2015 (9) TMI 400 - HC - Customs

Non-Compliance of Notification No.12 of 2012 Provisional conditional release Drill ship and rig respectively was brought in by petitioners and in order to fulfill obligation under contracts with ONGC Drill ship ABAN ICE and drilling Rig ABANIV were seized by respondent no.3 on belief that though it were exempted from payment of duty under Notification No.12 of 2012 but terms and conditions of this notification are not complied with Held that - Admittedly petitioners have received provisional release order, but same imposed unreasonable conditions namely deposit of entire duty with interest and submission of bank guarantee and also submission of bond of 100% of value Petitions can be disposed of by accepting undertakings of petitioners given to Court Subject to compliance of this, petitioners shall be permitted to deploy its drill ships/rigs as per requirement of ONGC However petitioners shall not be permitted to remove these drill ships/ rigs out of India save and except with prior permission of respondent no.3/ respondent no.4 Petitions are disposed of accordingly.

Issues Involved:
1. Seizure of drill ship and drilling rig.
2. Compliance with exemption notification conditions.
3. Provisional release and conditions imposed.
4. Undertakings by petitioners.
5. Role of Directorate General of Hydrocarbons.
6. Legal precedents and principles on exemption notifications.

Detailed Analysis:

1. Seizure of Drill Ship and Drilling Rig:
The petitioners filed writ petitions because the drill ship 'ABAN ICE' and drilling rig 'ABANIV' were seized on May 25, 2015, by respondent no.3 under Section 110(1) of the Customs Act, 1962. The seizure was based on the belief that these assets were liable to confiscation due to non-compliance with the terms and conditions of Notification No.12 of 2012, which provided duty exemption.

2. Compliance with Exemption Notification Conditions:
The exemption under Notification No.12 of 2012 was contingent upon fulfilling certain conditions. The petitioners contended that they had consistently undertaken to use the drill ship and drilling rig solely for contractual obligations with ONGC. Despite this, the third respondent imposed conditions that the petitioners deemed unreasonable, including the deposit of entire duty with interest, submission of a bank guarantee equal to 10% of the value, and a bond of 100% of the value.

3. Provisional Release and Conditions Imposed:
The petitioners sought provisional release of the drill ship, which was granted on June 29, 2015, but under stringent conditions. These included a deposit of the entire duty with interest, a bank guarantee of 10% of the value, and a bond of 100% of the value. Additionally, the rig could not be removed without Customs' permission and had to be produced upon request.

4. Undertakings by Petitioners:
The petitioners filed an undertaking in the court on July 2, 2015, emphasizing that the rig would remain in India under the contract dated September 19, 2013, for one year, subject to ONGC's requirements. They also undertook that the drill ship would operate in India until December 31, 2016, and would not be moved outside India without prior permission from respondent no.3/respondent no.4.

5. Role of Directorate General of Hydrocarbons:
The Directorate General of Hydrocarbons, Ministry of Petroleum and Natural Gas, was impleaded as a party respondent. An affidavit from this Directorate clarified that an Essentiality Certificate was issued in favor of ONGC on November 4, 2014, under Notification No.12 of 2012. The ONGC applied for a no-objection certificate for adding blocks in this Essentiality Certificate, which was granted on July 6, 2015.

6. Legal Precedents and Principles on Exemption Notifications:
The court referred to the Supreme Court judgment in Commissioner of Customs (Imports) Mumbai Vs. M/s. Tullow India Operations Limited, which held that importers entitled to exemption benefits subject to producing an Essentiality Certificate should not be penalized for delays in certificate issuance by public authorities. The judgment emphasized that conditions within the control of the importer must be strictly complied with, while those dependent on public functionaries should be construed liberally.

Conclusion:
The court disposed of the petitions by accepting the petitioners' undertakings and directing them to execute a bond of 100% of the value of the ship/rig within three weeks. The petitioners were permitted to deploy the drill ships/rigs per ONGC's requirements and written instructions. The court clarified that the directions were without prejudice to the rights and contentions of both sides and allowed Customs to initiate proceedings if desired. The writ petitions were disposed of accordingly, with reference to the Supreme Court judgment to guide the interpretation of exemption notifications.

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