Cus - Notfn 21/2002 - Imported goods subjected to process of coating at Customs Warehouse and thereafter cleared to ONGC Project - surplus material cannot be treated as unauthorized diversion - Demand of duty not sustainable: CESTAT
By TIOL News Service
AHMEDABAD, NOV 16, 2015: THE Appellant was awarded a contract for offshore exploration/exploitation activity of ONGC operation in respect of MANHARD-II Project as a sub-contractor. The Appellant entered into a sub-contract agreement for installation, inspection and testing etc. and fabrication of bends of the said Project with M/s Jindal. M/s Jindal imported C.S. Seamless Line Pipes from Japan and filed Warehouse Bills of Entry. M/s Jindal carried out certain processes such as Coating etc. on these imported pipes in the warehouse and thereafter filed ex-bond Bills of Entry and Coastal shipping bills. The goods were removed from Mundra to Mumbai High and claimed exemption from payment of Customs duty under Sr.No.215 read with condition No.30 attached to the Table of Notification No.21/2002-Cus, dt01.03.2002 for use at ONGCMANHARD-II Oil Exploration Project.
After completion of the use of the said pipes at ONGC MANHARD-II Oil Exploration Project, the surplus 410 Coated Pipes were received back by the Appellant.
On 09.11.2011, the Central Excise officer, Belapur and Central Intelligence Unit, J.N. Customs House, Nhava Sheva searched the storage yard of M/s Logistics Enterprises Pvt.Ltd at Taloja, Navi Mumbai, hired by the Appellant and found that the said pipes belonging to the Appellant were removed from Mumbai Port to the said place without permission from the Customs and, therefore, the goods were seized under Panchnama.
ASCNdt.26.09.2013 was issued proposing to deny the benefit of Notification No.21/2002-Cus in respect of the said 410 Coated Pipes, demanding duty alongwith interest and to impose penalty and confiscation of the seized goods.
The Adjudicating authority upheld the charges alleged in the SCN. He observed that the surplus quantity of 410 imported pipes had not been used at ONGCMANHARD-II Project and the Appellant had attempted to divert the said imported goods for home consumption without payment of appropriate Customs duty.
Aggrieved, the appellant is before the CESTAT.
It is submitted that the Appellant had complied with all the conditions as stipulated in exemption notification insofar as the goods were imported for use in connection with the ONGC Project;that the goods were required for off-shore exploration/exploitation activity of ONGC Project; disputed 410 coated pipes were taken for use in off-shore oil exploration; that the exemption notification does not provide actual use/end use condition; that the Department cannot add a new condition to the notification either restricting the scope of exemption notification or whittling it down.
Support is taken of the following case laws viz. Clough Engineering Ltd - 2006-TIOL-102-CESTAT-MUM , (upheld by the Supreme Court); Ramson Garments Finishing Equip. P. Ltd - 2007-TIOL-378-CESTAT-BANG & Inter Continental (India) - 2008-TIOL-83-SC-CUS .
The AR reiterated the findings of the Adjudicating authority and submitted that since the Appellant had not used 410 Pipes in ONGC Project, therefore, they are liable to pay duty for home consumption.
The CESTAT inter alia observed -
++ the expression 'goods are required for the purpose of off-shore oil exploration/exploitation' in Clause (b) in Condition No.30 of the said notification, makes it clear that at the time of clearance of the goods from the Customs Warehouse, it would be certified that the goods will be cleared for the purpose of off-shore oil exploration. In the present case, there is no dispute that coated pipes were cleared for the purpose of oil exploration. After the use of pipes at Mumbai Project, there was surplus quantity of 410 pipes were returned. It is noticed that the imported pipes were processed by coating etc. at the warehouse by M/s Jindal as per the provisions of Section 65 of the Act, 1962. Therefore, in our considered view, the Appellant fulfilled the condition 30 as stipulated in the notification.
++ we find that the 410 Coated Carbon Steel Pipes were covered under Warehouse Bills of Entry, ex-Bond Bills of Entry as referred in Para 5.2 of the show cause notice. Admittedly, these coated pipes were removed from the bonded warehouse for use in the offshore under the Bills of Coastal goods. The imported goods were issued for laying the project. It is noted that the imported pipes had lost its identity after processing at warehouse. So, it may be construed that the imported goods were used for the purpose of project.
++ in the present case, it is evident from the records that the imported goods were undertaken the process of coating etc. at the Customs Warehouse and thereafter, it was cleared to ONGC Project at Mumbai Port. Hence, there is no material available of unauthorized diversion of the goods from the warehouse. The goods were cleared for use at ONGC Project and the surplus material cannot be treated as unauthorized diversion. Hence, the demand of duty and confiscation of the goods cannot be sustained.
Holding that the demand of duty alongwith interest, penalty & confiscation of the goods cannot be sustained, the order was set aside and the appeal was allowed.
(See 2015-TIOL-2421-CESTAT-AHM)
