TaxTMI 
TaxTMI 
2019 (11) TMI 22
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.... customs duties on goods imported for undertaking 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 ....
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....oms, Cochin passed an Order in original dated, 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 ....
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....oner, Preventive Department about the arrival of the rig 'Transocean Mercury'. • Intimation to Customs Department about the arrival of the vessel with "Transocean Mercury"; • 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....
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....ld practice was that no bills of entry were being filed when vessels were being imported into India. 4.3. Further, as seen from the numerous circulars pertaining to stores and consumables, emphasis was always given to filing of bill of entry for the stores and consumables when the vessels were being converted from a foreign run to a coastal run; nowhere 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....
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....r home consumption is to be filed at the time of removal of the goods from the warehouse for home consumption and duty is to be paid at this point of time. Therefore, even if an into bond bill of entry had been filed at the time of entry into India, no duty was required to be paid by the Appellants on the rig/tug as it was being entered for ware-housing. At 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....
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....as the rig in question was warehoused (which is an un-disputed fact), the act of importation is not complete and therefore, the Appellants have correctly filed the bill of entry for the rig and the tug in April 2012 when it was meant for home consumption. At this point, the question of duty demand does not arise as the Appellants are clearly eligible to avail the 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 alon....
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....empt on goods falling under 89.01 vide Sl.NO.306 of the Notification No. 12/12-C.E. 11. Learned Counsel submits that the impugned Order-in-Original has invoked clauses (d), (f), (g) & (h) of Section 111 of the Customs Act, 1962. However, confiscation is not possible under any of the clauses. Confiscation under Section 111(d) is possible if there is any prohibition on the import of the goods. For ship stores, bunkers, 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 pr....
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....d not explain how the same were imported into India. The facts came to light only pursuant to seizure undertaken by the department. Therefore, in the said context the Hon'ble Supreme Court took the view that benefit of the Notification will not be available to the diamonds. In the instant case, the department was at all times put to notice of the fact that the rig and the AHTS was being brought into India for repairs. Pursuant 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; thou....
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....ot required to file bill of entry. In view of the DGH assertion that they could have issued essentiality certificate had they applied in 2011, they were liable for duty exemption under the said Notification. Therefore, amendment to IGM cannot be denied. 13. Regarding the penalties imposed on the Rig, Tug M/s. Devshi Bhanji Khona (D B Khona) Shipping Clearing and Forwarding Agents, Nicolas Singhal Master, Tug M. V. Shunter, 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 appel....
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....following (i). Malabar Diamond Gallery Pvt Ltd Vs ADG, DRI, Chennai 2016(341) ELT65 (Mad) (ii). CC (Preventive) Mumbai Vs M. Ambalal & Co 2010(260) ELT 487(SC) (iii). Pride Foramer Vs UOI 2002(148) ELT19(Bom) (iv). Aban Loyd Chiles Offshore Ltd Vs CC, Mumbai 2003(156) ELT 490(Tri-Mum) (v) CC (Import) NCH, Mumbai Vs PATVOLK 2006(202) ELT 411(Bom) (vi). Maersk India Pvt Ltd Vs CC, Mumbai 2009(238) ELT 793 (Tri-Mum) (vii). 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 ....
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....MV Talisman, the said rig was not mentioned as Cargo. However, a separate IGM appears to have been filed for the rig itself claiming the same to be calling on Cochin Shipyard Ltd. for repairs. The Department disputes that the appellants have not declared the vessel and the tug as goods having been imported in the country. Though, in terms of the Production Sharing Contract (PSC) dated 02.03.2007 they were very much aware that the said vessel and the tug were to be used in the country for petroleum operations. 16.1. Leaving aside for a while 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 compl....
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....ed in carriage of cargo or passengers between Mumbai and Abu Dhabi is a foreign going vessel covered by the first part of the definition and would be as such a foreign going vessel throughout the length of its voyage, if, during its voyage between these two ports, it touches other Indian ports. The judgment in Scindia Steam Navigation Co. Ltd. is based on the view that, despite being dry-docked for repairs, the ship was still engaged in the carriage of goods between Calcutta and the foreign port. A rig has been held in Amership Management Pvt. Ltd. as a foreign 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 fo....
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....we reduce the fine for redemption of the rig from Rs. 2 crores to Rs. 10 lakhs. 16.2. It is seen that Tribunal has considered the said decision in the case of Scindia Steam Navigation. Hon'ble Apex Court has upheld the findings of the Tribunal with regards to the nature of the rig which has arrived for repairs. In view of the same, we are not in a position to accept the contentions of the appellants that the vessel was a foreign going vessel. Hon'ble Apex Court observed that: 31. While we are disposed to accept that there was no import, we would not on the said 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 ....
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....of import is merely a procedural lapse as there is no mala fide intention of the appellant as no benefit accrues to the appellant by non-filing of Bill of Entry. We agree with the submission of the appellant that at the material period i.e. in 2006 when the vessel was imported there was confusion among the assessees and department regarding filing of Bill of Entry in respect of vessel and the same was clarified by the Board vide clarification letter F. No. 450/79/2010-CUS-IV, dated 25-9-2010. Therefore, prior to the issuance of said clarification, non-filing of bill of entry is under the bona 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-filin....
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....rding charges to the officers of customs. The Appellants have even paid the lighterage dues and the boarding charges for the customs officers. At no point of time the officers gave guidance to the appellants. Therefore, looking into the facts of the case that the appellants have taken the plea of confusion in the Customs practices itself; that the appellants have been regularly keeping the Department to notice of all the activities and that the officers have boarded the vessels and supervised the supply of ship stores and spares to "Transocean Mercury" and "MV Shunter", we find that redemption 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....
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....anted by Notification No. 21/2002. It can be seen from the proceedings before the Hon'ble High Court that obtaining essentiality certificate is not something for which the appellant can be blamed. There are a lot of procedural lapse and despite the intervention of Hon'ble Bombay High Court; it took a lot of time to issue the essentiality certificate. The assessee cannot be blamed in inherent delays of Governmental system. In view of the above, it is felt that so long as it is not in doubt that the goods were required for the intended purposes, production of essentiality certificate is merely a procedural formality. Production 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 (31....
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....ally to the proper officer a bill of entry for home consumption or warehousing in the prescribed form: Provided that the Commissioner of Customs may, in cases where it is not feasible to make entry by presenting electronically, allow an entry to be presented in any other manner: Provided further that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section the proper officer may, pending the production of such information permit him, previous to the entry thereof (a) to examine the goods 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 ....
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.... abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding one lakh rupees." 7. Upon combined reading of the above-mentioned statutory provisions, it can be seen that Section 46 nowhere provides for any time-limit for filing a bill of entry by an importer upon arrival of goods. It is, of course, true that Section 48 permits the authorities to sell the goods after following the procedure if within thirty days of unloading the same at the customs station, the same are not cleared for home consumption or warehoused or transshipped. This is entirely different from suggesting 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....
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....n vessels of Heading 89.03 (which covers "yachts and other vessels for pleasure or sports; rowing boats and canoes") and life boats, troop-ships and hospital ships (89.06). The note further says that the heading includes cruise ships and excursion boats, ferry-boats of all kinds, including train-ferries, car ferries and small river-ferries, tankers, refrigerated vessels for the transport of meat, fruit, etc., cargo vessels of all kinds, whether or not specialized for the transport of specified goods such as ore vessels and other bulk carriers, container ships, Ro-Ro ships, LASH type vessels, barges of various kinds and vessels of the hydro-glider type, hydrofoils and hovercraft. Thus the coverage of Heading 8901 is very wide and all types of vessels for the transport of persons or goods would merit classification under the said heading. 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 subm....
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....ide India is a foreign going vessel. 19.1. We also find that Hon'ble High Court of Bombay in the case of 2002 Pride Foramer (148) ELT 19 (Bom) (supra) held that 53. For all the reasons stated above, we are of the view that the respondents are perfectly justified in refusing to permit the petitioner to clear, ship stores and spares for use on the Oil Rig, on transhipment permit and without payment of customs duty while the Oil Rig is in a designated area. We also hold that the continental shelf land the exclusive economic zone are the parts of India in view of the provisions of Sections 6(6) and 7(7) of the Maritime Zones Act and for the purposes thereof and pursuant to notifications referred to in Para 26 (supra) the provisions of the Customs Act, 1962 were extended to such areas, consequently, the Oil Rigs proceeding to such areas or operating therein are not foreign 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....
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....estricted to normal period as no suppression etc can be alleged as the entire activities of the vessels were within the knowledge of Customs and understandably, the supplies were made to Vessels located in a bonded area/Customs area and under the watchful eyes and supervision of the officers. For this reason, the issue needs to go back to the Original Authority for re-calculation of the duty foregone on ship stores, capital goods/spares supplied to both "Transocean Mercury" and "MV Shunter", for the normal period. 20. Coming to the appeals No. C/21269/2018 and C/21271/2018 filed against the OIA which allowed the Department's appeal against the amendment in the IGM allowed by the lower authorities, we find that the appellants have sought amendment to IGM and the same was allowed by the lower authorities. We find that in terms of Section 30 (3), if the proper officer is satisfied that 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 wi....