2011 (5) TMI 161 - HC - Customs

Cancellation of Essentiality Certificate - Notification No.21/2002 dated 132002 - Whether the petitioner No.2 is a subcontractor of ONGC or not is not a relevant criteria for issuing the Essentiality Certificate - Once it is found by the DGH that the goods are required for petroleum operations, then the DGH cannot refuse to issue the Essentiality Certificate - DGH had issued the Certificate, but after import, purported to cancel the Certificate not on the ground that the imported goods are not required for petroleum operations, but on the ground that the benefit of the Notification is not available to the importer in the present case - DGH could not have cancelled the Certificate on the ground that the benefit of the Notification is not available to the importer since Condition No.29(c) of the Notification No.21/02 is not fulfilled in the present case, the benefit of Notification No.21/02 would not be available - if the imports were made on permanent basis so as to use the imported goods not only for the approved ONGC project but also for other projects, then the benefit of the Notification would not be available - So long as the goods imported by the petitioner No.2 are required for petroleum operations and are in fact used by the petitioner No.1 for the petroleum operations, the question of canceling the Essentiality Certificate does not arise at all - In the present case, the petitioner No.1 is the subcontractor who is in fact executing the petroleum operations for and on behalf of the ONGC - Decided in the favour of the assessee

Summary

Issues:
- Justification of canceling Essentiality Certificate by Director General of Hydrocarbons based on subcontractor status
- Obligation of Director General of Hydrocarbons to ascertain necessity of imported goods for petroleum operations
- Applicability of Notification No.21/02 conditions for benefit availability
- Relevance of importer's subcontractor status for issuing Essentiality Certificate
- Impact of temporary import for specific project on benefit availability
- Interpretation of evaluation by ONGC for subcontractor status

Analysis:
The judgment in question revolves around the cancellation of an Essentiality Certificate by the Director General of Hydrocarbons (DGH) based on the subcontractor status of the importer. The main issue raised was whether the DGH was justified in canceling the certificate on the ground that the importer was not a bona fide subcontractor of ONGC. The court highlighted that the DGH's role is to determine the necessity of imported goods for petroleum operations, not the subcontractor status. It emphasized that the DGH cannot cancel the certificate based on benefit availability, a matter for Customs Authorities. The court found the reasons for canceling the certificate legally unsustainable.

Regarding the conditions of Notification No.21/02, the court dismissed the argument that benefit availability depends on fulfilling Condition No.29(c), stating that any violation should be addressed in assessment proceedings by Customs Authorities. The judgment clarified that the importer's subcontractor status is not a prerequisite for issuing the Essentiality Certificate. The court also addressed the temporary import for a specific project, noting that the benefit availability is not impacted if goods are reexported after project completion.

Furthermore, the court rejected the relevance of ONGC's evaluation of the subcontractor, as the essential factor is the necessity of goods for petroleum operations. It emphasized that the ONGC's evaluation pertains to goods claimed by the subcontractor, not the importer. The judgment concluded by quashing the DGH's order canceling the Essentiality Certificate, stating that the reasons provided were legally insufficient. The ruling made the Rule absolute in favor of the petitioner, with no costs imposed.