By TIOL News Service

MUMBAI, APRIL 22, 2013: THE appellant imported oil well equipments claiming the benefit of Notification No. 21/2002-Cus which grants full duty exemption subject to the condition that the goods are imported under a certificate issued by the Directorate General of Hydrocarbons (DGH in short) certifying that the goods are required for the petroleum operations to be undertaken under a contract with the Government of India.

After using the goods for the said purpose, the appellant in 2008-09 filed shipping bills for export of the goods to M/s. Oil Field Warehouse & Services Pvt. Ltd., Vishakhapatnam SEZ.

The department was of the view that the essentiality certificate issued by the DGH stipulated a condition of re-export of the goods after its usage and, therefore, the goods should have been re-exported. In the present case, the goods had been supplied to the SEZ in Visakhapatnam and the same does not amounts to export as defined in the Customs Act, 1962.

Accordingly, demand of duty foregone at the time of importation was made on the appellant amounting to Rs. 36,00,940/- and the goods were held liable to confiscation under Section 111(o) with an option to redeem the same on payment of Rs. 20,00,000/- and a penalty of Rs. 10,00,000/- was also imposed on the appellant.

There is another order involving a similar issue and where the duty demand confirmed is Rs.18,03,661/- along with redemption fine of Rs.10 lakhs and penalty of Rs.5 lakhs.

Against both these orders, the appellant is before the CESTAT.

It is submitted that -

+ there is no condition of re-export stipulated under Notification No. 21/2002-Cus as amended; that the notification only stipulates that they should submit an essentiality certificate from the DGH that the equipments imported are required for petroleum operations and the appellant has fulfilled the conditions by using the same for petroleum operations.

+ after the usage period was over, they have exported the same to SEZ in Visakhapatnam and supply of goods from DTA to SEZ is deemed exports under Section 2(m) of the SEZ Act, 2005; u/s 52 of the said Act, the provisions of SEZ Act shall have over-riding effect notwithstanding anything contained contrary in any other law for the time being in force and thus the appellants have fulfilled the condition of re-export.

+ that the condition of re-export in respect of second-hand capital goods flows from para 2.21 of the EXIM Policy 2004-2009 which stipulates that new or second-hand capital goods/equipments, components, etc, may be imported for export without a licence/certificate/permission on execution of legal undertaking/bank guarantee with the Customs authorities provided that the item is freely exportable without any condition/requirement of licence/permission as may be required under ITC(HS) schedule. However, para 2.17 of the said Policy also allows import of second-hand capital goods without any licence.

+ Inasmuch as the Notification under which they have availed exemption does not stipulate any condition of re-export, the question of non-exportation cannot deny them the benefit of exemption. Further, under para 2.17 of the EXIM Policy, the appellant could have imported these second-hand capital goods without any condition of re-export. There is no dispute about the fact that the goods imported by the appellants are capital goods, namely, drilling oil well equipments used in the exploration of oil.

+ Reliance is placed on the decision in Transocean Offshore International Ventures Ltd. vs. Commissioner of Customs (Import), Mumbai 2009-TIOL-1160-CESTAT-MUM.

The Revenue representative reiterated the findings of the lower authority.

The Bench noted that the issue lies in a narrow compass. Accordingly, after dispensing with the requirement of pre-deposit, the Bench observed -

“5.1 The goods were imported by the appellant claiming the benefit of Notification 21/2002. As per the said Notification, for availment of exemption, the importer has to produce a certificate from the DGH certifying that the imported goods are required for petroleum operations in terms of a contract under the new exploration licensing policy. In the present case, the appellant has produced such a certificate from the DGH at the time of importation of the goods and, therefore, they have fulfilled the terms and conditions of the Notification. Further, the appellants have used the capital goods during the period permitted in the certificate issued by DGH. After completing their use, they have sent these goods to the Visakhapatnam SEZ which activity is deemed as “export” under Section 2(m) of the SEZ Act, 2005. Thus there is no failure on the part of the appellants in fulfilling the terms and conditions of exemption. As regards the requirement of re-export, para 2.21 of the Foreign Trade Policy 2004-2009 provided for importation without a licence of second-hand capital goods on re-export basis by executing a legal undertaking with the Customs authorities. However, para 2.17 of the said Policy provides that the import of second-hand capital goods shall be allowed freely without any condition of re-export. If that be so, merely because they have claimed benefit under para 2.21 at the time of importation, even though they were eligible for the benefit under para 2.17 of the EXIM policy, the benefit of para 2.17 of the Foreign Trade Policy cannot be denied to the appellant. In any case, the appellant has supplied the material to the Visakhapatnam SEZ which is a deemed export as per the provisions of the SEZ Act.”

Holding that the appellants are eligible for the benefit of exemption under Notification 21/2002-Cus, the orders of the Commissioner of Customs (Import), Mumbai were set aside and the appeals were allowed with consequential relief.

(See 2013-TIOL-637-CESTAT-MUM )