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TMI Blog2006 (2) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 28 of the said Act, confiscating the said goods under Section 111(j) of the said Act with an option to the importer to redeem the same on payment of a fine of Rs. 5,00,00,000/- (Rupees five crores only), and imposing a penalty of Rs 2,00,00,000/- (Rupees two crores only), under Section 112(a) of the said Act on the appellant. 2. The appellant had filed bill of entry No. 14315, dated 28-4-1993, seeking clearance of one second-hand jack up rig deepsea matdrill, nine leg sections for the said rig, one anchor for the rig and twenty containers for the rig (6 nos.). The value declared by the appellant was US $ 3,400,000 (C F) equivalent to Rs. 10,79,55,397.50 (CIF) as per the bill of entry. Though initially the appellant had claimed assessment of the rig under Tariff Heading 8430.49 and claimed benefit of Notification No. 279/92 that was changed by the appellant by their letter dated 29-7-1993 to claim assessment under Heading 8905.90 read with Notification No. 133/87 attracting nil rate of duty. The appellant relied upon a letter of the Chief Engineer (Drilling) of the ONGC in which it was stated that the matt supported jack up rig deepsea matdrill was not a floating or submersi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeal memo, since the imported goods were not released by the Customs authorities on the basis of the classification claimed by the appellant under sub-heading 8905.90 read with Notification No. 133/87 at nil rate of duty, the appellant had approached the civil court for immediate release of goods. The Court of Commercial Sub-Judge, Delhi passed an order on 24-8-1993 in the said civil suit No. 481/93 restraining the Customs authorities from causing obstruction in the movement and operation of the said rig. A copy of that order dated 24-8-1993, which is at Annexure 4 to the appeal memo reads as under : - IN THE COURT OF SMT. KAMLESH SABHARWAL : COMMERCIAL SUB-JUDGE Suit No. 481/93. Jagson International Ltd. A company incorporation under the Companies Act, 1956 Regd. At 5, Krishna Menon Lane, New Delhi. ......Plaintiff v. 1. Central Board of Excise Customs, North Block, New Delhi. 2. Collector of Customs (Docks) Customs House, Madras. ... .Defendents Suit for permanent injunction. To Collector of Customs (Docks) Customs House, Madras. WHEREAS in the above-noted case the plaintiff has filed a suit with application under order 39 Rule 1 of CPC. Yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sos or order 39 Rule 3, C.P.C. Put up on 6-12-94. Sd/- CJ/Delhi 3.3 It will be noticed that when the order was made on 1-11-1994, the earlier suit was already withdrawn and, therefore no interim order in that suit could have survived beyond the withdrawal of that suit. The civil court, however, ordered status quo to be maintained in terms of the interim order previously made by the Civil Judge, Delhi, named in the order. 3.4 After the show cause notice dated 27-5-1995 was issued alleging that the goods were classifiable under sub-heading 8905.20 and not under 8905.90, the appellant challenged that show cause notice in the civil court by making an amendment application in the pending suit, as stated in Paragraph 9 of the appeal memo and asked the authorities to keep the proceedings in abeyance during the pendency of the suit. 3.5 It also appears that the appellant had approached the designated authority under the Kar Vivad Samadhan Scheme. However, the appellant did not comply with the order made in that scheme, as stated by the learned Counsel for both the sides, and that order was not followed by the appellant by making payment within thirty days and as stated by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No. 196/89 was already rescinded (on 1-3-1997), the appellant was not eligible for such benefit on the ground that the conditions of the notification were not satisfied. It was, therefore, held that the appellant was liable to pay duty of Rs. 13,30,22,640/- under Section 28 of the said Act, and the goods were confiscated and penalty imposed as per the impugned order. Arguments on behalf of the appellant : 6. The learned Counsel appearing for the appellant contended that the rig in question was falling under Tariff Heading 8905.90 and not under Heading 8905.20, because it was not floating or submersible drilling or production platform . It was submitted that classification was a matter of chargeability and the burden would be squarely upon the department to show that the goods were covered by a particular tariff entry. The learned Counsel contended that one has to understand the expression describing the goods as per the commercial parlance and in accordance with the meaning assigned to it by the Governmental authorities. He submitted that as per the opinion of the Chief Engineering (Drilling), ONGC and the letter dated 2-11-1993 of the Ministry of Petroleum given o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the rig was covered under Heading 8905.20. It was submitted that the impugned proceedings before the Commissioner were for deciding the classification of the goods and consequently till that time there was no duty determination, nor any decision on classification. Therefore, the appellant ought not to have been denied the benefit of that notification, since earlier there could have been no occasion to file the essentiality certificate , because, as per the assessee, the goods were classifiable under Heading 8905.90 in respect of which nil rate of duty was payable under the Notification No. 133/87. It was also argued that since the show cause notice did not refer to the provision of Section 111 (j) and had referred to the provision of Section 111(d) of the said Act in connection with confiscation, the adjudicating authority could not have confiscated the goods under Section 111(j). It was also submitted that since the goods were removed on the strength of the order of the civil court, there was no scope for confiscating the goods even under Section 111(j) of the Act. It was also submitted that the penalty was not justified. 6.1 The learned Senior Advocate for the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Central Excise, Jamshedpur reported in 2005 (182) E.L.T. 290 (S.C.) Commissioner of Central Excise, Nagpur v. Vicco Laboratories reported in 2005 (179) E.L.T. 17 (S.C.) was cited for the proposition that in classifying the product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. (h) The decision of the Supreme Court in Formica India Division v. Collector of Central Excise reported in 1995 (77) E.L.T. 511 (S.C.), was cited to point out that it was held therein that once the Tribunal took the view that the appellants were liable to pay duty on the intermediary product and that they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. It was held that the appellants should be permitted to avail of the benefit of the notification by compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion arose for consideration and the facts were almost identical, the Supreme Court held that it cannot permit the Revenue to take a different stand in the case. (m) The decision of the Calcutta High Court in Rasoi Ltd. v. Union of India reported in 2004 (176) E.L.T. 101 (Cal.), was cited for the proposition that vested right can be invoked in accordance with the conditions mentioned in the notification as it then stood. (n) The decision of Tribunal in Mohamad Naseer v. Collector of Customs reported in 2003 (162) E.L.T. 560 (Tribunal) was cited to point from Paragraph 11 of the judgment that where the provisions of Sections 111(m) and 111(o) of the Customs Act were not invoked in the show cause notice, it was held that the Commissioner had travelled beyond the show cause notice. The Tribunal held that the adjudicating authority has to pass its order within the parameters of the allegations levelled in the show cause notice. (o) The decision of the Supreme Court in Unichem Laboratories Ltd. v. Collector of Central Excise, Bombay reported in 2002 (145) E.L.T. 502 (S.C.), was cited to point out that the Supreme Court has observed in Para 13 of the judgment that, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... altered opinion, in the show cause notice. The learned Counsel pointed out that by communication dated 4-9-1995, the appellant was provided with an extract of the oral discussion held with the Chief Engineer, ONGC on 1-2-1994 in the Custom House, at the request of the appellant, and therefore, there was no denial of opportunity of being heard to the appellant on the altered view of the Chief Engineer. The learned Counsel further submitted that the rig in question, having regard to its description and nature of functions, clearly fell within Tariff Heading No. 8905.20. He submitted that it is the character of the item which required to tally with the item described in the heading. The drill in question had the character of floating and also of drilling and it had a platform. It was self-elevating type of rig. He submitted that the HSN Explanatory Notes were uniformly applicable for understanding the nature of the items described in the tariff heading. He submitted that as per the International Convention on the Harmonized Commodity Description and Coding System to which India is a party, the Customs Tariff and statistical nomenclature was required to be in conformity with the Harmo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have removed the goods even on the strength of the order of the civil court which clearly contemplated that the appellant shall be bound by the observation of the Customs duty provisions and to pay Customs duty, if any, under Heading 8905.90. It was submitted that the question of applicability of the Notification No. 133/87 was required to be decided by the proper officer before the appellant could have cleared the goods. Therefore, the goods were liable to be confiscated since they were removed without following the essential part of the interim stay and without allowing the proper officer to provisionally assess and permit the goods to be removed in accordance with the interim order. 7.1 The learned Counsel for the Revenue relied upon the following decisions in support of his contentions : - (a) The decision of the Tribunal in Mangalore Chemicals Fertilizers Co. Ltd. v. Collector of Customs, Bombay, reported in 1997 (93) E.L.T. 548 (Tri.), was cited for the proposition that opinion given by World Customs Organization in regard to classification of goods have great persuasive value considering the purpose for which it was set up. It was held that the purpose of setting u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a proof of the fact that the importers have fulfilled the conditions enabling them to obtain the benefit under the exemption notification, and that whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. In Paragraph 30 of the judgment, it was held that the conditions referred to in sub-section (1) of Section 25 as regards time when such certificate is to be produced would, thus, mean those which were within the control and power of the importer. If it is not within the power and control of the importer and depends upon the acts of other public functionaries, non-compliance of such condition, subject to just exception cannot be held to be a condition precedent which would disable it from obtaining the benefit therefrom for all times to come. (e) The decision of the Supreme Court in Eagle Flask Industries Ltd. v. Commissioner of Central Excise, Pune, reported in 2004 (171) E.L.T. 296 (S.C.), was cited for the proposition that for availing the benefits u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.90, on the strength of the opinion of the Chief Engineer (Drilling) ONGC in which it was stated as under : - STATEMENT OF FACT The Mat Supported Jackup Rig Deepsea Matdrill is not floating or submersible drilling or Production Platform. This is being issued on the request of M/s. Jagson International Limited vide their letter dated 28-7-1993. (A. VAZEERULLAH ) CHIEF ENINEER (DRILLING) It will be seen that the Chief Engineer simply asserted that the mat-supported jack up rig deepsea matdrill was not a floating or submersible drilling or production platform, without indicating any reason for such assertion. It is this opinion which constituted the basis of the endorsement which was subsequently obtained below the licence and therefore, that endorsement cannot add any weight to what was asserted in the opinion. In the letter dated 2-11-1995 of the Government of India, Ministry of Petroleum and Natural Gas it was observed that as per the description given in subsequent paragraphs of HSN of 89.05 CTA, 1975 the deepsea matdrill can also fall under Para C(1) with minor variations. 8.3 It is needless to say that such opinions regarding the nature of the goods though having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinions or other advice as guides to the interpretation of the Harmonized System. 8.5 Thus, the Harmonized System Explanatory Notes are the authentic material which can be used for understanding the commodity description. When reliance is placed on HSN Explanatory Notes, which are duly published and known in the field concerned, there can arise no question of any opportunity to cross-examine the members of the Harmonized System Committee which prepares the Explanatory Notes, classification opinions or other advice. Therefore, the contention raised on behalf of the appellant that the Commissioner could not have referred to the opinion of the World Customs Organization Committee has absolutely no basis. The Commissioner, in fact, relied upon the HSN Explanatory Notes while also referring to the opinion of the Committee, which confirmed the classification of the goods in question under Heading 8905.20. 8.6 The HSN Explanatory Notes in the context of Heading 8905.20, even in absence of any confirmation from the Council, clearly indicated that the goods in question fell under Heading 8905.20. The HSN Explanatory Notes in the context of Heading 8905.20 read as under : - (C) Float ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee tabulars, 10 ft. diam. by 235 ft. can be extended to 255 ft. or 325 ft. long. Admittedly, the rig has self-elevating platform. The legs of the rig and the mat, rest on the sea bed when drilling is performed. The legs are drawn back vertically and then the mat is also drawn back and the rig becomes capable of floating and can be towed away. The rig has clearly a working platform. It is capable of drilling. It is capable of floating. It has legs along with the mat for resting on the sea bed when the drilling function is to be performed. The legs can be drawn back (i.e. retracted) in vertical direction and they go vertically above the platform level when the rig is to be brought into a floating state. Therefore, all the characteristics of a floating and drilling platform as contemplated under Tariff Heading No. 8950.20 are present in this rig as indicated in the HSN Explanatory Notes, even without reference to the subsequent advice given by the Committee of the World Customs Organization confirming that the rig fell within the description of the said Heading No. 8905.20. 8.8 The Harmonized System Committee in its document No. 41.295 E issued on 28th May, 1997 had examined the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floating or submersible drilling or production platform, he was not certifying in terms of the customs tariff heading. Normally, in international oil trade, Drill-ships/barges are called floaters, since they float on sea while drilling, Jack-up rigs are not grouped as floaters since they do not float while drilling but with the help of retractable legs/mat, they are lowered on the work-site and supported on the sea bed. Therefore, when he was asked to certify that Jack-up rigs are not floating platforms, he gave the above certificate since jack-up fall under separate category in international trade parlance. However, when the Chief Engineer was given the HSN Explanatory Notes, he went through them. On finding that self-elevating platforms are grouped under the sub-heading of floating or submersible drilling platforms , he said that the present rig also would be covered by this sub-heading. At the time of giving the certificate to M/s. Jagson International Ltd. he was not aware that self-elevating platforms are categorised as floating platforms in customs tariff and hence, he said he gave such a certificate solely based on the terminology used in international oil trade. 8.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as produced in May, 1999. As per the said Notification No. 196/89 issued by the Central Government under Section 25(1) of the Customs Act, 1962, off-shore drilling Rigs including Jack/up Drilling, Drilling Rigs, Drilling Drillships spares were described at S.No. 1 amongst the goods which were entitled to partial exemption when imported into India in connection with the purposes of off-shore oil exploration or off-shore oil exploitation. These were exempted from so much of the portion of duty of Customs leviable thereon which is specified in the first schedule to the Customs Tariff Act, 1975, as was in excess of the amount calculated at the rate of 30% ad valorem and from the whole of the additional duty, if any, leviable thereon under Section 3 of the Customs Tariff Act subject to the condition that the importer produces, at the time of clearance of the goods, a certificate, issued by a duly authorized officer of the Directorate General of Hydrocarbons in the Ministry of Petroleum and Natural Gas, Government of India, certifying that the said goods are essential for the purposes of the said off-shore oil exploration or off-shore oil exploitation. In the present case the purpose f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8905.20 of the Customs Tariff. The reasons given by the Commissioner for holding that the goods were not eligible for the benefit of the Notification No. 196/89 cannot, therefore, be sustained. The appellant is, therefore, liable to pay duty in respect of the said rig at the reduced rate as contemplated by the Notification No. 196/89, under Section 28 of the said Act. 10. It has been contended that the confiscation of the rig in question was not justified because the provision of Section 111(j) of the said Act was not specifically mentioned in the show cause notice which only referred to the provision of Section 111 (d) of the said Act in the context of confiscation of the rig. 10.1 The rig in question has been confiscated under Section 111(j) of the said Act with an option to the appellant to redeem the same on payment of a fine of Rupees Five Crores. The learned Commissioner has held that the Customs at no stage had assessed the bill of entry only due to the fact that the importer had at every stage approached the civil courts and stalled the process, as was clearly indicated in the facts of the case. Eventually, the goods had been removed apparently on the basis of an interi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 There was a specific allegation made in the show cause notice that the goods had been cleared without payment of duty and were liable for confiscation. It appears that the provisions of Section 111(d) were referred to in the show cause notice in the context of requirement of a valid licence, because, initially the appellant had not produced the licence as was required in respect of second hand capital goods which were more than seven years old under Para 28 of the EXIM Policy 1992-97. The show cause notice, however, clearly referred to the suit No. 481/93 and to the fact that the goods were removed without payment of duty. The removal of goods without payment of duty entailing confiscation was a sufficient averment in the show cause notice so as to bring in the provisions of Section 111(j) of the Act. Mere non-mention of the statutory provision, namely, 111(j) could not be fatal in the present case where the allegations were specifically made to the effect that the rig was cleared by the appellant without payment of duty which was required to be done in the context of the provisions of Section 47 of the said Act by paying duty, if any, as assessed by the proper officer. Mere non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 125(1), it is, inter alia, provided that such fine shall not exceed the market price of the goods confiscated, less, in the case of imported goods, the duty chargeable thereon. Under subsection (2) of Section 125, where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods. By Section 126 of the Act, it has been provided that if any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government, and that the officer adjudging confiscation shall take and hold possession of the confiscated goods. Since by virtue of confiscation, the goods vest in the Central Government, there is a clear justification for imposing fine in lieu of confiscation which is to the extent of market price of the goods confiscated. In other words, the rationale behind this provision lies in giving the equivalent in terms of the value of the goods to the Central Government which would become the owner of the goods by virtue of confiscation. This rationale is required to be kept in mind while consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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