2013 (11) TMI 793 - AT - Customs

Benefit of exemption under Notification 21/2002-Cus - Export and import of oil well equipments - Violations of requirements of Notification 21/2002-Cus - Held that - The goods were imported by the appellant claiming the benefit of Notification 21/2002. As per the said Notification, for availment of exemption, the importer has to produce a certificate from the DGH certifying that the imported goods are required for petroleum operations in terms of a contract under the new exploration licensing policy. In the present case, the appellant has produced such a certificate from the DGH at the time of importation of the goods and, therefore, they have fulfilled the terms and conditions of the Notification. Further, the appellants have used the capital goods during the period permitted in the certificate issued by DGH. After completing their use, they have sent these goods to the Visakhapatnam SEZ which activity is deemed as export under Section 2(m) of the SEZ Act, 2005. Thus there is no failure on the part of the appellants in fulfilling the terms and conditions of exemption. As regards the requirement of re-export, in the Foreign Trade Policy 2004-2009 provided for importation without a licence of second-hand capital goods on re-export basis by executing a legal undertaking with the Customs authorities. However, the said Policy provides that the import of second-hand capital goods shall be allowed freely without any condition of re-export. If that be so, merely because they have claimed benefit at the time of importation, even though they were eligible for the benefit under the EXIM policy, the benefit of the Foreign Trade Policy cannot be denied to the appellant. In any case, the appellant has supplied the material to the Visakhapatnam SEZ which is a deemed export as per the provisions of the SEZ Act - Therefore, assessees are eligible for benefit of exemption under Notification 21/2002-Cus. - Decided in favour of assessees.

Summary

Issues:
1. Interpretation of Notification No. 21/2002 for duty exemption.
2. Determination of re-export requirements under the Notification.
3. Consideration of deemed exports to SEZ under the SEZ Act, 2005.
4. Application of EXIM Policy provisions on second-hand capital goods.
5. Compliance with conditions for duty exemption and confiscation of goods.

Issue 1: Interpretation of Notification No. 21/2002 for duty exemption:
The appeals challenged orders by the Commissioner of Customs regarding duty exemption under Notification No. 21/2002 for imported oil well equipment. The appellant companies, M/s. Baker Hughes Asia Pacific Ltd. and M/s. BJ Services Company Middle East Ltd., imported goods under this notification and subsequently exported them to a Special Economic Zone (SEZ) in Visakhapatnam. The Revenue contended that the goods did not meet the re-export requirement, leading to duty demands and confiscation.

Issue 2: Determination of re-export requirements under the Notification:
The dispute centered on whether the goods were required to be re-exported after usage, as stipulated by the Directorate General of Hydrocarbons (DGH) essentiality certificate. The Revenue argued that supplying goods to the SEZ did not constitute 'export' under the Customs Act, thus necessitating duty payment and confiscation.

Issue 3: Consideration of deemed exports to SEZ under the SEZ Act, 2005:
The appellants asserted that the supply of goods from the Domestic Tariff Area (DTA) to the SEZ qualified as deemed exports under Section 2(m) of the SEZ Act, 2005. They contended that under Section 52 of the SEZ Act, the provisions of the Act prevailed over conflicting laws, supporting their compliance with re-export conditions.

Issue 4: Application of EXIM Policy provisions on second-hand capital goods:
The appellants relied on the EXIM Policy 2004-2009, arguing that the exemption notification did not explicitly mandate re-export for second-hand capital goods. They highlighted provisions allowing import of such goods without re-export conditions, emphasizing that their actions aligned with the policy's intent.

Issue 5: Compliance with conditions for duty exemption and confiscation of goods:
After analyzing the submissions, the Tribunal found that the appellants met the Notification requirements by obtaining the DGH certificate and using the goods for petroleum operations within the specified period. The Tribunal determined that the goods' transfer to the Visakhapatnam SEZ constituted 'export' under the SEZ Act, absolving the appellants of non-compliance with re-export obligations.

In conclusion, the Tribunal ruled in favor of the appellants, holding them eligible for duty exemption under Notification 21/2002-Cus. The impugned orders were set aside, and the appeals were allowed, granting consequential relief as applicable.