2010 (1) TMI 17 - HC - Customs

Demand on the ground of violation of conditions of notification no. 21/2002-Cus dated 1.3.2002 at the time of import - After performing the contract work of drilling the importer re-exported the ship. However a part of the drill ship which would be used for the purpose of drilling namely blow out preventer and its accessories during the operation sheared off and immersed in the sea which is admittedly irretrievable. Because of the non exportation of the particular part the show cause notice was issued. The Commissioner of Customs as well as the Tribunal held that the non exportation of that particular part would not per se amount to violation of exemption condition and set aside the show cause notice issued for recovery of the amount in a sum of Rs.5, 75, 84, 140/ - held that - It is the admitted case of the Department that the blow out preventer and its accessories were immersed in the deep water of the sea and became irretrievable. Hence the importer cannot be directed to perform the function which is impossible of performance. revenue appeal dismissed.

Summary

Issues:
Appeal against Final Order of Customs Tribunal - Liability under Customs Act - Penalty under Customs Act - Exemption conditions for imported goods - Non-exportation of part of imported goods - Insurance requirement for benefit of Notification.

Analysis:
The appeal was filed against the Customs Tribunal's order confirming the Commissioner of Customs' decision regarding liability under the Customs Act and penalty imposition. The case involved the importation of a drill ship by the respondent, a sub-contractor, valued at Rs.148.92 crores for oil well drilling operations, availing exemption under Notification No.21/2002. The exemption condition required certification from Directorate General of Hydro Carbons and an undertaking from the contractor. After completing the contract work, a part of the drill ship, the blow out preventer, sheared off and immersed in the sea, leading to a show cause notice for non-exportation. Both the Commissioner of Customs and the Tribunal ruled that this incident did not violate the exemption condition, setting aside the recovery notice of Rs.5,75,84,140.

The appellant contended that the ship and its accessories needed insurance for the benefit of the Notification, which was not done. However, the Court found no such insurance condition in the Notification. The Department acknowledged that the irretrievable immersion of the blow out preventer in the sea was the reason for non-exportation. The Court emphasized that directing the importer to perform an impossible task was unjustifiable. The Tribunal's decision to confirm the Commissioner's order and reject the recovery of the penalty was based on this factual background. As there was no evidence of diversion of the sheared off part for another purpose, the appeal lacked merit under the circumstances presented.

In conclusion, the civil miscellaneous appeal was dismissed by the Court, upholding the decision of the Tribunal and the Commissioner of Customs. The Court found no basis to entertain the appeal given the facts and circumstances of the case. The judgment clarified the exemption conditions, the impact of non-exportation of goods, and the absence of an insurance requirement for the benefit of the Notification in question.