2000 (3) TMI 1116 - AT - Customs

Summary

Issues Involved:
1. Waiver of penalty imposed.
2. Stay of operation of the Commissioner's order for confiscation and redemption fine.
3. Compliance with Customs formalities and duty payment.
4. Valuation of the drilling rig.
5. Hardship caused by non-operation of the rig.
6. Undertaking and guarantee by the applicant.
7. Financial hardship and income from the rig.
8. Legal precedents and established practices.

Detailed Analysis:

1. Waiver of Penalty Imposed:
The applicant sought a waiver of the Rs. 5.00 crores penalty imposed by the Commissioner. The Tribunal noted that the applicant did not have a strong prima facie case regarding the penalty. The Commissioner's findings indicated that the applicant knowingly failed to comply with Customs formalities and duty payments, despite being aware of the legal requirements. The Tribunal decided to waive the deposit of the penalty in excess of Rs. 3.00 crores, provided the applicant pays Rs. 3.00 crores within a month from the receipt of the order.

2. Stay of Operation of the Commissioner's Order:
The Commissioner's order included the confiscation of the drilling rig under various clauses of Section 111 of the Customs Act, 1962, with an option to redeem it on payment of a fine of Rs. 15.00 crores. The applicant requested a stay on this order. The Tribunal decided to stay the operation of the Commissioner's order, subject to the applicant undertaking to pay the applicable duty, redemption fine, and the balance of the penalty, supported by a bank guarantee of Rs. 50 crores. This stay was conditional on the applicant providing notice to the Commissioner of Customs before moving the rig from its designated area.

3. Compliance with Customs Formalities and Duty Payment:
The Commissioner found that the rig was imported into India without filing a bill of entry or paying the required duty, making it liable for confiscation. The applicant argued that there was a departmental practice of not insisting on a bill of entry for such rigs, supported by various court judgments and departmental letters. However, the Tribunal noted that there was no conclusive evidence supporting this practice, especially for the period after 1998, when the rig entered the designated area.

4. Valuation of the Drilling Rig:
The applicant contested the valuation of the rig at US$ 49 million, arguing it was inflated due to commercial considerations. They provided valuations from surveyors and actual transactions of comparable rigs, suggesting a lower value. The Tribunal acknowledged the dispute over the rig's valuation, noting the range between US$ 49 million and US$ 13 million, and decided that this aspect needed further consideration.

5. Hardship Caused by Non-Operation of the Rig:
The applicant argued that not allowing the rig to operate would cause irreparable harm to both the applicant and ONGC. The Tribunal noted that ONGC had not approached them to claim any hardship. They also considered the High Court's previous orders allowing the rig to operate without any security, but acknowledged that the situation had changed with the rig now being confiscated government property.

6. Undertaking and Guarantee by the Applicant:
The applicant offered to provide a bank guarantee of Rs. 20.00 crores and undertook to inform the department well in advance of any movement of the rig outside India. The Tribunal required a bank guarantee of Rs. 50 crores and specified conditions for the applicant to notify the Commissioner of Customs before moving the rig from its designated area or terminating the charter with ONGC.

7. Financial Hardship and Income from the Rig:
The Tribunal noted that there was no argument of financial hardship from the applicant. The Commissioner contended that the applicant was earning a sizable daily income from the rig, which was not disputed by the applicant. This factor influenced the Tribunal's decision regarding the waiver and stay conditions.

8. Legal Precedents and Established Practices:
The applicant cited various legal precedents and departmental practices to support their case. The Tribunal considered these but found that there was no conclusive evidence of a consistent practice of not requiring a bill of entry for such rigs, especially post-1998. The Tribunal emphasized the need to comply with the legal requirements under the Customs Act, 1962, and the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976.

Conclusion:
The Tribunal granted partial relief by waiving the deposit of the penalty in excess of Rs. 3.00 crores and staying the operation of the Commissioner's order, subject to specific conditions regarding payment, guarantees, and notifications. The appeal was listed for an out-of-turn hearing on June 5, 2000, considering the value of the goods and the peculiar circumstances of the case.