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2018 (9) TMI 196 - AT - CustomsRecovery of customs duty forgone with Interest - actual use condition - Confiscation - import of rig Deep Sea Treasure - non-deployment of the Rig due to cancellation of the LOA/ contract - end use exemption - N/N. 12/2012-Cus dated 17.03.2012. Whether any of the conditions of the Notification No. 12/2012 Cus. dated 17.03.2012 (Serial no.356 read with condition No. 41) has been violated and consequently, M/s Jagson is required to pay confirmed duty, interest, penalty fine, and in default, the liability to pay such confirmed duty, fine and penalty, etc. be shifted to M/s ONGC.? Held that - There is no dispute of the fact that the Rig Deepsea Treasure which was imported for the purpose of oil exploration at licensed Oil blocks of ONGC has not been put to use for the said purpose. The department has seized the said Rig on 19.12.2014 and after adjudication, the same was confiscated and duty forgone was confirmed with interest and also penalty imposed on M/s Jagson. It is also ordered that in default of payment of said duty, fine and penalty by M/s Jagson, the same would be paid by M/s ONGC. It is informed by both sides that the Rig Deep Sea Treasure has been still lying idle, and in the custody of customs, as M/s Jagson has not cleared the same on payment of appropriate fine, duty, penalty etc. nor the ONGC has paid the said confirmed liability - On a simple reading of the said entry 356, it is clear that the goods specified in list 13, required in connection with petroleum operations, undertaken under petroleum exploration licenses or mining leases, as the case may be, which are issued or renewed after 01.4.1999, and granted by the Government of India or State Government to Oil Natural Gas Corporation or Oil India Limited, on nomination basis, would be eligible to be imported duty at Nil rate. In the present case, the imported Rig Deepsea Tressure has been imported by M/s Jagson for the purpose of petroleum operation/ exploration in the blocks allotted to M/s ONGC, as per LOA awarded to them for a period of 3 years, but the said rig has never been put to use on cancellation of the LOA by the ONGC. Thus, it is not the case of the appellants that duty foregone was demanded denying the benefit of exemption notification, even if the rig Deepsea Treasure was put to use for petroleum operation/exploration for a certain period but less than the contract period of 3 years - there is no specific user of the goods mentioned thereunder, but its use and user are general in nature; thus requirement of end use certificate so as to be eligible to the benefit of the exemption notification, could have been stipulated thereunder and the same is considered not relevant with regard to entry 356. There is no difficulty to conclude that by not putting into use the imported Rig Deepsea Treasure for petroleum operation/exploration at the Licensed oil block of ONGC, irrespective of the reasons for such non-use, there has been violation of the condition of Notification 12/2012 Cus. dt.17.3.2012 (entry 356), consequently, the said Rig Deepsea Treasure has been rightly confiscated by the adjudicating authority, under Sec.111(o) of Customs Act, 1962 - penalty also justified - the redemption fine and penalty is disproportionate and highly excessive in the facts and circumstances of the case, and is reduced. Time Limitation - Held that - Since there has been violation of the conditions of the Notification, subsequent to import of the Rig Deep sea Treasure, by not deploying the same for petroleum operation/ exploration, time limit prescribed under Section 28(1) of the Customs Act, 1962 is not applicable. Appeal disposed off.
Issues Involved:
1. Denial of exemption benefit under Notification 12/2012-Cus dated 17.03.2012. 2. Non-deployment of imported rig "Deep Sea Treasure" for petroleum operations. 3. Interpretation of pre-import and post-import conditions. 4. Liability to pay customs duty, fine, and penalty. 5. Jurisdiction of DRI Officers in issuing the SCN. 6. Recovery of duty, fine, and penalty from ONGC. Detailed Analysis: 1. Denial of Exemption Benefit: The appellant, M/s Jagson International Ltd., imported the rig "Deep Sea Treasure" without paying customs duty under Notification 12/2012-Cus dated 17.03.2012, based on a contract with ONGC. However, the Customs Department initiated an investigation after learning that the contract was canceled and the rig was not deployed for oil exploration. The adjudicating authority denied the exemption benefit, confirming a total demand of ?46,02,76,965/- with interest and a penalty of ?4,60,27,800/-, along with the confiscation of the rig under Section 111(o) of the Customs Act, 1962. 2. Non-Deployment of Imported Rig: The rig was imported under the condition that it would be used for petroleum operations. Despite obtaining necessary certificates and extensions, the rig was not deployed due to the cancellation of the contract by ONGC. The appellant argued that the exemption notification did not stipulate any post-import condition requiring the rig's deployment, while the Revenue contended that the notification implicitly required the rig to be used for its intended purpose. 3. Interpretation of Pre-Import and Post-Import Conditions: The appellants argued that the conditions of the notification were pre-import conditions and that there was no post-import end-use requirement. They cited various judgments to support their claim that the intention to use the rig for petroleum operations at the time of import was sufficient for the exemption. The Revenue, however, argued that the notification's conditions implicitly required the rig's deployment for petroleum operations, and non-use constituted a violation of the exemption conditions. 4. Liability to Pay Customs Duty, Fine, and Penalty: The Tribunal concluded that the non-deployment of the rig constituted a violation of the exemption notification, justifying the confiscation of the rig and the imposition of duty, fine, and penalty. However, the Tribunal reduced the redemption fine to ?1.00 crore and the penalty to ?10.00 lakhs, considering the circumstances of the case, including the cancellation of the contract by ONGC and the rig's idleness. 5. Jurisdiction of DRI Officers in Issuing the SCN: The appellants challenged the jurisdiction of DRI Officers in issuing the SCN based on a judgment by the Delhi High Court. The Tribunal rejected this contention, noting that the Supreme Court had stayed the operation of the Delhi High Court's judgment and that the Andhra Pradesh High Court had expressed a contrary view. 6. Recovery of Duty, Fine, and Penalty from ONGC: The Tribunal upheld the adjudicating authority's direction that ONGC should pay the duty, fine, and penalty if M/s Jagson failed to do so. The Tribunal noted that ONGC had furnished an undertaking to discharge these liabilities in case of a violation by the sub-contractor. The Tribunal also pointed out that ONGC had recovered damages from M/s Jagson but had not paid the customs duty. Conclusion: The Tribunal upheld the confiscation of the rig and the imposition of duty, fine, and penalty, albeit with reduced amounts. The Tribunal also confirmed the recovery of these amounts from ONGC if M/s Jagson failed to pay. The Tribunal rejected the challenge to the jurisdiction of DRI Officers and allowed for the possibility of re-exporting the rig, subject to compliance with the Customs Act and Rules.
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