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TMI Blog2018 (9) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... gone 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 cancella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t availing the benefit of Notification 12/2012-cus dated 17.03.2012 (serial no. 356, Condition No. 41). They have also imported the Components and parts of the said rig by filing bills of entry at other ports. On the basis of intelligence received by the Customs Dept., that the contract for deployment of Deep Sea Treasure was cancelled by the ONGC and Jagson had not deployed the said rig for Oil exploration, investigation was initiated and statements of various persons were recorded and the Rig Deep Sea Treasure with its parts and components totally valued at ₹ 299,38,28,906/- was seized by the Customs department on 29.12.2014. 3. Consequently, a SCN was issued to the app-ellant proposing to recover the customs duty forgone on the said imported rig Deep Sea Treasure with interest and proposal for confiscation of the same under the provision of the Customs Act, 1962. Similar SCNs were issued on imports made at other ports. All these SCNs have been adjudicated by a common adjudicator as per the notification issued by the Board. On adjudication, total demand of ₹ 46,02,76,965/- with interest was confirmed and penalty of ₹ 4,60,27,800/- imposed under Section 112 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing essential certificates from Director of Hydro Carbon in the Ministry of Petroleum and Natural Gases, Govt. of India, Affidavit of M/s ONGC in accordance with clause (ii) and undertaking from ONGC as per clause(iii) of condition 41(c) of the said Notification. It is his contention that there has been no end use requirement nor any post import condition stipulated under the said Notification, therefore, non-deployment of the Rig due to cancellation of the LOA/ contract cannot invite liability to discharge duty forgone on the said imported Rig and confiscation of the rig. 6. Interpreting the scope of Serial No. 356 of the Notification No. 12/12-Cus dated 17.03.2012, he has submitted that exemption was extended to the goods specified in list 13 required in connection with petroleum operations . In the present case, there is no dispute that goods imported are mentioned under List 13 and its requirement for petroleum operations has not been disputed by the department as the essentiality certificate about requirement of such rig is in connection with the petroleum operations at the site of ONGC has been obtained from DGHC. It is his contention that condition 41 required to be complied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation. Further, he has submitted that seizure and confiscation under Section 111(o) is unwarranted and without any legal basis. He has argued that re-export of the goods on its non-use was not a condition in the exemption notification, therefore, non-compliance of the same cannot render the goods liable for confiscation. Thus, Section 111(o) has been wrongly invoked and the confiscation is illegal. 8. The Appellant has further submitted that the present notice is issued by ADG(DRI), hence in view of the judgment of the Hon ble High Court in the case of Mangley Impex Ltd. vs UOI 2016 (335) ELT 605-DEL, SCN is bad in law as the DRI Officer cannot be treated as proper officer even if deemed to be empowered to perform such functions by way of Section 28(11) of the Customs Act, 1962. 9. The Ld. Advocate Shri T. B. Vishavnathan for M/s ONGC has submitted that ONGC is one of the prominent Government of India undertaking, engaged in the exploration and exploitation of petroleum resources, both on-shore and off-shore. Apart from ONGC itself engaged in petroleum operations, they also engaged sub-contractor for the said purpose. It is his contention that M/s Jagson was awarded a contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of goods, under the same exemption notification, viz. Sr. No. 368 of Notification No. 12/2012-Cus, Condition No. 9 appended to it says that the imported goods should be exclusively used for constructions; similarly condition No. 40 relating to entry nos. 350, 351, 452, 453, stipulates end use of the imported goods. He has submitted that since in the present entry i.e. Sr. No. 356 read with condition 41(c), on submissions of three documents mentioned thereunder, exemption was granted at the time of import and there is no post-import condition indicating for furnishing end-use undertaking/bond either by the importer-sub-contractor or licensee ONGC. It is his argument that subsequent non-use of the imported goods for petroleum operations, cannot be construed as non-compliance of these conditions. He submits that perhaps this is the intention of the Government, since, the imported rig could only be deployed for petroleum operations. In support, he has referred to the judgement of the Hon ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai vs. Tullow India Operations Ltd. 2005 (189) ELT 401 (SC). Further, he has submitted that in absence of actual user condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Treasure was not deployed/used for petroleum operations and the argument of the appellants that the Notification No. 12/2012-Cus dated 17.03.2012 does not contain an end use condition is fallacious, baseless and not maintainable. It is his contention that the appellant has tried to mis-interpret the said notification only by picking the expression required in connection with , and without going to other part of the said notification; it is a well settle legal principle of interpretation that any provision or an exemption notification should not be read in piecemeal, but should be read as a whole. It is his contention that exemption notifications are issued under Section 25 of the Customs Act, 1962 by the Government of India with a single object/motto, that is public interest, and it gets defeated, when the imported goods exempted from the duty for the avowed purpose, is not used for the specified purpose. It cannot be the intention of the legislature to extend the exemption to the imported rigs without being used/deployed for petroleum exploration for the specific exploration License issued on nomination basis to ONGC. It is his contention that the appellant had failed to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 also specifically says about deploying the drilling unit. Further, a certificate issued by the Director General of Hydrocarbons in terms of condition no. 41 (c) (i) allows the import for execution of contract as per subject and reference i.e. for petroleum operations undertaken; and in the list of goods at column no. 7, the purpose of goods has been specifically mentioned as Drilling . Further, in the affidavit dated 13.12.2013, submitted by ONGC in favour of the appellants in terms of condition no. 41(c)(ii), it has been stated that the appellant are their bonafide contractor for provisions of drilling for Oil Natural Gas Corporation in PEL-ML-ONGC block. Further, in condition 41(c)(ii) of the notification, ONGC had filed an undertaking on 10.12.2013, wherein it has been specifically mentioned items imported vide below mentioned invoice number by our bonafide sub-contractor M/s JIL, would be used for the petroleum operations and have been imported for the use in PEL/ML block for provisions of drilling under the LOA number .. Therefore, cumulatively reading all these documents which necessarily filed to comply with condition of the notification clearly indicate that the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant through various letter to re-export the rig between May 2014 and October 2014, which was never agreed upon by the appellants. Therefore, this is a fancy argument and has no basis. 16. The Ld. AR for the Revenue has submitted that in view of the undertaking furnished by ONGC in compliance with the condition of the exemption Notification, the ONGC should accept the liability to discharge duty, fine and penalty when the appellant M/s Jagson fail to discharge the same. 17. Heard both the sides at length and perused the records. 18. The undisputed facts are that M/s ONGC has awarded LOA to M/s Jagson on 13.06.2013, valid for 3 years for petroleum operation/ exploration at the respective oil blocks Licensed to ONGC on nomination basis by Govt. of India. Under the said LOA, M/s Jagson is required to mobilize the Rig Deepsea Treasure within 180 days and commence petroleum operation/exploration, accordingly. Since, M/s Jagson could not mobilize the Rig Deepsea Treasure within the stipulated time i.e. till 10.12.2013, extensions were allowed from time to time by ONGC to M/s Jagson till 07.05.2014. In the meanwhile, in December 2013/ January 2014, M/s Jagson had imported the Rig Deepse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating authority is bad in law. 21. Thus, the issues involved for determination in the present appeals are: 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. 22. Exemption Notification No. 12/2012-Cus dated 17.03.2012 has been issued under Section 25 of the Custom Act, 1962. Before analyzing the said Notification, it is necessary to refer to Section 25 of the Customs Act, 1962, under which the said Notification is issued, and the relevant portion reads as follows: 25. Power to grant exemption from duty. - (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or mining leases, as the case may be, referred to in that clause and containing the name of such sub-contractor, (ii) an affidavit to the effect that such sub-contractor is a bona-fide sub-contractor of the licensee or lessee, as the case may be, (iii) an undertaking from such licensee or lessee, as the case may be, binding him to pay any duty, fine or penalty that may become payable, if any of the conditions of this notification are not complied with by such sub-contractor or licensee or lessee, as the case may be, and (iv) a certificate, in the case of a petroleum exploration license or mining lease, as the case may be, issued or renewed after the 1st of April, 1999, by the Government of India or any State Government on nomination basis, that no foreign exchange remittance is made for the import of such goods undertaken by the sub-contractor on behalf of the licensee or lessee, as the case may be: Provided that nothing contained in this sub-clause shall apply if such sub-contractor is an Indian Company or Companies. [(d) where the goods so imported by the licensee or a sub-contractor of the licensee are sought to be transferred, the importer produces to the Deputy Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption. 26. Now, On a simple reading of the said entry 356, it is clear that the goods specified in list 13, required in connection with petroleum opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbon in the Ministry of Petroleum Natural Gas to the effect that the imported goods are required for petroleum operations referred to in clause (a). Clause (c) of the said condition 41 is meant for an importer who is sub-contractor of the licensee i.e. either ONGC or Oil India Limited; besides they are required to produce a certificate form Director General of Hydro Carbon (DGHC), as necessary for the licensee under clause(b), in addition, they are required to produce an affidavit by the licensee to the effect that the sub-contractor is a bonafide sub-contractor and also an undertaking from the licensee binding him to pay the duty, fine or penalty that may become payable, if any of the conditions of the Notification are not complied with by sub-contractor or licensee as the case may be. 29. The Ld. Advocates for the appellants vehemently argued that liability to pay duty, fine or penalty etc. would arise only if any of the conditions mentioned above is violated. It is their submission that in the present case there is no violation of any of the conditions, which are pre-import conditions, and in absence of any post import end-use condition, non-deployment of imported Rig Deep Sea T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to invoke the performance bond, forfeit the amount of performance bond and terminate the agreement. Apart from termination, contractor will be put up on holiday of two years as per clause no. 22.8.1 of model contract conditions. Customs duty The drilling unit will be deployed, in eligible PEL/ ML areas and NELP areas (issued or renewed after 01.04.1999) where presently exemption of customs duty is available as per Notification No. 12/2012-CUSTOMS dated 17th March, 2012. 31. Similarly, the affidavit/undertaking filed by M/s ONGC, pursuant to clause (c)(ii) (iii) of condition 41, indicates the use of such Rig. The said affidavit reads as: 32. The essentiality Certificate issued by the DGHC is reproduced below: 33. Analyzing these documents, filed at the time of import to avail the benefit of exemption under entry 356 read with condition 41 of the exemption Notification 12/2012 Cus. 17.3.2012, it can safely be inferred that the Rig Deepsea Treasure has been imported by the sub-contractor M/s Jagson, pursuant to the LOA issued by the licensee M/s ONGC, for its use for the petroleum operation for drilling purpose at the sites of M/s ONGC and these documents are necessary to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes no difference regarding the availability of the exemption. 35. The facts in BPL Display Devices Ltd s case (supra) more of less similar to Dalmia Dadri Cement Ltd s case. The appellant therein had imported parts of picture tubes for manufacture of colour picture tubes availing benefit of Notification No. 13/97-Cus, as amended. During the course of transit, a small percentage of the imported parts were damaged and could not be used in the manufacture of picture tubes by the appellant. The appellant had claimed the benefit of notification in respect of the entire lot of parts imported. In that context, the Hon ble Supreme Court referring to the Dalmia Dadri Cement Ltd s case observed that the benefit of notification cannot be denied merely because a small percentage of parts could not be used in the manufacture of picture tubes, being damaged during transit. 36. In Clough Engineering Ltd. Vs. Commissioner of Customs, (Import), Mumbai 2006 (198) ELT 457 (Tri.-Mumbai), the facts before the Tribunal was whether excess quantity of the pipes, imported for oil exploration purpose availing benefit of Notification No. 21/02-Cus dated 01.03.2002, are liable for confiscation and imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings, 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 and we uphold the same; also imposition of penalty under Sec.112(a) of the Customs Act, 1962 is justified, as no mens rea is required for the said violation, in view of the principle laid down in the case of Commissioner of Customs vs Bansal Industries 2007 (207) ELT 346 (Mad.). 41. But, we find that the redemption fine and penalty is disproportionate and highly excessive in the facts and circumstances of the case. It is not in dispute that the LOA was abruptly cancelled by M/s ONGC on 07.5.2014, the day when the rig was ready for use, being supported by various certificates issued by third party agencies, a fact not disputed by ONGC. It is also borne out of the record that deployment of the rig was not cancelled on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cotton Mills Pvt. Ltd. v. S.K. Bhardwaj, A.C.C.E. - 1987 (32) E.LT. 534 (Bombay) (ii) Commissioner v. Raghuvar (India) Ltd. - 2000 (118) E.L.T. 311 (S.C.) 13. We find that while Section 12 gives the power to levy customs duty, Section 25 gives the power to grant exemption of duty in the public interest either absolutely or subject to conditions. In the case of Notification No. 64/88, the exemption granted is conditional. The conditions relating to (i) free treatment of 40% outdoor patients and (ii) reservation of 10% of beds for free treatment of patients with family income less than ₹ 500 p.m. make it manifestly clear what the public interest behind the said exemption is. If these conditions are not fulfilled after importation and the public interest is not served, the exemption becomes unavailable and full duty as leviable under Section 12 becomes payable. 14. We note that the impugned notification has not provided for obtaining any bond or bank guarantee for recovery of duty in the event of failure to fulfil the conditions of free treatment. However, it is the prerogative of the Government to grant exemption, as has been held in Sri Sathya Sai Inst. (supra), and it is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referable to sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc. The order for payment of duty under Section 125 (2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. A reference may beneficially be made to a decision of this Court reported in Mohan Meakins Ltd. v. Commissioner of Central Excise, Kochi, 2000 (115) E.L.T. 3 (S.C.) = (2000) 1 SCC 462 wherein it has been observed in Para 6 . . Therefore, there is a mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy under sub-section (1) of that section. In this view of the matter the objection raised by the Centre that Section 28 of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for import of the goods for petroleum operation/exploration in view of clause (b) of condition 41 appended to entry 356 of the Notification. In these circumstances, we are of the firm view that the plea of the ONGC that duty, fine, and penalty cannot be recovered from them on the basis of an Undertaking, needs to be rejected outright. The judgment in VXL India Ltd. s case(supra) is not applicable to the facts of the present case as in that case the duty was sought to be recovered from the purchaser of the imported vehicle, since the importer of the vehicle had absconded. In that context the Hon ble High Court upheld the view of the Tribunal that duty can only be recovered from the importer of the vehicle. 48. Needless to emphasize, in the process of compliance of various provisions of the Customs Act for export and import, as a policy of liberalization in general and for Public Sector Undertakings in particular, Bonds and Bank Guarantee are not insisted, but to suffice, simple undertakings are accepted. 49. In directing recovery of the amount of duty, fine and penalty from ONGC, in the event, the sub-contractor M/s Jagson defaults in making such payments, it is worth mentioning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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