By TIOL News Service

MUMBAI, OCT 08, 2014: THESE are appeals filed by Revenue against two orders passed by Commissioner of Customs, Kandla. Vide the two orders Customs duty demands of Rs.309.45 crore & Rs.3.07 crores have been dropped by the adjudicating authority.

The facts are:

The respondent, M/s. PSL Ltd., is a manufacturer of coated pipes and the manufacturing is undertaken in a Customs bonded/warehouse. The respondent acted as a sub-contractor to contractors, such as, L&T, Punj Lloyd Ltd. and National Petroleum Construction Co. Ltd., who were awarded contracts by ONGC for lying of pipelines, etc. in connection with the oil exploration /exploitation activities undertaken in the Bombay High. The bare pipes imported by ONGC were supplied to the respondent for coating and the coated pipes were supplied back to ONGC through the contractor and essentiality certificate for use of these pipes was also furnished and the respondent claimed the benefit of Serial No. 215, Notification No.21/2002-Cus dated 01/03/2002. The department was of the view that the respondent did not submit any certificate with respect to the finished products, namely, coated pipes and in the absence of such a certificate from DGHC, the coated pipes, which are manufactured under bond is liable to import duty at the time of clearance from bond and accordingly issued show-cause notices proposing to demand Customs duty on the entire value of the coated pipes.

The Commissioner of Customs, Kandla observed that the coated pipes themselves are eligible for exemption; so also the raw materials used in the manufacture of coated pipes are eligible to exemption. Therefore, the question of any duty demand would not arise, since in both the situations exemptions are available.

This reasoning does not go down well with the Revenue and, therefore, they are before the CESTAT.

The Special Consultant for the Revenue apart from reiterating the allegations in the SCNs inter alia submitted that the respondent had supplied coated pipes to Bombay High and hence the supply of coated pipes is an import transaction and liable to duty; since the entire SEZ has been declared as part of the territory of India vide Notification issued under Sections 6 & 7 of the Management of Territorial Waters and Special Economic Zones and other Maritime Zones Act, 1976, the places where Bombay High and its installations are located, are part of India and therefore, supply of pipes form the bonded warehouse to another part of India cannot be considered as an export transaction but is an import transaction and the goods should be assessed at the applicable rates of duty. Inasmuch as dropping of demands of duty by the adjudicating authority is incorrect in law.

The respondent inter-alia submitted that when the appellant cleared the goods from the bonded warehouse, they have considered the same to be an export transaction and filed the shipping bills which were assessed by the Customs authorities; the entire transaction was known to the department and hence, extended period of time could not have invoked for confirmation of duty.

The Bench observed –

"5.1 …, it is not in dispute that both the bare pipes as well as the coated pipes were for use for oil exploration/exploitation and the essentiality certificate issued by the DGHC clearly evidences this fact. Though, the certificate specifically mentions serial No.215 of the Notification No.21/2002, the finished products are also specified therein and the said finished products figure in List 12 to Notification No.21/2002, which also exempts the said goods from import duty vide Serial No. 216 subject to production of essentiality certificate from DGHC. Since the end use is not in dispute, the appellant would be entitled to the benefit of Serial No. 216 even though they have not specifically claimed the exemption. Since the assessment of duty liability has to be done by the Customs, notwithstanding the fact that the appellant did not claim the benefit of exemption, the same should have been extended to the respondent importer. Further, we observe that the demands covered under show-cause notice dated 07/04/2010 and 17/07/2009 are clearly time barred, inasmuch as the entire transactions were fully known to the department and the respondent's clearance of coated pipes to Bombay High under shipping bills were also approved by the Customs authorities concerned."

In fine, the Revenue appeals against the order dropping the Customs duty demands of Rs.309.45 crore & Rs.3.07 crores were dismissed as being devoid of any merits.

In passing: Picture abhi baaki hai, mere dost…

(See 2014-TIOL-1937-CESTAT-MUM)