time of ex-bond, i.e. in April, 2012, the Appellants had obtained essentiality certificates for the rig as well as the tug, so that the rate of duty applicable in terms of Section 15(1) (b) read with the exemption Notification No.12/12-Cus (Sl.No.359) is Nil. Therefore, the question of any customs duty arising in the fact and circumstances of the instant case does not arise. 7. Learned Counsel submits that the essentiality certificate is to be considered as dating back to March 2011, i.e. to the date when the rig and the tug entered the Indian customs waters. It is an un-disputed fact that the Appellants had essentiality certificates when the bill of entry for home consumption was filed in April, 2012, when the rig and tug were to be deployed for petroleum operations. DGH have certified, vide their letter dated 25.10.2013, that they would have issued the same essentiality certificate in the year 2011 had the Appellants applied for. Appellants undertook imports availing the benefit of the Notification No.21/2002-Cus (Sl.No.271) for spares and equipment for the very rig in question on the strength of Essentiality Certificate No. ECIN 201104190039 dated 19.04.2011. 8. Learned ....
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....e benefit of the Notification No.12/2012-Cus (Sl.No.359) dated 17.03.2012. Further, that the bill of entry has been filed one year late will not dis-entitle the Appellants from claiming the benefit of the Notification. As held in CC vs Shreeji Overseas (India) Pvt. Ltd., 2013 (289) ELT 401 (Guj), there is no time limit prescribed for the same under Section 46 of the Customs Act, 1962. 10. On the issue of classification of Anchor Handling cum Tug Supply vessel, learned Counsel submits that it is correctly classifiable under the Heading 89.01 of the Customs Tariff as a supply vessel. The vessel in question is basically an off-shore supply vessel. It is also equipped with Anchor-Handling and tugging facility. Appellants in the instant case, brought the said vessel into India so as to use the same in petroleum operations along with the rig. The Essentiality Certificate described AHTS as a supply vessel. This is certified to in the following documents - (i). the class notation certificate issued by Lloyds Register clearly describes the tug-cum-supply vessel in question as offshore supply ship cum tug; (ii). the safety management certificate dated 15.06.2011 mentions the vessel to b....
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....s, etc. there is no prohibition under the Customs Act or any other enactment for the time being in force. With regards to the usage of vessels, also there is no prohibition/restriction in force as the said vessels were not engaged in coasting trade as contemplated under the Merchant Shipping Act. Further, the impugned Order-in-Original invokes Section 3 and 11(1) of the Foreign Trade [Development and Regulation] Act, 1992 ("FTDRA") and Rules 11, 14(1) and 14(2) of the Foreign Trade (Regulation) Rules, 1993 ("FTDRR"). It is submitted that the Appellant has not signed/ used any declaration/statement/document for the purpose of importing goods, knowing or having reasons to believe that such declaration was false nor has the Appellants employed any corrupt or fraudulent practices for the purpose of importing any goods, and in the absence of these conditions being satisfied, the provisions of the FTDRA and FTDRR cannot be invoked. The declarations made by the Appellants in relation to the rig and the tug were under the bona fide view and belief, as also endorsed by the Customs Department itself, that no import had occurred for the rig and the tug, which bona fide belief is also evidence....
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....suant the same, the department was further put to note of the fact that they intent to import the rig and the AHTS into India for being used in petroleum operations. It was based on the declarations made by the Appellants that actions were initiated by the department. Therefore, unlike in the case of Ambalal, the department was at all times aware of the rig and the AHTS being in India. 12. Regarding the appeals 21269 and 21269 against the commissioner(Appeals) order allowing the department's appeal against amendment to IGM, Learned Counsel submits that all the necessary declarations have been given in the IGM; In IGM 9582 dated 24.03.2011 rig was mentioned and a separate IGM i.e. 9583 was filed for rig; it was clearly mentioned that the rig was for repairs; though contract dated 2-3-2007 was in existence at the time of import, the rig was not in apposition to be put to use without repairs; relying upon Circular No. 44/2005 he submits that when there is no fraudulent intention, amendment can be permitted and in the instant case there was no fraudulent intention; as no financial gain accrued to the appellants as a result of non-filing of bill of entry or late filing of IGM, no mala ....
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.... Authorization Holder Mr. Prateek Sisodia and GAC Shipping (India) Pvt. Ltd, Learned Counsels reiterated the above submissions and submitted that as there were at best only procedural infractions caused by the lacunae in the law and as no duty was required to be paid by the appellants at any point of time, in view of the exemption, no mala fide intention can be attributed to any of the above appellants. Accordingly, penalties imposed on them need to be set aside. 14. Shri K. Veera Bhadra Reddy, Additional Commissioner, AR on behalf of the Revenue, reiterates the findings of OIO (in respect of Appeals C/21052/2014, C/21066/2014, C/20890/2014 and C/21399/2014) and OIA (in respect of Appeals C/21269/18 and C/21271/18). He submits that the Counsels for the appellants are trying to divert the case from essentials. Reading from the Customs Act,1962, he differentiates between 'goods' and 'stores' and submits that the 'Rig' is very much in the nature of goods and not declaring the same is violation of the provisions of Sections 30, 46 and 47 of the Customs Act,1962. Having not declared the them as good and having not filed bill of entry, the rig is rendered liable for confiscation under S....
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.... Sedco Forex International Drilling Inc Vs CC, Mumbai 2001(135) ELT 625(Tri-Mum) (viii). UOI Vs V.M. Salgaonkar & Bros (P) Ltd 1998 (99) ELT 3 (SC) 15. Heard both sides. Perused the records of the case. Brief issues that require our consideration in the instant case are as follows: (i) Whether the vessel mercury focus (formerly known as Transocean Mercury), imported by the appellants, which initially underwent repairs in the Cochin Shipyard and later moved to the site of exploration, merits to be called as a 'foreign going vessel' or it is to be treated as 'goods' for the purposes of Customs Act, 1962. (ii) Whether the appellants required to declare the vessel and the tug as goods in the IGM and to this extent, is there any misdeclaration by the appellants. Whether they are liable for confiscation under Sections 111(d)(f)(g) and(h) of the Customs Act, 1962. (iii) Whether the benefit of Notification No.12/2012 (Sl.No.359) dated 17.03.2012 is applicable to the appellants in respect of the vessel and the Tug. (iv) Whether the said vessel and the tug MV Shunter which was brought to tow the above vessel is to be considered as a supply vessel meriting classification under 89.0....
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....e the issue relating to whether or not the rig was to be declared as goods or conveyance, both sides do not dispute the fact that the rig and the tug are vessels. They have been brought to Cochin Shipyard with an understanding on the part of the appellants that the same will be deployed to undertake Petroleum operations in the block allotted to them, albeit after repairs. The appellants rely upon the case of Scindia Steam Navigation Co. Ltd. and state that while undergoing repairs the vessel retains character of a foreign going vessel. Therefore, they plead that Bill of Entry was not required to be filed in 2011 and after the repairs were completed, and before the vessel was put to used in Petroleum operations, they have filed a Bill of Entry. We find that Tribunal in the case of Aban Loyd Chiles Offshore Ltd (supra) have held that oil rig when enters Indian territorial waters for the purposes of repairs is not engaged in any operation outside India and loses its character of being a foreign going vessel. The Tribunal held that: 6. Section 2(21) of the Act defines a foreign going vessel or aircraft to mean any vessel or aircraft for the time being engaged in the carriage of goods....
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....reign going vessel because it was engaged in the operations outside Indian territorial waters in view of clause (2) of the extended definition. It would not be appropriate to apply the first part of the definition while considering the second. Each of the three clauses of the extended definition has nothing to do with the main part of the definition and applied in different situations of facts. Each of these situations must thus be considered on its own merit. It would therefore not be possible to say that a craft which is anchored without undertaking any operation whatsoever for long periods outside the territorial waters is a foreign going vessel. So also, when a rig enters Indian territorial waters for purposes of repairs, it is obviously not engaged in any operation outside India and loses its character of foreign going vessel. It may no doubt resume its character as a foreign going vessel when it leaves Indian territorial waters and resumes its operation. This is in fact the view taken in Salgaonkar Engineering v. OJF Gomes. We, therefore, do not find it possible to say that the rig, on the occasion when it entered Indian territorial waters, was a foreign going vessel. 12. T....
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....d finding hold that the owner had not violated the provisions of the Act, which are much broader and wider in scope. The Act regulates and mandates compliance by the foreign going vessels when they enter the territorial waters. Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a 'goods' meant for home consumption. Thus, violations recorded by the Tribunal cannot be found fault with. 16.3. Once the nature of the vessel was not that of a foreign going vessel, it acquires the nature of a vessel imported for the purpose of use in India. Therefore, it requires to fulfil the conditions of import. As the vessel was not categorically declared as goods intended for import in the IGM filed on behalf of the appellants, contravention of section 30, 32 etc. of Customs Act have taken place. We find that Hon'ble High Court of Bombay in the case of Pride Foramer Vs UOI 2002 (148) E.L.T. 19 (Bom.), after considering the deeming extension of India territorial waters and its application to Customs Act held that: 42. Be that as it may, by virtue of Section 7 of the Territorial Waters Act, 1976 parliamentar....
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....ona fide belief. Moreover, in the present case, the shipping agent of the appellant vide letter dated 6-11-2006 informed the Assistant Commissioner of Customs (Export) the details about the subject vessel and also filed IGM and Bill of Entry and paid customs duty on the cargo. The Preventive Officer and Superintendent of Customs Department after joint survey and examination ordered for conversion of vessel on 10-11-2006. Both the aforesaid documents are scanned below: 16.5. In view of the ratio of the decisions above, we hold that though no serious breach of provisions has occurred in non-filing of the bill of entry in 2011, the same cannot be said to be true in respect of cargo declaration in the IGM. We find that there is a purpose under the scheme of Customs Act, 1962 and regulations made under behind the requirement to declare the goods imported in a proper manner. This is not to be taken as casual information given by filling up of the forms. This would certainly give necessary information/inputs to the customs authorities as to have information as to which was the cargo imported by which vessel. This would help them to ensure that no dutiable goods imported escape payment of....
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....on fine imposed on appellants in lieu of confiscation of "Transocean Mercury" and "MV Shunter", can be reduced. 17. Coming to the applicability of the Notification No. 12/2012-Cus (SI. No. 359) dated 17.03.2012 which grants exemption to goods imported for Petroleum operations. We find that Tribunal and the Hon'ble Apex Court have been consistent in holding that though the vessel can be penalized for other infractions, exemption, if any, available cannot be denied. Revenue also accepts the fact that the said vessel and tug have been imported for the purposes of undertaking Petroleum operations at the designated slots as per the PSC. Department proceeds to deny the exemption on the count that the "Transocean Mercury" and "MV Shunter" were, in fact, imported in 2011 and at that point of time, the appellants did not file any Bill of Entry and the essentiality certificate was not in existence at that time; that the essentiality certificate issued to the appellants in 2012 was only prospective and cannot be allowed retrospectively. However, we find that such a constructed view is not permissible. It is not the case of the Department that the said "Transocean Mercury" and "MV Shunter" we....
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....ction of such certificate on a later date cannot be a ground for denial of benefit of notification. 5.4 The fact that the goods cleared under transhipment permit are required for the intended purpose is clear from the facts that the essentiality certificate has been issued. Whether it is issued under Notification No. 17/2001 or 21/2002 is immaterial so long as the essentiality certificate covered the goods, benefit of notification cannot be denied. 17.1. We find that Tribunal in another case of the appellants themselves have taken a similar view 2014 (313) ELT 231 (Tri.) Therefore, we find that the exemption contained in the Notification is very much available to the appellants. Learned AR for the department has taken a plea that the goods are rendered liable for confiscation; have been rendered to be smuggled goods and as such in view of the ratio of Ambalal Patel and other cases submitted by him, exemption cannot be extended. Learned counsel for the appellants on the other hand, submits that instant case cannot be equated with cases in which smuggling is involved by way of concealment etc. we find force in the argument. Though, technically in terms of Section 2(39) of Customs ....
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....oods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under Section 57 without warehousing the same. (2) Save as otherwise permitted by the proper officer, a bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier of the consignor. (3) A bill of entry under sub-section (1) may be presented at any time after the delivery of the import manifest or import report, as the case may be: Provided that the Commissioner of Customs may in any special circumstances permit bill of entry to the presented before the delivery of such report: Provided further that a bill of entry may be presented even before the delivery of such manifest if the vessel or the aircraft, by which the goods have been shipped for importation into India, is expected to arrive within thirty days from the date of such presentation. (4) The importer while presenting a bill of entry shall make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, relating to the imported goods. (5) I....
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....ng that under Section 46 of the Act, there is any time-limit prescribed for filing of bill of entry. 8. In that view of the matter, Section 117 of the Act would not come in picture since it cannot be stated that the importer breached any provision. Tax Appeal is therefore, dismissed. 17.3. We also find that Tribunal has taken a similar stand in the case of Shreeram Rayons 2012 (262) ELT 347 (Tri. Ahm). In view of the above, we find that there is no infirmity in the filing of Bill of Entry in 2012 and allowing the exemption to "Transocean Mercury" and "MV Shunter" available as per Notification No. 12/2012-Cus dated 17.03.2012. 18. The appellants have taken a plea that the tug MV Shunter was an anchor handling cum tug supply vessel and is correctly classifiable under CTH 8901. They submit that the vessel in question is basically an offshore supply vessel and is equipped with anchor handling and tugging facility. They submitted the following documents as the proof of the same: (i) The class notation certificate issued by Lloyds Register clearly describes the tug-cum-supply vessel in question as offshore supply ship cum tug. (ii) The safety management certificate dated 15.06.20....
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.... 7.2 The Revenue wants to classify the products under Heading 89.05 which reads as follows: - "89.05 - Light vessels, fire floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms. 8905.10 - Dredgers 8905.20 - Floating or submersible drilling or production platforms 8905.90 - Other As per the HSN explanatory notes, the heading covers light-vessels, fire-floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function The vessels coming under this heading normally perform their main function in a stationary position and they include light vessels, drill ships, fire floats, dredgers of all kinds, salvage ships for the recovery of sunken vessels; permanently moored air-sea rescue floats; bathyscaphes; pontoons fitted with lifting or handling machines and pontoons clearly designed to serve as a base for these machines. The heading also includes floating docks, floating or submersible drilling or production platforms. ....
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....ign going vessels under Section 2(21) of the Customs Act. If that is so, the petitioner is not entitled to the benefit of Section 53 read with 54 and/or of Section 86 r/w 87 of the Customs Act. In our view, the petition must fail. 19.2. In view of the above, we hold that the impugned vessel is not a foreign going vessel; we find that such ship stores supplied to a vessel which is not a foreign going vessel are not applicable for exemption thereof. We find that Apex Court in the case of Aban Loyd Chiles Offshore Ltd 2006 (200) ELT 370 (SC) upheld the finding of the Tribunal as far as recovery of duty forgone on the ship stores, where the ships were not foreign going vessels. However, Apex court limited their judgement to the issue of limitation. 19.3. The appellants stated that they have also availed exemption for certain capital goods/spares under the Notification No. 12/2012-Cus dated 17.03.2012 and that commissioner included such value also in the duty recoverable on account of ship stores supplied. We hold that such exemption will not be available to the appellants for the period for which the Rig "Transocean Mercury" and the supply Vessel "MV Shunter" were either undergoing r....
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....hat the import manifest or import report is in any way incorrect or incomplete, and that there was no fraudulent intention, he may permit it to be amended or supplemented. As discussed above, we find that the appellants have been continuously in correspondence with the Department as far as the dealing with the vessel and tug are concerned. The officers have boarded the vessels and have given necessary entry inwards etc. They have also supervised the supply of stores and spares in to the ships. All the activities were within the knowledge of the Department. Therefore, it cannot be alleged that there was a fraudulent intention in seeking the amendment. Therefore, we find that the lower authorities have allowed the amendment of IGM after considering all relevant facts and after due application of mind and that the amendment allowed is well within the provisions of law. Therefore, we find that the OIA is not maintainable and liable to be set aside and appeals No C/21269/2018 and C/21271/2018 need to be allowed. 21. Coming to the various penalties imposed on various appellants, as discussed above, we already held that the benefit under Notification 12/2012-Cus dated 17.03.2012 is avail....