2024 (10) TMI 1187 - AT - Customs

Applicability of Customs Duty exemption under Notification No. 12/2012-Cus for imports made prior to and after the amendment by Notification No. 06/2017-Cus. - applicability of depreciation provisions under Clause (e) of Condition 40A post-amendment - HELD THAT - Notification 12/2012 as it stood prior to 02 February, 2017 did not contain the Clause (e) in the Condition No. 40A. The law as it stood prior to 02 February, 2017 has been interpreted in various decisions - In the case of CLOUGH ENGINEERING LTD. VERSUS COMMISSIONER OF CUS. (IMPORT) , MUMBAI 2005 (10) TMI 173 - CESTAT, MUMBAI it was held that ' he appellants are eligible to the benefit of Notification No. 21/2002 and hence confiscation duty demand and penalty are not sustainable, and accordingly set aside the same.' The said decision was approved by the Hon ble Apex Court in the case of COMMISSIONER VERSUS CLOUGH ENGINEERING LTD. 2006 (8) TMI 597 - SC ORDER . The aforementioned decisions were made in respect of Notification No. 21/2002-Cus which provided similar exemption as in case of 12/2012- Cus. The aforementioned decision is equally applicable to the facts of the case in respect of Notification No. 12/12- Customs as it stood prior to 02 February, 2017. In view of the above, the demand in respect of imports made vide Bill of Entry dated 24 January, 2017 is set aside. The facts in the instant case are that the appellant had imported certain goods, as certified by DGSC and had put most of the goods in use for the stated purpose. A part of the goods were leftovers. It is found that the facts in the instant case are significantly different from the facts in the case of M/S JAGSON INTERNATIONAL LTD., OIL NATURAL GAS CORPORATION LTD. VERSUS C.C. -JAMNAGAR (PREV.) 2018 (9) TMI 196 - CESTAT AHMEDABAD where the importer had failed to fulfil the necessary conditions of place by ONGC. In view of the above, the reliance on the decision of Tribunal in the case of Jagson International ltd, in the impugned order is not correct. After introduction of Clause (e) in Condition 40A by Notification No. 06/2017 dated 02 February 2017, the duty became payable on the leftover goods imported for the petroleum operations or for coal bed methane operations. However, the said notification also prescribed the rate of depreciation at which the goods will be valued. It is seen that in the instant case does not involves any violation of Section 111 of the Customs Act and the notification itself foresees the possibility of leftovers and disposal thereof. In these circumstances, we do not find any reason for confiscation of goods or imposition of penalties on anyone. The impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh decision - Appeal allowed by way of remand.

Summary

Issues Involved:

1. Applicability of Customs Duty exemption under Notification No. 12/2012-Cus for imports made prior to and after the amendment by Notification No. 06/2017-Cus.
2. Interpretation and applicability of depreciation provisions under Clause (e) of Condition 40A post-amendment.
3. Validity of confiscation and penalties imposed under Section 111 of the Customs Act.

Issue-wise Detailed Analysis:

1. Applicability of Customs Duty exemption under Notification No. 12/2012-Cus:

The primary issue revolves around the demand for Customs Duty on imports made by the appellant, Sapura Offshore Sdn Bhd Limited, under Notification No. 12/2012-Cus. The appellant argued that the imports made via the Bill of Entry dated 24.01.2017 should not attract duty due to precedents set by various judicial decisions, including State of Haryana v. Dalmia Dadri Cement Ltd and Clough Engineering Ltd. v. Commissioner of Cus. (Import), Mumbai. These decisions interpreted exemptions under similar notifications, emphasizing the absence of an end-use condition in the notification. The Tribunal agreed with this interpretation, noting that the goods were certified as required for petroleum operations by the Directorate General of Hydrocarbons (DGHC), thereby setting aside the demand for duty on imports made before the amendment on 02.02.2017.

For imports made in March 2017, the situation differed due to the amendment introduced by Notification No. 06/2017-Cus, which added Clause (e) to Condition 40A. This amendment stipulated that if imported goods were to be disposed of, duty would be payable on their depreciated value. The Tribunal acknowledged this change, indicating that the exemption no longer applied to leftover goods post-amendment, thus necessitating the payment of duty on such goods.

2. Interpretation and applicability of depreciation provisions under Clause (e) of Condition 40A:

The Tribunal examined the depreciation provisions introduced by the amendment, which allowed for duty calculation based on the depreciated value of goods. The appellant sought depreciation up to the time of disposal, whereas the impugned order limited depreciation to the date of removal from the offshore platform. The Tribunal found that Clause (e) clearly stated depreciation should be calculated from the date of clearance of goods, not their removal from offshore to onshore. The Tribunal emphasized that disposal meant transfer or sale to another entity, not mere removal. Consequently, the Tribunal set aside the denial of depreciation benefits, allowing for depreciation up to the actual disposal date.

3. Validity of confiscation and penalties under Section 111 of the Customs Act:

The Tribunal found no grounds for confiscation or penalties under Section 111 of the Customs Act. It noted that the notification itself anticipated the possibility of leftover goods and their disposal. Since the appellant had complied with the certification requirement by DGHC and the notification provided for depreciation on disposed goods, the Tribunal saw no violation warranting confiscation or penalties. Therefore, it set aside the impugned order's decision on confiscation and penalties.

Conclusion:

The Tribunal set aside the impugned order, remanding the matter to the original adjudicating authority for a fresh decision in line with its observations. The Tribunal's decision clarified the applicability of exemptions and depreciation under the amended notification, emphasizing the need for adherence to the specific provisions introduced by the amendment.