2014 (11) TMI 910 - AT - Customs

Benefit of exemption under Notification No.12/2012-Cus. (Sl. No.359) - Confiscation of goods - Redemption fine - Smuggling of goods - Held that - Prima facie when the ship and tug and rig were brought and rig was handed over for repair an into bond bill of entry must have been filed. Similarly in the case of tug, before utilizing the same in Indian waters, a bill of entry must have been filed. Therefore in both cases, it can be said that the goods have acquired the characteristics of smuggled goods even though it cannot be said that appellants have intentionally and deliberately resorted to evasion of duty and violation of procedure in view of the fact that there were entries in IGM even though not in appropriate column. At the time of importation, non-filing of bill of entry can be said to be a procedural error and for this reason, when the appellant is eligible for the exemption available otherwise which is a substantial benefit, it may not be correct to deny the entire benefit when we know that appellants are eligible for the same. Needless to say since the rig and the tug have acquired the characteristics of smuggled goods, they are liable for confiscation and penalty is imposable on the concerned importer thereof, but duty demand is a different proposition. The bank guarantee for ₹ 3.5 crores executed by the appellants if kept alive during the pendency of appeal, would be sufficient for hearing the appeal. - Learned counsel agrees to keep the bank guarantee alive during the pendency of appeal. - Stay granted.

Summary

Issues:
1. Eligibility for customs duty exemption for oil and gas exploration equipment.
2. Allegations of goods acquiring the nature of smuggled goods.
3. Requirement of Essentiality Certificate for availing exemptions.
4. Non-filing of bill of entry and procedural errors.
5. Confiscation, redemption fine, and penalty imposition.

Analysis:

Issue 1: Eligibility for customs duty exemption
The appellant, engaged in oil and gas exploration, imported a rig and a tug for repair and exploration purposes. The Revenue contended that the appellant was not eligible for exemption due to procedural lapses and alleged nature of goods as smuggled. The appellant argued that the rig being sent to Cochin Shipyard, part of the customs station, did not require a bill of entry. The Counsel emphasized that the tug's single use for moving the rig did not warrant smuggling allegations. The confusion regarding vessels' classification as goods or convenience was highlighted. The appellant maintained that the rig and tug were used for intended purposes and the Essentiality Certificate was valid, challenging the duty demand, fine, and penalties imposed.

Issue 2: Allegations of goods as smuggled
The Revenue initiated proceedings claiming the goods had acquired characteristics of smuggled goods due to procedural non-compliance. The impugned order confirmed a substantial customs duty demand, imposed a redemption fine, and penalty equivalent to the duty demand. The appellant argued against intentional evasion, citing entries in the IGM. The Tribunal observed that while procedural errors occurred, denying the entire exemption was not sustainable as the goods were used as intended, and the Essentiality Certificate was valid. Confiscation and penalty were deemed applicable, but the duty demand was subject to further consideration.

Issue 3: Requirement of Essentiality Certificate
The Revenue emphasized the absence of the Essentiality Certificate at the time of importation, leading to demands for duty, fine, and penalties. The appellant contended that the Certificate was produced later, fulfilling the Notification's requirements. The Tribunal acknowledged the significance of the Certificate for availing exemptions but noted that procedural errors did not warrant complete denial of benefits, especially when the appellants were eligible.

Issue 4: Non-filing of bill of entry and procedural errors
The dispute revolved around the non-filing of bill of entry for the rig and tug upon arrival in India. The Revenue argued that the lack of proper entry in the IGM and Essentiality Certificate at the time of importation justified the duty demand and penalties. The appellant stressed the procedural error aspect, asserting that the goods did not qualify as smuggled due to genuine oversight and subsequent compliance with requirements.

Issue 5: Confiscation, redemption fine, and penalty imposition
The Tribunal considered the goods' characteristics akin to smuggled goods due to procedural lapses but noted the genuine usage for intended purposes. While confiscation and penalties were deemed appropriate, the denial of the entire exemption was viewed as excessive. The Tribunal suggested maintaining a bank guarantee during the appeal process and granted early hearing applications due to the substantial amount involved.

In conclusion, the Tribunal acknowledged the procedural errors but leaned towards upholding the eligibility for exemptions, subject to confiscation and penalties, emphasizing the genuine usage and compliance efforts by the appellants.