2002 (5) TMI 714 - AT - Customs

Import - 100% Export Oriented Unit (EOU) - Customs exemption - Demand - Duty liability - Confiscation and penalty

Summary

Issues Involved:
1. Eligibility for exemption under Notification Nos. 133/94-Cus. and 77/80-Cus.
2. Definition and recognition of exports.
3. Compliance with the Export-Import Policy.
4. Validity of demand for customs duty and penalties.
5. Applicability of interest under Section 28AA of the Customs Act.
6. Verification of the quantity of pipes laid within the territorial waters of India.

Detailed Analysis:

1. Eligibility for Exemption under Notification Nos. 133/94-Cus. and 77/80-Cus.:
The appellants claimed benefits under Notification Nos. 133/94-Cus. and 77/80-Cus. for importing capital goods, raw materials, and consumables. The exemption was challenged on the grounds that the coated pipes supplied to ONGC were not exported out of India. The adjudicating authority held that since the pipes were used within the territorial waters of India, they did not qualify as exports, thus denying the exemption.

2. Definition and Recognition of Exports:
The appellants argued that the coated pipes supplied to ONGC were laid beyond the territorial waters of India, thus constituting exports. Affidavits from ONGC engineers confirmed that the pipes were laid in non-designated areas beyond 12 nautical miles. The Central Board of Excise and Customs (CBEC) circulars and notifications supported the appellants' claim, stating that supplies to areas beyond territorial waters are considered exports. The Tribunal accepted these affidavits as they were unrebutted by the Commissioner.

3. Compliance with the Export-Import Policy:
The appellants were permitted to clear 25% of their production to the Domestic Tariff Area (DTA) under the Export-Import Policy 1992-97 and Notification No. 133/94-Cus. The Tribunal found that the length of pipes laid within 12 nautical miles (25.746 kms) was within the 25% DTA entitlement. Thus, the appellants complied with the policy and the notification.

4. Validity of Demand for Customs Duty and Penalties:
The Tribunal observed that the demand for customs duty of Rs. 163.29 crores on pipes imported by ONGC was unsustainable as the appellants were not the importers. The demand was raised under Section 28 of the Customs Act, which applies to the importer. Since the appellants were not the importers, the demand was invalid. Additionally, the Tribunal noted that the provisional assessment of bills of entry and the subsequent denial of exemption did not warrant confiscation or penalties under Section 111(o) of the Customs Act.

5. Applicability of Interest under Section 28AA of the Customs Act:
The Tribunal held that Section 28AA, which provides for interest on delayed payment of duty, was not applicable as it was introduced after the imports in question. The imports were made before the enactment of Section 28AA, and the assessments were provisional under Section 18, not under Section 28. Therefore, no interest was leviable.

6. Verification of the Quantity of Pipes Laid within the Territorial Waters of India:
The Tribunal remanded the case to the jurisdictional Commissioner for verification of whether the 25.746 kms of pipes laid within 12 nautical miles fell within the 25% DTA entitlement. If verified, no further action was required. If not, the Commissioner was directed to adjudicate this aspect afresh after providing the appellants an opportunity to be heard.

Conclusion:
The Tribunal accepted the appellants' contention that the coated pipes supplied to ONGC and laid beyond the territorial waters constituted exports, thus qualifying for the exemption under Notification Nos. 133/94-Cus. and 77/80-Cus. The demand for customs duty on pipes imported by ONGC was invalid, and no confiscation, penalty, or interest was warranted. The case was remanded for limited verification of the quantity of pipes laid within the territorial waters.