2003 (6) TMI 69 - AT - Customs

Vessel - Foreign going vessel - Confiscation - Import into India for the purposes of repair - liability of the rig to confiscation and the penalty - HELD THAT - The rig entered the country without such entry being planned due to circumstances beyond the control of its owners or charterers. Therefore, applying the common ratio of these judgments, it will follow that its import had not been completed. The question of payment of duty on the rig also will not arise. We may however mention in passing that even if the rig was liable to duty, it will be entered into drawback under the provisions of Section 74 of the Act, since it was not used in the country for the short duration. This is in fact what had been held in Sedco Forex. The fact that a shipping bill was not filed for its clearance therefore will not, as we have held earlier, be an obstacle. The contravention of clause (f) has been established as the goods entered the transit or transhipment is required to be mentioned in the manifest. Clause (g) will also be attracted as the goods were unloaded without the permission of the proper officer as required in Section 32. The goods were also loaded or unloaded except under supervision of a proper officer. Clause (h) will therefore apply. Clause (j) also will apply as the goods were removed without the permission of a proper officer. The rig therefore becomes liable to confiscation. We do not find any deliberate intention on the part of the importer to contravene these regulations although there has been clear negligence and disregard of the rules. Having regard to these facts, we reduce the fine for redemption of the rig from Rs. 2 crores to Rs. 10 lakhs. Having regard to the fact that there was no deliberate intent to evade duty attributed to the importer, we do not think any justification for penalty upon the importer or its employees. We set aside these penalties. In our decision in Sedco Forex, we had found that the owner of the towing vessel could not be expected to be aware of the complexity of the law, and noting the absence of any intent, set aside the confiscation of the towing vessel and penalty. The same position would not apply here. Since the towing vessel Malaviya IV was on charter to Oil and Natural Gas Commission, the owner of the tug, Great Eastern Shipping Co., would have no knowledge of the intended use to which it was to be put. However, Oil and Natural Gas Commission being the person in charge of the vessel would have been fully aware of it. The rig would have been towed by the tug on its specific directions. In these circumstances, we confirm the confiscation of the tug, but reduce the fine to redeem it on payment of fine of Rs. 50,000/-.

Issues Involved:
1. Classification of the rig as a foreign going vessel.
2. Requirement of filing a bill of entry and importation status.
3. Valuation of the rig for duty purposes.
4. Confiscation and penalties imposed on the rig and associated parties.

Summary:

1. Classification of the Rig as a Foreign Going Vessel:
The main contention was whether the rig, when brought into Indian territorial waters for repairs, retained its status as a foreign going vessel. The Tribunal referred to the Bombay High Court's judgment in Amership Management Pvt. Ltd. v. UOI and Scindia Steam Navigation Co. Ltd. v. CC, concluding that a rig engaged in drilling operations outside Indian territorial waters is a foreign going vessel. However, it loses this status when it enters Indian territorial waters for repairs, as it is not engaged in any operation outside India during this period.

2. Requirement of Filing a Bill of Entry and Importation Status:
The appellant argued that the rig was not imported for home consumption but only brought in for repairs, hence no bill of entry was required. The Tribunal referred to the Supreme Court's judgment in Apar Pvt. Ltd. and concluded that the rig was not intended for use in India and was only brought in for repairs. Therefore, it was not goods for home consumption, and the act of importation was not completed. Consequently, no duty was payable.

3. Valuation of the Rig for Duty Purposes:
The appellant contested the valuation method used by the Commissioner, who depreciated the rig's value from its original built cost. The Tribunal noted that the rig was not intended for use in India and was only brought in for repairs. Therefore, the question of valuation for duty purposes did not arise, as the rig was not liable for duty.

4. Confiscation and Penalties Imposed on the Rig and Associated Parties:
The Commissioner had ordered the confiscation of the rig and imposed penalties under various clauses of Section 111 and Section 112 of the Act. The Tribunal found that while the rig was liable to confiscation due to non-compliance with import regulations, there was no deliberate intent to evade duty. Therefore, the fine for redemption of the rig was reduced from Rs. 2 crores to Rs. 10 lakhs, and penalties on the importer and its employees were set aside. The confiscation of the towing vessel Malaviya IV was confirmed, but the fine for its redemption was reduced to Rs. 50,000/-.

In conclusion, the Tribunal provided a nuanced interpretation of the legal provisions, balancing the technical violations with the absence of deliberate intent to evade duty.

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