Cus - Self propelled tug imported for petro operations & certificate obtained from Ministry – Tug was used for salvage operations due to oil spill resulting from collision between two vessels – stay granted: CESTAT
By TIOL News Service
MUMBAI, OCT 28, 2013: WHAT is more important – containing the oil spill which had resulted in the Mumbai Port operations coming to a standstill or debating whether this would amount to violating the conditions of exemption notification under which the Tug was imported?
For the appellant, it was the first option but for the Customs authorities it was the second one.
Read further –
The appellant was requested by the Harbour Master, MbPT to spare the services of the ‘Tug' to undertake emergency salvage operations. Without batting an eyelid, they released their "tug"to attend to the distress call as anyways it was standing idle in Mumbai Harbour. Little did they know that the Revenue authorities were waiting for this opportunity to deny them the benefit of exemption notfn. 21/2002-Cus and demand Customs duty of Rs.5.40 Crores on this ‘helping hand' extended by them to the MbPT.
The applicant had imported self propelled tug "Smit Jaguar"and claimed exemption under Notification No.21/2002-Cus dated 01.03.2002 on the ground that the same are to be used in connection with petroleum operations. The goods were cleared and exemption was granted. The applicant also executed a bond for Re-export after completion of the contract period.
On an investigation by the customs authorities, it was found that the vessel was used for other than the petroleum operations i.e. for "salvage operation"in the Mumbai Port for a period of 22 days from 10 th August 2010 to 2 nd September 2010.
The department was of the view that as the applicant has violated the condition of the Notification that the imported vessel has to be used only for petroleum operations and, therefore, they are not entitled to the benefit of Notification 21/2002 at Sl.No.216.
The Commissioner of Customs (Import) confirmed the duty demand of Rs.5,40,88,924/- along with an interest and equivalent amount of penalty under Section 114A of the Customs Act, 1962. Redemption fine of Rs.5,00,00,000/- in lieu of confiscation under Section 125 (1) of the Customs Act was also imposed.
The appellant is before the CESTAT and makes the following submissions -
"…that they have fulfilled the condition of the Notification and had obtained the Essentiality Certificate from the Director General of Hydrocarbons, Ministry of Petroleum and Natural Gas, Govt. of India, and the vessel was being used for petroleum operations only as per the agreement. Because of a collision between two vessels within Mumbai Port limits, there was heavy oil spill and the operations at Port area had come to a standstill. Therefore, on the request of the Harbour Master, Mumbai Port Trust, the applicant temporarily released ‘Smit Jaguar' which was standing idle at that time in Mumbai Harbour so as to enable the vessel to undertake the emergency salvage operations. The Mumbai Port Trust had also taken necessary approval from Director General of Shipping to undertake the salvage operations. As the vessel was imported by the applicant for a particular purpose and the same has been achieved therefore, benefit of Notification 21/2002 at Sl.No.216 cannot be denied as they have executed a bond although there is no post import condition in the Notification."
The Revenue representative submitted that "Salvage operations were not petroleum operations" and such an alternative purpose is not permitted under the notification. He prayed that the appellant be asked to pre-deposit the entire adjudged dues.
The Bench considered the submissions and observed that the appellant had obtained the necessary certificate duly authorized by the relevant authority certifying that the vessel has to be used for petroleum operations as per the agreement entered into between the appellant and the Government of India; that it is an admitted fact that the vessel was used for petroleum operations except for a period of 22 days for salvage operations; that there is no post import condition imposed in the notification. Noting that the facts of the case were similar to the case of Clough Engineering Ltd. [ 2006-TIOL-102-CESTAT-MUM ], the Bench observed that the benefit of the notification 21/2002-Cus cannot be denied.
Saying so, the Bench held that the appellant had made out a case for 100% waiver of pre-deposit of adjudged dues and hence waived pre-deposit of the adjudged dues and granted stay.
In passing : Probably, it's time to salvage something called sensitivity.
(See 2013-TIOL-1599-CESTAT-MUM )
