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TMI Blog2019 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants required to declare the vessel and the tug as goods in the IGM and to this extent, is there any misdeclaration by the appellants? - Confiscation under Sections 111(d)(f)(g) and(h) of the Customs Act, 1962 - HELD THAT:- Both sides do not dispute the fact that the rig and the tug are vessels. They have been brought to Cochin Shipyard with an understanding on the part of the appellants that the same will be deployed to undertake Petroleum operations in the block allotted to them, albeit after repairs - Once the nature of the vessel was not that of a foreign going vessel, it acquires the nature of a vessel imported for the purpose of use in India. Therefore, it requires to fulfil the conditions of import. As the vessel was not categorically declared as goods intended for import in the IGM filed on behalf of the appellants, contravention of section 30, 32 etc. of Customs Act have taken place. Looking into the facts of the case that the appellants have taken the plea of confusion in the Customs practices itself; that the appellants have been regularly keeping the Department to notice of all the activities and that the officers have boarded the vessels and supervised the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rig Transocean Mercury and the AHTS M. V. Shunter and that they are not liable to pay any duty in this regard. Therefore, the penalty imposed on M/s Focus Energy under Section 114A is set aside. As above, we find that there was a mis-declaration on the part of the appellants and the shipping agents, as far as the nature of the Rig Transocean Mercury and the AHTS M. V. Shunter is concerned, and the same have become liable for confiscation. There were reasons for the captain to be unsure/unaware of the procedures to be followed in such cases and as such ignorance of CBEC Circular 58/97 dated 06-11-1997 is understandable. Therefore, we find that penalty imposed on him can be reduced. Appeal allowed in part. - C/20890/2014-DB, C/21052/2014-DB, C/21066/2014-DB, C/21399/2014-DB, C/21269/2018-DB, C/21271/2018-DB - Final Order No. 20901-20906/2019 - Dated:- 29-10-2019 - HON'BLE MR. S.S GARG, JUDICIAL MEMBER AND HON'BLE MR. P. ANJANI KUMAR, TECHNICAL MEMBER Sh. V. Sridharan and Smt. Lakshmi Menon, Advocates, Lakshmi Kumaran Sridharan, Shri Maruthi. S.H. Advocate For the Appellant (s) Mr. Veerabadra Reddy, Additional Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of petroleum operations. Accordingly, the appellants sought amendment of the IGMs filed when the rig and tug arrived in India. The amendments so sought were granted by the customs department in terms of Section 30 of the Customs Act; After the amendment of the IGM, a Bill of Entry No.176 dated 30.04.2012 (at page 240-241 of Vol II of the appeal memo) was filed for the rig and an essentiality certificate dated 13.04.2012 issued by the Director General of Hydrocarbon was also presented; the appellants sought exemption from payment of customs duties in view of the exemption contained in Notification No.12/12-Cus (Sl.No.359), granting exemption to goods imported for petroleum operations; Similarly, a Bill of Entry No.182 dated 4.05.2012, was filed for the supply vessel and an essentiality certificate dated 16.04.2012 issued by the Director General of Hydrocarbon was also presented; Customs, after examining the various aspects, assessed the bills of entry under Section 47, extending the exemption; 3. Subsequent to the clearance of the rig, an investigation was conducted by the department. A Show Cause Notice, dated 14th November 2012, was issued alleging that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing Department s appeal against amendment to IGM C/21271/2018 Focus Energy Ltd 4. Shri Sreedharan, appearing for the appellants, submits that the entire proceedings were initiated by the department in the instant case only after the bills of entry and the supporting documents were filed by the Noticees. Tracing the developments in the issue, right from the time the rig and the AHTS were brought to Cochin port, he submits that the customs department was always put to notice of the fact that the rig was first brought for repairs and that the AHTS will be used for towing the Rig to Cochin Shipyard; he submits the events, dates and documents as follows in the table below. DATE EVENT Documents submitted details contained therein 09.02.2011 Anchor Handling Cum Tug-cum-supply vessel M.V.SUNTER arrived at the Cochin Outer Anchorage Arrival report submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormalities on 27.3.2011. Counter verified by Customs Department. 25.03.2011 Application for entry inward filed for the Rig Entry inward sought for the Rig 30.03.2011 Cargo Declaration filed The position of the Rig is mentioned as CSL Shipyard . 30.03.2011 IGM for the rig filed vide an application IGM No.9583/2011 The IGM mentioned calling for repairs . Indicated that the Rig TRANSOCEAN MERCURY is towed by the AHTS CS safe Indicated Import Cargo to Cochin Counter verified by Import and Bond Department, Cochin Customs House. Letter written by Focus Energy to the Flag Officer Commanding, Southern Naval Area, Cochin. Mentions that the rig is being brought for repairs; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with importation of goods into India, the confusion arises when the goods take the form of vessels, aircrafts etc which also qualify as conveyances for carrying the imported goods. From the circulars, No. 450/79/2010-Cus IV dated 23.09.2010 and Circular No.16/2012-Cus dated 13.06.2012 issued by the CBEC, it is clear that the field practice was that no bills of entry were being filed when vessels were being imported into India. 4.3. Further, as seen from the numerous circulars pertaining to stores and consumables, emphasis was always given to filing of bill of entry for the stores and consumables when the vessels were being converted from a foreign run to a coastal run; nowhere does it state that a bill of entry is to be filed for the vessel also; it was only clarified by the Board in 2010; a detailed procedure taking into account numerous scenarios was issued in 2012. Therefore, the appellants cannot be faulted with for not filing a bill of entry when the same was never insisted upon by the department and in the circumstances the Customs cannot demand duty in the present case. Placing reliance on the decision of Hede Ferrominas Pvt. Ltd. v. Commissioner of Cus, (Impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Cochin Customs in response dated 15.10.2013 and 14.08.2014 respectively, against an applications made under the RTI Act. The decision of CESTAT in 267 ELT 387 also recognizes that ship repair is undertaken by Cochin Shipyard in terms of the provisions of Section 58 and Section 65. In terms of the provisions of Section 69 read with Section 15, a bill of entry for home consumption is to be filed at the time of removal of the goods from the warehouse for home consumption and duty is to be paid at this point of time. Therefore, even if an into bond bill of entry had been filed at the time of entry into India, no duty was required to be paid by the Appellants on the rig/tug as it was being entered for ware-housing. At the time of ex-bond, i.e. in April, 2012, the Appellants had obtained essentiality certificates for the rig as well as the tug, so that the rate of duty applicable in terms of Section 15(1) (b) read with the exemption Notification No.12/12-Cus (Sl.No.359) is Nil. Therefore, the question of any customs duty arising in the fact and circumstances of the instant case does not arise. 7. Learned Counsel submits that the essentiality certificate is to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court of India in the case of Garden Silk Mills Ltd. v. Union of India, 1999 (113) ELT 358 (SC) has held that import of goods is completed only when it becomes part of the mass of the goods within the country. Further, the said decision also states that the taxable event is when the goods reach the customs barrier and the bill of entry for home-consumption is filed. Thus, in the instant case, as the rig in question was warehoused (which is an un-disputed fact), the act of importation is not complete and therefore, the Appellants have correctly filed the bill of entry for the rig and the tug in April 2012 when it was meant for home consumption. At this point, the question of duty demand does not arise as the Appellants are clearly eligible to avail the benefit of the Notification No.12/2012-Cus (Sl.No.359) dated 17.03.2012. Further, that the bill of entry has been filed one year late will not dis-entitle the Appellants from claiming the benefit of the Notification. As held in CC vs Shreeji Overseas (India) Pvt. Ltd., 2013 (289) ELT 401 (Guj), there is no time limit prescribed for the same under Section 46 of the Customs Act, 1962. 10. On the issue of classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2. Alternatively, Goods classifiable under Heading 89.01 or 89.06 are exempt from the payment of Basic Customs Duty, vide Sr. No. 352 and 354 of Notification No. 21/02-Cus dated 1.3.02. Hence, the duty demand on tug-cum-supply vessel needs to be reduced to the extent of Basic Customs Duty. The effective rate of CVD on vessels classifiable under the Heading 89.01/89.06 is 1% in terms of Sl.111 and 114 of the Notification No.1/2011-C.E. During the period 2012-2013, the CVD is exempt on goods falling under 89.01 vide Sl.NO.306 of the Notification No. 12/12-C.E. 11. Learned Counsel submits that the impugned Order-in-Original has invoked clauses (d), (f), (g) (h) of Section 111 of the Customs Act, 1962. However, confiscation is not possible under any of the clauses. Confiscation under Section 111(d) is possible if there is any prohibition on the import of the goods. For ship stores, bunkers, etc. there is no prohibition under the Customs Act or any other enactment for the time being in force. With regards to the usage of vessels, also there is no prohibition/restriction in force as the said vessels were not engaged in coasting trade as contemplated under the Merchant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res does not arise. 11.2. The Hon ble Commissioner in the impugned order is relying on the decision of Commissioner of Customs (Prev.,), Mumbai v. Ambalal Co., 2010 (260) ELT 487 (SC) to state that the rig and the AHTS in question are smuggled goods and therefore the benefit of the Notification cannot be extended. The said decision will not be applicable to the facts of the instant case. In the case of Ambalal, the diamonds in question were imported without a license. The Assessee in that case could not explain how the same were imported into India. The facts came to light only pursuant to seizure undertaken by the department. Therefore, in the said context the Hon ble Supreme Court took the view that benefit of the Notification will not be available to the diamonds. In the instant case, the department was at all times put to notice of the fact that the rig and the AHTS was being brought into India for repairs. Pursuant the same, the department was further put to note of the fact that they intent to import the rig and the AHTS into India for being used in petroleum operations. It was based on the declarations made by the Appellants that actions were initiated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Warehouse and therefore relying on Apex Court in the case of M/s Asoka Hotel Vs AC Commercial Taxes 2012(276) ELT 433 (SC) when the goods are in bonded warehouse, it cannot be said that the goods have crossed customs barriers. On completion of repairs, they filed a bill of entry and imported availing the benefit of the notification No 12/12-Cus against essentiality certificate issued by the DGHC. Counsel submits, relying on Circular No. 16/2012-Cus dated 13-6-2012 that even assuming that the rig was in coastal run, they were not required to file bill of entry. In view of the DGH assertion that they could have issued essentiality certificate had they applied in 2011, they were liable for duty exemption under the said Notification. Therefore, amendment to IGM cannot be denied. 13. Regarding the penalties imposed on the Rig, Tug M/s. Devshi Bhanji Khona (D B Khona) Shipping Clearing and Forwarding Agents, Nicolas Singhal Master, Tug M. V. Shunter, Authorization Holder Mr. Prateek Sisodia and GAC Shipping (India) Pvt. Ltd, Learned Counsels reiterated the above submissions and submitted that as there were at best only procedural infractions caused by the lacunae in the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the essentiality certificate issued by DGH would be applicable prospectively from 2012 and not for the import of Rig and the Tug made in 2011; the appellants have also violated the conditions of Notification 58/97. 14.2. He submits that the master of the vessel in his statement has accepted his mistake; the shipping agents M/s GM Baxi have paid the penalty and are not in appeal; therefore, the guilt of the appellants is established and they have been correctly penalised by the commissioner. 14.3. Learned AR concluded his argument pacing reliance on the following (i). Malabar Diamond Gallery Pvt Ltd Vs ADG, DRI, Chennai 2016(341) ELT65 (Mad) (ii). CC (Preventive) Mumbai Vs M. Ambalal Co 2010(260) ELT 487(SC) (iii). Pride Foramer Vs UOI 2002(148) ELT19(Bom) (iv). Aban Loyd Chiles Offshore Ltd Vs CC, Mumbai 2003(156) ELT 490(Tri-Mum) (v) CC (Import) NCH, Mumbai Vs PATVOLK 2006(202) ELT 411(Bom) (vi). Maersk India Pvt Ltd Vs CC, Mumbai 2009(238) ELT 793 (Tri-Mum) (vii). Sedco Forex International Drilling Inc Vs CC, Mumbai 2001(135) ELT 625(Tri-Mum) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 2012, the description of goods was given as old and used offshore drilling jackup rig mercury focus with associated equipment, tools, accessories and essential squares. The position of the rig was shown to be CSL Shipyard in the general declaration acknowledged by Import Department on 13th March, 2011. In an application dated 24th March, 2011, M/s JS Shipping India Ltd. informed the Deputy Commissioner of Customs that they were agents for Transocean Mercury calling Cochin Shipyard Ltd. for repairs; there are no cargo or crew on board and requested them for allowing manual IGM. From the above, it is seen that the rig has arrived on MV Talisman. In the cargo declaration filed for the MV Talisman, the said rig was not mentioned as Cargo. However, a separate IGM appears to have been filed for the rig itself claiming the same to be calling on Cochin Shipyard Ltd. for repairs. The Department disputes that the appellants have not declared the vessel and the tug as goods having been imported in the country. Though, in terms of the Production Sharing Contract (PSC) dated 02.03.2007 they were very much aware that the said vessel and the tug were to be used in the country for petroleu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition or within any of the three clauses of the latter part. 7. In Amership Management Pvt. Ltd., the Bombay High Court evidently found that a rig engaged in drilling or survey operations outside Indian territorial waters was a foreign going vessel, because of clause (2) of Section 24. The ship which came in for repairs, which was under consideration in Scindia Steam Navigation Co. Ltd. was held to be a foreign going vessel, not because it is engaged in any operation outside India but because it fell in the first part of the definition, that it was for the time being engaged in the carriage of goods or passengers between any port in India or any port outside India. Thus, a ship that is engaged in carriage of cargo or passengers between Mumbai and Abu Dhabi is a foreign going vessel covered by the first part of the definition and would be as such a foreign going vessel throughout the length of its voyage, if, during its voyage between these two ports, it touches other Indian ports. The judgment in Scindia Steam Navigation Co. Ltd. is based on the view that, despite being dry-docked for repairs, the ship was still engaged in the carriage of goods between Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention 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 ₹ 2 crores to ₹ 10 lakhs. 16.2. It is seen that Tribunal has considered the said decision in the case of Scindia Steam Navigation. Hon ble Apex Court has upheld the findings of the Tribunal with regards to the nature of the rig which has arrived for repairs. In view of the same, we are not in a position to accept the contentions of the appellants that the vessel was a foreign going ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of Hede Ferrominsas (supra) held that 6.4 In view of above discussions and settled legal position, we are of the considered view that the subject vessel Happy Success is correctly classifiable as Supply Vessel falling under CTH 8901 and consequently exempted under Notification No. 21/2002-Cus. The ld. Adjudicating Authority in Para 50 of the impugned order confiscated the vessel on the charge of misdeclaration of classification of subject vessel. However, we held that classification of vessel under CTH 8901 as Supply Vessel claimed by the appellant is correct; therefore confiscation of vessel does not survive. As regard non-filing of Bill of Entry, we find that once goods is exempted by customs exemption notification, non-filing of Bill of Entry at the time of import is merely a procedural lapse as there is no mala fide intention of the appellant as no benefit accrues to the appellant by non-filing of Bill of Entry. We agree with the submission of the appellant that at the material period i.e. in 2006 when the vessel was imported there was confusion among the assessees and department regarding filing of Bill of Entry in respect of vessel and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants have not filed ant into Bond Bill of entry. The appellant s contention that the rig was only undergoing repairs at Cochin dockyard is not satisfactory as they were availing exemption for spares for the rig and the tug, for a period of about one year, under Notification No. 12/2012-Cus dated 17.03.2012 as applicable to rigs/vessels engaged in Petroleum operations. Therefore, we find that Commissioner has correctly held that the Transocean Mercury and MV Shunter are liable for confiscation under Sections 111 (d) (f) (g) (h) of Customs Act, 1962 as per the discussion in the OIO. In the instant case, the Customs officers have even boarded the rig and the AHTS before at the time it reached Cochin Port. This is evident from the letter dated 25.03.2011 and the documents evidencing the payment of boarding charges to the officers of customs. The Appellants have even paid the lighterage dues and the boarding charges for the customs officers. At no point of time the officers gave guidance to the appellants. Therefore, looking into the facts of the case that the appellants have taken the plea of confusion in the Customs practices itself; that the appellants have been regularly ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that the appellants finally obtained essentiality certificate in respect of the goods cleared under the trans-shipment permit. However, benefit of exemption was denied despite these essentiality certificates on two grounds: - (i) That the said certificates were issued mentioning Notification No. 21/2002 and not under Notification No. 17/2001. Notification No. 21/2002 came into effect w.e.f. 1-3-2002 i.e. after the clearance made at transhipment permit, while Notification No. 17/2001 granting similar benefits was available at the material time. (ii) That the certificates were produced after the clearance made on the transhipment permit and not at the time of clearance. 5.3 We find that Notification No. 17/2001 which was applicable at the material time, granted similar concession as are granted by Notification No. 21/2002. It can be seen from the proceedings before the Hon ble High Court that obtaining essentiality certificate is not something for which the appellant can be blamed. There are a lot of procedural lapse and despite the intervention of Hon ble Bombay High Court; it took a lot of time to issue the essentiality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te manner. The instant case, at its worst, can be called a case of improper importation and for which certain amount of responsibility also lies with the department. In view of this we find that the filing of bill of entry and availing of exemption contained in Notification No 12/2012-Cus dated 17.3.2012 is quite acceptable. 17.2. Moreover, we find that Hon ble Gujarat High Court in the case of Shreeji Overseas (supra) held that there is no time limit for filing the Bill of Entry. Hon ble High Court held that 4. We are in agreement with the view of the Commissioner as confirmed by the Tribunal. Section 46 of the Act provides for entry of goods on importation and reads as under: 46. Entry of goods on importation. - (1) The importer of any goods other than goods intended for transit or transshipment, shall make entry thereof by presenting electronically to the proper officer a bill of entry for home consumption or warehousing in the prescribed form: Provided that the Commissioner of Customs may, in cases where it is not feasible to make entry by presenting electronically, allow an entry to be presented in any other m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer be sold by the person having the custody thereof; Provided that - (a) animals, perishable goods and hazardous goods, may, with the permission of the proper officer, be sold at any time; (b) arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct. Explanation - In this section, arms and ammunition have the meanings respectively assigned to them in the Arms Act, 1959 (54 of 1959). 6. Section 117 of the Act provides for penalties for contravention, etc. not expressly mentioned and reads as under: 117. Penalties for contravention, etc. not expressly mentioned. - Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of HAL Offshore Ltd. Vs CC (Import), Mumbai held that 1 7. We have carefully considered the submissions made by both the sides. Our findings and conclusions are discussed in the ensuring paragraphs. 7.1 As the issue relates to classification, it will be useful to understand the scope of the relevant tariff entries. 89.01 - Cruise ships, excursion boats, ferry boats, cargo ships, barges and similar vessels for transport of persons or goods 8901.10 - Cruise ships, excursion boats and similar vessels principally designed for the transport of persons; ferry boats of all kinds 8901.20 - Tankers 8901.30 - Refrigerated vessels, other than those of sub-heading No. 8901.20 8901.90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain function in a stationary position and they include light vessels, drill ships, fire floats, dredgers of all kinds, salvage ships for the recovery of sunken vessels; permanently moored air-sea rescue floats; bathyscaphes; pontoons fitted with lifting or handling machines and pontoons clearly designed to serve as a base for these machines. The heading also includes floating docks, floating or submersible drilling or production platforms. 18.2. We find that similar decision was taken in the case of Hede Ferrominas Pvt. Ltd. v. CC (Import, Mumbai) 2016 (334) ELT 540, Prince Maritime Services Pvt. Ltd., 2015 (327) ELT 283 (Tri. Mum), Lewk Altair Shipping Pvt. Ltd., 2019 (366) ELT 318 (Tri. Hyderabad). We find that as the Tug is a supply vessel a few additional features to tow, it is correctly classifiable under CTH 8901. Therefore, we hold that the exemption under Notification 12/2012-Cus dated 17.03.2012 is available to the appellants on MV Shunter . Classification of the supply vessel is thus, answered. 19. Now, coming to the issue of dutiability of ship stores and spares supplied to Transocean Mercury and MV Shunter , we find that we have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, Apex court limited their judgement to the issue of limitation. 19.3. The appellants stated that they have also availed exemption for certain capital goods/spares under the Notification No. 12/2012-Cus dated 17.03.2012 and that commissioner included such value also in the duty recoverable on account of ship stores supplied. We hold that such exemption will not be available to the appellants for the period for which the Rig Transocean Mercury and the supply Vessel MV Shunter were either undergoing repairs or were in the anchorage. During this period the Rig and Tug were not engaged in any petroleum operations, though the intention behind bringing the vessels was to undertake Petroleum operations in the designated areas. To that extent we find that such exemption extended, though on the basis of essentiality certificates issued by the Competent Authority, is not available as the Vessels were not utilised for the intended purposes. Therefore, we find that there is no force in the argument of the Learned Counsel that the calculation of duty of stores and spares, supplied to Transocean Mercury and MV Shunter , at the time of demand or provisional release i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Therefore, we find that the lower authorities have allowed the amendment of IGM after considering all relevant facts and after due application of mind and that the amendment allowed is well within the provisions of law. Therefore, we find that the OIA is not maintainable and liable to be set aside and appeals No C/21269/2018 and C/21271/2018 need to be allowed. 21. Coming to the various penalties imposed on various appellants, as discussed above, we already held that the benefit under Notification 12/2012-Cus dated 17.03.2012 is available to the appellants, M/s Focus Energy, on the Rig Transocean Mercury and the AHTS M. V. Shunter and that they are not liable to pay any duty in this regard. Therefore, the penalty imposed on M/s Focus Energy under Section 114A is set aside. As above, we find that there was a mis-declaration on the part of the appellants and the shipping agents, as far as the nature of the Rig Transocean Mercury and the AHTS M. V. Shunter is concerned, and the same have become liable for confiscation. However, we find that the issue being one of understanding of the existing practices in the Customs House and the fact that the agents had no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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