2006(02)LCX0331

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI [COURT NO. I]

Justice R.K. Abichandani, President and Shri K.C. Mamgain, Member (T)

Jagson International Ltd.

Versus

Commissioner of Customs, Chennai

Final Order No. 79/2006-Cus. (PB), dated 27-2-2006 in Appeal No. C/452/2002

Cases Quoted -

Asiatic Oxygen Ltd. v. Assistant Collector -1991(04)LCX0040 Eq 1992 (057) ELT 0563 (Cal.) - Referred[Para 6.1]

Bajaj Tempo Ltd. v. Commissioner - 2003(10)LCX0004 Eq 2004 (165) ELT 0323 (Tribunal) - Referred[Para 6.1]

Birla Corporation Ltd. v. Commissioner - 2005(07)LCX0007 Eq 2005 (186) ELT 0266 (S.C.) - Referred[Para 6.1]

Birla Institute of Technology v. Collector -1991(04)LCX0060 Eq 1991 (056) ELT 0753 (Tribunal) - Referred[Para 6.1]

Collector v. Lotus Inks - 1996(09)LCX0068 Eq 1996 (087) ELT 0580 (S.C.) - Referred[Para 6.1]

Commissioner v. Dynaspede Integrated Systems Ltd. - 2001(08)LCX0383 Eq 2002 (147) ELT 0541 (Tribunal)Referred
[Para 6.1]

Commissioner v. Integra Micro Systems Pvt. Ltd. - 2004(12)LCX0100 Eq 2005 (180) ELT 0174 (Tribunal)Referred[Para 6.1]


Commissioner v. Marvel Glove Industries - 2004(08)LCX0277 Eq 2005 (180) ELT 0117 (Tribunal) Referred[Para 6.1]

Commissioner v. Tullow India Operations Ltd. - 2005(10)LCX0006 Eq 2005 (189) ELT 0401 (S.C.)Relied on
[Paras 6.1,7,7.1,9.1]


Commissioner v. Vicco Laboratories - 2004(12)LCX0069 Eq 2005 (179) ELT 0017 (S.C.) - Referred[Para 6.1]

Dabur (India) Ltd. v. Commissioner - 2005(04)LCX0004 Eq 2005 (182) ELT 0290 (S.C.) - Referred[Para 6.1]

Eagle Flask Industries Ltd. v. Commissioner - 2004(09)LCX0235 Eq 2004 (171) ELT 0296 (S.C.) - Referred[Para 7.1]

Formica India Division v. Collector - 1995(03)LCX0079 Eq 1995 (077) ELT 0511 (S.C.) - Referred[Paras 6.1, 7]

Gokak Patel Volkart Limited v. Collector - 1987(02)LCX0013 Eq 1987 (028) ELT 0053 (S.C.) - Referred[Para 6.1]

Hindustan Ferodo Ltd. v. Collector - 1996(12)LCX0029 Eq 1997 (089) ELT 0016 (S.C.) - Referred[Para 6.1]

Jindal Drilling and Inds. Ltd. v. Collector - 1998(12)LCX0049 Eq 2001 (138) ELT 1335 (Tribunal) -Referred[Para 7.1]

Mangalore Chemicals and Fertilizers Co. Ltd. v. Collector - 1997(03)LCX0105 Eq 1997 (093) ELT 0548 (Tribunal-Referred[Para 7.1]
Manisha Pharma Plasto Pvt. Ltd. v. Union of India - 1999(05)LCX0161 Eq 1999 (112) ELT 0022 (Del.) - Referred.. [Para 7.1]


Mohamad Naseer v. Commissioner - 2003(06)LCX0223 Eq 2003 (162) ELT 0560 (Tribunal) - Referred[Para 6.1]


Muller and Phipps (India) Limited v. Collector - 2004(05)LCX0090 Eq 2004 (167) ELT 0374 (S.C.) - Referred[Para 6.1]


Rajasthan Rajya Sahakari Spg.& Wvg. Mills Federation v. Commissioner-2001(09)LCX0150 Eq 2002 (140) ELT 0235 (Tribunal) - Referred[Para 6.1]


Rasoi Ltd. v. Union of India - 2004(06)LCX0257 Eq 2004 (176) ELT 0101 (Cal.) - Referred[Para 6.1]


R.I.S. Engg. Co. v. Collector -1984(03)LCX0037 Eq 1985 (019) ELT 0254 (Tribunal) - Referred[Para 6.1]


S.K.F. Bearings India Ltd. v. Collector - 1998(08)LCX0238 Eq 1999 (109) ELT 0774 (Tribunal) - Referred[Para 6.1]


Sun Export Corporation v. Collector - 1997(07)LCX0044 Eq 1997 (093) ELT 0641 (S.C.) - Referred[Para 6.1]

Unichem Laboratories Ltd. v. Collector - 2002(09)LCX0174 Eq 2002 (145) ELT 0502 (S.C.) - Referred[Paras 6.1, 7]


Union of India v. Garware Nylons Ltd. - 1996(09)LCX0005 Eq 1996 (087) ELT 0012 (S.C.) - Referred[Para 6.1]


Union of India v. Narasinhulu - 1969 (2) SCC 659 - Referred[Para 7.1]


Union of India v. Urvish Snuff Factory - 1994(09)LCX0067 Eq 1995 (077) ELT 0823 (Guj.) - Referred[Para 7.1]


Vaz Forwarding Pvt. Ltd. v. Collector - 1983(08)LCX0033 Eq 1983 (014) ELT 2019 (Tribunal) - Referred[Para 6.1]


Wipro Ltd. v. Collector - 1998(10)LCX0170 Eq 1999 (107) ELT 0398 (Tribunal) - Referred[Para 6.1]

Zuari Agro Chemicals Ltd. v. Collector -1995(07)LCX0053 Eq 1997 (089) ELT 0707 (Tribunal) - Referred[Para 6.1]

Advocated By -

S/Shri S.K. Bagaria, Senior Advocate with Sanjay Grover, Advocate and R.K. Kapoor, Consultant, for the Appellant.
Shri M. Chandrasekharan, Senior Advocate, for the Respondent.

[Order per : Justice R.K. Abichandani, President (for the Bench)].

This appeal is directed against the order of the Commissioner of Customs made on 22-3-2002 declaring that the second-hand jack up rig deepsea mat-drill and parts imported by the appellant vide bill of entry No. 14315, dated 28-4-1993 is classifiable under Heading 8905.20 of the Customs Tariff Act, 1975, confirming the duty demand of Rs. 13,30,22,640/- (Rupees thirteen crores thirty lakhs twenty - two thousand six hundred and forty only) under Section 28 of the said Act, confiscating the said goods under Section lll(j) of the said Act with an option to the importer to redeem the same on payment of a fine of Rs. 5,00,00,000/- (Rupees five crores only), and imposing a penalty of Rs 2,00,00,000/- (Rupees two crores only), under Section 112(a) of the said Act on the appellant-

2. The appellant had filed bill of entry No. 14315, dated 28-4-1993, seeking clearance of one second-hand jack up rig deepsea matdrill, nine leg sections for the said rig, one anchor for the rig and twenty containers for the rig (6 nos.).
The value declared by the appellant was US $ 3,400,000 (C&F) equivalent to Rs. 10,79,55,397.50 (CIF) as per the bill of entry. Though initially the appellant had claimed assessment of the rig under Tariff Heading 8430.49 and claimed benefit of Notification No. 279/92 that was changed by the appellant by their letter dated 29-7-1993 to claim assessment under Heading 8905.90 read with Notification No. of 133/87 attracting "nil" rate of duty. The appellant relied upon a letter of the Chief Engineer (Drilling) of the ONGC in which it was stated that the matt supported jack up rig deepsea matdrill was not a floating or submersible drilling or production platform. They also relied upon a letter from Adkins Oil Tools Inc.


2.1 As per the show cause notice, the said rig did not fall under Subheading 8J905.90 which was a residuary sub-heading ("Others"), but it fell under sub-Heading 8905.20 which entry covered, "floating or submersible drilling or production platform". It was alleged in the show cause notice that such jack up rigs come under the category of self elevating platform and fell under Heading 8905.20 as per the HSN Explanatory Notes. It was alleged that the rig had a hydraulic elevating unit which, with the help of rack and pinion system enabled the drilling platform to remain above the water level while it was in operation. It was also stated in the show cause notice that the matter was discussed with the Chief Engineer of the ONGC who had issued the certificate and he had after going through the HSN Explanatory Notes said that the said rig would be covered by sub-heading 8905.20. He had stated that at the time of giving the certificate to the appellant, he was not aware that self-elevating platforms were categorized as floating platforms in the Customs Tariff and had stated that he had given the certificate solely based on the terminology used in the International Oil trade. It was further alleged in the show cause notice that sub-heading 8905.20 did not provide that these platforms should be capable of floating at the time of drilling, for classification under the said heading. It was enough if they had such facility structurajly. It was further alleged in the show cause notice that the appellant had filed suit No. 481/93 in the Court of Commercial Sub-Judge, New Delhi which came to be withdrawn. However, they again filed suit No. 449/94 in which an order was made on 2-11-94 to maintain status quo in terms of the order earlier made by the Commercial Sub-Judge, Delhi. It was, in terms, alleged in the show cause notice that the goods were cleared without payment of duty and without valid licence and, therefore they were liable to be confiscated under Section 111(d) of the said Act.


3. It appears from the record that the appellant did not respond to the show cause notice and kept on threatening the adjudicating authority with contempt proceedings on the ground that they had approached the civil court in the matter and had obtained interim stay. As stated in Paragraph 4 of the appeal memo, since the imported goods were not released by the Customs authorities on the basis of the classification claimed by the appellant under sub-heading 8905.90 read with Notification No. 133/87 at 'nil' rate of duty, the appellant had approached the civil court for immediate release of goods. The Court of Commercial Sub-Judge, Delhi passed an order on 24-8-1993 in the said civil suit No. 481/93 restraining the Customs authorities from causing obstruction in the movement and operation of the said rig. A copy of that order dated 24-8-1993, which is at Annexure 4 to the appeal memo reads as under : -

"IN THE COURT OF SMT. KAMLESH SABHARWAL :
COMMERCIAL SUB-JUDGE
Suit No. 481/93.
Jagson International Ltd. A company incorporation under the Companies Act, 1956 Regd. At 5, Krishna Menon Lane, New Delhi.
Plaintiff
v.

Central Board of Excise & Customs, North Block, New Delhi.

Collector of Customs (Docks) Customs House, Madras.


... .Defendents

Suit for permanent injunction. To Collector of Customs (Docks) Customs House, Madras.
WHEREAS in the above-noted case the plaintiff has filed a suit with application under order 39 Rule 1 of CPC. You are hereby restrained from causing obstruction in the movement and operation of Deepsea Matdrill to the ONGC sites in India Waters till the disposal of the suit. But the plaintiff shall be bound by the observation and to pay custom duty, if any, under the Heading 8905.90.
Given under my hand and the seal of this court on this 24th day of August, 1993.

Sd/-
COMMERCIAL SUB-JUDGE: DELHI"

3.1. It appears that instead of approaching the adjudicating authority in connection with payment of Customs duty and for the necessary permission to remove on such payment of duty under Heading 8905.90, the appellant simply removed the rig by sending an intimation to the adjudicating authority that it was removing the rig in view of the order of the civil court. According to the appellant, the rig was removed on 9-10-1993. This was admittedly done without obtaining any permission of the proper officer and simply on the basis of the Port Trust Authorities allowing it to leave from the Port limits. As stated in Paragraph 6 of the appeal memo, the appellant thereafter withdrew the said suit No. 481/93.


3.2 Thereafter, another suit being Civil Suit No. 449/94 was instituted by the appellant on 29-10-1994 in the Civil Court of Civil Judge, Delhi, who made the following order on 1-11-1994 : -
"1-11-94 Pr : Counsel for the pltf.

Fresh suit received on assignment from the Id. Sr. Civil Judge. Be checked and registered.

It is stated on the same facts. Previous suit was filed in the court of Smt. Kamlesh Sabharwal, CJ, Delhi which granted a stay in favour of the pltf. A copy of the stay order is placed on record. It is further stated that during the pendency of the proceedings, the parties arrived at some compromise. On assurance by the defdt., the pltf. withdrew the case from the successor court i.e. court of Sh. ML. Mehta, CJ, Delhi on 28-10-94. It is submitted that soon thereafter, fresh threats has been made to the pltf. Which necessitated the pltf. for filing the present suit. Pltf. Counsel has taken me to the documents dt. 28-7-94 issued to the defdts. Under these circumstances, issue notice to the def dt. on P.F. & P.C. In the meanwhile, let status quo be maintained in terms of order passed previously from the court of Smt. Kamlesh Sabharwal, CJ, Delhi, the pltf. is directed to comply with the provisos or order 39 Rule 3, C.P.C. Put up on 6-12-94.
Sd/-
CJ/Delhi"

3.3. It will be noticed that when the order was made on 1-11-1994, the earlier suit was already withdrawn and, therefore no interim order in that suit could have survived beyond the withdrawal of that suit. The civil court, however, ordered status quo to be maintained in terms of the interim order previously made by the Civil Judge, Delhi, named in the order.


3.4. After the show cause notice dated 27-5-1995 was issued alleging that the goods were classifiable under sub-heading 8905.20 and not under 8905.90, the appellant challenged that show cause notice in the civil court by making an amendment application in the pending suit, as stated in Paragraph 9 of the appeal memo and asked the authorities to keep the proceedings in abeyance during the pendency of the suit.


3.5. It also appears that the appellant had approached the designated authority under the Kar Vivad Samadhan Scheme. However, the appellant did not comply with the order made in that scheme, as stated by the learned Counsel for both the sides, and that order was not followed by the appellant by making payment within thirty days and as stated by the learned Counsel for the appellant, it became infructuous. The appellant also approached the Settlement Commission, and that proceeding was rejected on the ground that it involved classification of goods and a civil suit was pending.


4. As noted in the impugned order of the Commissioner, the appellant was offered several opportunities to represent their case over a period of seven years and was granted opportunity for personal hearing on nine occasions, namely, 18-10-1995, 30-10-1995, 26-3-1997, 21-4-1997, 27-1-1998, 12-3-1998, 15-4-1999, 9-10-2001 and 21-12-2001, but they avoided availing such opportunities insisting that the matter was sub-judice, inspite of the fact that there was no stay order against the adjudication proceedings, and had threatened to take contempt proceedings.


5. The Commissioner taking into consideration the nature and function of the rig and the HSN Explanatory Notes came to a finding that it was covered under Heading 8905.20. He also took into account the fact that the issue was referred to the World Customs Organization by the department's letter dated 8-1-1996 and that, they had confirmed the correctness of the classification of such rigunder Heading 8905.20. It was also held that the Customs had at no stage assessed the bill of entry since the appellant had at every stage approached the court and stalled the process. Eventually, the goods had been removed on the basis of the interim order of the civil court made on 24-8-1993 in suit No. 481/93.It was held that the appellant had removed the goods with undue haste from the Customs area without the permission of the "proper Officer" and without assessment of the bill of entry by the "proper officer", thereby contravening the provisions of Section 47 of the said Act and rendering the goods liable to confiscation under Section 111 (j) of the Act. The order of the civil court in fact specifically stated that the appellant was bound by the observation and payment of Customs duty, if any, under Heading 8905.90. The learned Commissioner, however, denied the benefit of the Notification No. 196/89 to the appellant on the ground that the concessional rate of duty contemplated the reunder depended on
the satisfaction of the conditions thereof. Since the appellant had not produced the "essentiality certificate" at time of clearance and since when the certificate was issued in May, 1999, the Notification No. 196/89 was already rescinded (on 1-3-1997), the appellant was not eligible for such benefit on the ground that the conditions of the notification were not satisfied. It was, therefore, held that the appellant was liable to pay duty of Rs. 13,30,22,640/- under Section 28 of the said Act, and the goods were confiscated and penalty imposed as per the impugned order.

Arguments on behalf of the appellant:

6. The learned Counsel appearing for the appellant contended that the rig in question was falling under Tariff Heading 8905.90 and not under Heading 8905.20, because it was not "floating or submersible drilling or production platform". It was submitted that classification was a matter of chargeability and the burden would be squarely upon the department to show that the goods were covered by a particular tariff entry. The learned Counsel contended that one has to understand the expression describing the goods as per the commercial parlance and in accordance with the meaning assigned to it by the Governmental authorities. He submitted that as per the opinion of the Chief Engineering (Drilling), ONGC and the letter dated 2-11-1993 of the Ministry of Petroleum given on 28-7-1993, the rig in question was not a floating or submersible drilling or production platform. The opinion of the Government of India, Ministry of Petroleum as well as the endorsement made in the licence after that opinion was obtained, were all based on the view of the Chief Engineer which came to be subsequently altered. It was submitted that the appellant was not communicated the altered opinion of the Chief Engineer, nor was the appellant informed about the opinion of the World Customs Organization. Therefore, the appellant was seriously prejudiced in the matter of adequate hearing which was required to be given in consonance with the principles of natural justice. The learned Counsel submitted that the opinion of the Chief Engineer and the letter of the Ministry had great evidentiary value and, therefore they were binding on the Commissioner. It was also submitted that even if the views of the expert body i.e. WCO were to be relied upon, the Commissioner ought to have accepted the view expressed by the Chief Engineer (Drilling) ONGC, on the ground that where two views are possible in the matter of classification, the view which is in favour of the assessee ought to be adopted. As regards the HSN Explanatory Notes, it was submitted that the department cannot create a controversy and then go to HSN Explanatory Notes, which can be resorted to only when there was confusion. He submitted that since the said rig did not have "retractable legs", it was not covered by sub-heading 8905.20. It was then contended that the Commissioner had wrongly denied the benefit of the Notification No. 196/89 on the ground that the "essentiality certificate" was produced late and that it was issued after the notification was rescinded. It was submitted that though the certificate was issued after the notification was rescinded on 1-3-1997, it was issued in relation to the goods which were imported during the period when the notification operated. He submitted that the classification of the rig was done under sub-heading 8905.20 for the first time when the impugned order was made by the adjudicating authority and, therefore the appellant should have been permitted to avail of the benefit of that notification on the basis of the "essentiality certificate" which was produced before the making of the order of adjudication in view of the stand taken up in the show cause notice that the rig was covered under Heading 8905.20. It was submitted that the impugned proceedings before the Commissioner were for deciding the classification of the goods and consequently till that time there was no duty determination, nor any decision on classification. Therefore, the appellant ought not to have been denied the benefit of that notification, since earlier there could have been no occasion to file the "essentiality certificate", because, as per the assessee, the goods were classifiable under Heading 8905.90 in respect of which 'nil' rate of duty was payable under the Notification No. 133/87. It was also argued that since the show cause notice did not refer to the provision of Section 111 (j) and had referred to the provision of Section 111(d) of the said Act in connection with confiscation, the adjudicating authority could not have confiscated the goods under Section 111(j). It was also submitted that since the goods were removed on the strength of the order of the civil court, there was no scope for confiscating the goods even under Section 111(j) of the Act. It was also submitted that the penalty was not justified.

6.1 The learned Senior Advocate for the appellant placed reliance on the following decisions in support of his contentions : -
(a) The decision of the Supreme Court in Collector of Customs, Madras v. Lotus Inks reported in 1996(09)LCX0068 Eq 1996 (087) ELT 0580 (S.C.), was cited for the proposition that when two views are possible, the one in favour of the assessee would guide the classification.


(b) The decision of the Supreme Court in Sun Export Corporation v. Collector of Customs, Bombay reported in 1997(07)LCX0044 Eq 1997 (093) ELT 0641 (S.C.), was also cited for the same proposition that assuming that there are two views possible, that one favourable to the assessee in matters of taxation has to be preferred.

(c) The decision of the Supreme Court in Union of India v. Garware Nylons Ltd. reported in 1996(09)LCX0005 Eq 1996 (087) ELT 0012 (S.C.), was cited for the proposition that the burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the
manner claimed by them.


(d) The decision of the Supreme Court in Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay reported in 1996(12)LCX0029 Eq 1997 (089) ELT 0016 (S.C.),was cited for the proposition that the onus of establishing that goods are classifiable under a particular tariff entry rests upon the Revenue.


(e)The decision of the Supreme Court in Commissioner of Central Excise, Nagpur v. Vicco Laboratories reported in 2004(12)LCX0069 Eq 2005 (179) ELT 0017 (S.C), was referred to for the same proposition that the burden of proof that particular product is classifiable under a particular tariff heading is on the Revenue and must be discharged by proving that it is so understood by consumers of product or in common parlance. (Para 7).


(f) The decisions of the Calcutta High Court in Asiatic Oxygen Ltd. v. Assistant Collector of Customs reported in 1991(04)LCX0040 Eq 1992 (057) ELT 0563 (Cal.), and the decisions of the Tribunal in Commissioner of Customs (A), Airport, Mumbai v. Marvel Glove Industries - 2004(08)LCX0277 Eq 2005 (180) ELT 0117 (Tri. - Mumbai), Wipro Ltd. v. Commissioner of Customs, Chennai reported in 1998(10)LCX0170 Eq 1999 (107) ELT 0398 (Tribunal) and RIS Engineering Co., Bombay v. Collector of Central Excise, Bombay reported in 1984(03)LCX0037 Eq 1985 (019) ELT 0254 (Tribunal), were cited in support of the contention that the opinion of the Government officials and the Government certificates cannot be brushed aside lightly.


(g) The decision of the Supreme Court in Dabur (India) Ltd. v. Commissioner of Central Excise, Jamshedpur reported in 2005(04)LCX0004 Eq 2005 (182) ELT 0290 (S.C.) Commissioner of Central Excise, Nagpur v. Vicco Laboratories reported in 2004(12)LCX0069 Eq 2005 (179) ELT 0017 (S.C.) was cited for the proposition that in classifying the product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product.


(h) The decision of the Supreme Court in Formica India Division v. Collector of Central Excise reported in 1995(03)LCX0079 Eq 1995 (077) ELT 0511 (S.C), was cited to point out that it was held therein that once the Tribunal took the view that the appellants were liable to pay duty on the in termediary product and that they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. It was held that the appellants should be permitted to avail of the benefit of the notification by complying at this stage with Rule 56A to the satisfaction of the department.


(i) The decision of the Supreme Court in Commissioner of Customs (Imports) Mumbai v. Tullow India Operations Ltd., reported in 2005(10)LCX0006 Eq 2005 (189) ELT 0401 (S.C), was cited for the proposition that whereas the eligibility clause in relation to an exemption notification is given strict meaning, and the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning. It was held that the essentiality certificate must be treated to be a proof of the fact that the importers have fulfilled the conditions enabling them to obtain the benefit under the exemption notification.


(j) The decision of the Tribunal in Zuari Agro Chemicals Ltd. v. Collector of Customs, Bombay reported in 1995(07)LCX0053 Eq 1997 (089) ELT 0707 (Tribunal), was cited for the proposition that the substantive benefit, if otherwise due, should not be denied merely on minor procedural infraction.


(k) In support of the contention that condition regarding production of certificate before clearance of goods is a procedural requirement and exemption cannot be denied on the sole ground of delayed submission of such certificate, the learned Counsel relied on the following decisions :-

The decisions of the Tribunal in Vaz Forwarding Pvt. Ltd., Bombay v. Collector of Customs, Bombay reported in 1983(08)LCX0033 Eq 1983 (014) ELT 2019, SKF Bearings India Ltd. v. Collector of Customs, Bombay, reported in 1999 (109) ELT 774, Commissioner of CMS., Bangalore v. Integra Mico Systems (P) Ltd. reported in 2005 (180) ELT 174, Rajasthan Rajya Sa-hakari SPG. & WVG. Mills Federation v. CCE, Jaipur reported in 2002 (140) ELT 235, Birla Institute of Technology v. Collector of Customs reported in 1991 (056) ELT 753, Bajaj Auto Ltd. v. Commissioner of Central Excise, Indore reported in 2004 (165) ELT 323 and Commissioner of Central Excise, Cochin v. Dynaspede Integrated Systems Ltd. reported in 2002 (147) ELT 541.

(l) The decision of the Supreme Court in Birla Corporation Ltd. v. Commissioner of Central Excise reported in 2005(07)LCX0007 Eq 2005 (186) ELT 0266 (S.C.), was cited to point out that where same question arose for consideration and the facts were almost identical, the Supreme Court held that it cannot permit the Revenue to take a different stand in the case.

(m) The decision of the Calcutta High Court in Rasoi Ltd. v. Union of India reported in 2004(06)LCX0257 Eq 2004 (176) ELT 0101 (Cal.),. was cited for the proposition that vested right can be invoked in accordance with the conditions mentioned in the notification as it then stood.


(n) The decision of Tribunal in Mohamad Naseer v. Collector of Customs reported in 2003(06)LCX0223 Eq 2003 (162) ELT 0560 (Tribunal) was cited to point from Paragraph 11 of the judgment that where the provisions of Sections 111(m) and 111(o) of the Customs Act were not invoked in the show cause notice, it was held that the Commissioner had travelled beyond the show cause notice. The Tribunal held that the adjudicating authority has to pass its order within the parameters of the allegations levelled in the show cause notice.


(o) The decision of the Supreme Court in Unichem Laboratories Ltd. v. Collector of Central Excise, Bombay reported in 2002(09)LCX0174 Eq 2002 (145) ELT 0502 (S.C.), was cited to point out that the Supreme Court has observed in Para 13 of the judgment that, "it is no part of the duty of Revenue authorities to deprive an assessee of the benefit available to him in law with a view to augment the quantum of duty for the benefit of the Revenue and they must act reasonably and fairly."


(p) The decision of the Supreme Court in Gokak Patel Volkart Limited v. Collector of Central Excise, Belgaum reported in 1987(02)LCX0013 Eq 1987 (028) ELT 0053 (S.C.), rendered in the context of the provisions of Section 11A of the Central Excise Act, was cited to point out that where no notice was given with regard to the period in question, it was held that compliance with the statutory requirement of notice had not been made and therefore, demand was in contravention of the statutory provisions.


(q) The decision of the Supreme Court in Muller & Phipps (India) Ltd. v. CCE reported in 2004(05)LCX0090 Eq 2004 (167) ELT 0374 (S.C.)=2004 (4) SCC 787, was cited to point out that where the question involved was whether Jhonson Prickly Heat Powder and Phipps Processed Talc were patent or proprietary medicines classifiable under the erstwhile Tariff Item 14-E and Heading 30.03, as claimed by the appellants or whether they are cosmetics or toilet preparations falling under the erstwhile Tariff Item 14-F and Heading 33.04 as claimed by the department it was held that, where commodity taxation is taken up the State authorities, the court should be guided by the manner of classification of the goods which are brought to tax rather than the etymological meaning of the product in question or the express opinion thereon. The Court held that when throughout, the meaning given to the products in question not only by the department itself, but also by other departments like the Drug Controllers and the Central Sales Tax Authorities is that the product in question is a medicinal preparation, that view should be accepted.
Arguments on behalf of the Revenue
:
7. The learned Senior Advocate appearing for the Revenue submitted that the certificate of the Chief Engineer (Drilling), ONGC, as regards the nature of the rig was not supported by any reasoning. He submitted that the letter of the Ministry of Petroleum as well as the endorsement on the licence were based on this certificate. Moreover, the Chief Engineer had changed his opinion after going through the HSN Explanatory Notes. He also submitted that there was clear reference to the discussion with the Chief Engineer and his altered opinion, in the show cause notice. The learned Counsel pointed out that by communication dated 4-9-1995, the appellant was provided with an extract of the oral discussion held with the Chief Engineer, ONGC on 1-2-1994 in the Custom House, at the request of the appellant, and therefore, there was no denial of opportunity of being heard to the appellant on the altered view of the Chief Engineer. The learned Counsel further submitted that the rig in question, having regard to its description and nature of functions, clearly fell within Tariff Heading No. 8905.20. He submitted that it is the character of the item which required to tally with the item described in the heading. The drill in question had the character of floating and also of drilling and it had a platform. It was self-elevating type of rig. He submitted that the HSN Explanatory Notes were uniformly applicable for understanding the nature of the items described in the tariff heading. He submitted that as per the International Convention on the Harmonized Commodity Description and Coding System to which India is a party, the Customs Tariff and statistical nomenclature was required to be in conformity with the Harmonized System. It was submitted that the general rules for the interpretation of Harmonized System and all the Section, Chapter and sub-heading notes were required to be applied. It was also submitted that the appellant was not entitled to raise any objection against the applicability of the Harmonized System or any clarification issued in that connection by the world body and cannot seek any right to cross-examine the members of the world body since the world body was concerned with the contracting parties to the convention i.e. the States and not with the citizens or subjects of the States. As regards the applicability of the Notification No. 196/87, the learned Counsel, in view of the decisions of the Supreme Court in Unichem Laboratories Ltd. v. Collector of Central Excise, Bombay reported in 2002(09)LCX0174 Eq 2002 (145) ELT 0502 (S.C.). Formica India Division v. Collector of Central Excise reported in 1995(03)LCX0079 Eq 1995 (077) ELT 0511 (S.C.) and Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd. reported in 2005(10)LCX0006 Eq 2005 (189) ELT 0401 (S.C), very fairly submitted that even if the certificate was produced later, benefit could not have been denied. The learned Counsel contended that the appellant had not approached the "proper officer" after the interim order was obtained by it from the civil court and, therefore the goods were removed without permission of the proper officer and without allowing provisional assessment to be done. He submitted that the allegation made in the show cause notice regarding the goods having been removed without payment of duly was sufficient to bring their case within the purview of Section 111(j) for the purpose of confiscation. It was submitted that when confiscation was clearly mentioned in the show cause notice in the context of removal without payment of duty as well as want of licence, it cannot be said that mere non-mention of the particular Clause (j) of Section 111 was fatal and that the goods could not have been confiscated. The learned Senior Advocate also submitted that the appellant had adopted delaying tactics by resorting to civil proceedings though the civil court had no jurisdiction to entertain the matters pertaining to classification of goods and levy and collection of duties. He submitted that it was a settled legal position that the civil court had no jurisdiction to entertain such matters and the appellant could not have removed the goods even on the strength of the order of the civil court which clearly contemplated that the appellant shall be bound by the observation of the Customs duty provisions and to pay Customs duty, if any, under Heading 8905.90. It was submitted that the question of applicability of the Notification No. 133/87 was required to be decided by the proper officer before the appellant could have cleared the goods. Therefore, the goods were liable to be confiscated since they were removed without following the essential part of the interim stay and without allowing the proper officer to provisionally assess and permit the goods to be removed in accordance with the interim order.


7.1 The learned Counsel for the Revenue relied upon the following decisions in support of his contentions : -

(a) The decision of the Tribunal in Mangalore Chemicals & Fertilizers Co. Ltd. v. Collector of Customs, Bombay, reported in 1997(03)LCX0105 Eq 1997 (093) ELT 0548 (Tri.), was cited for the proposition that opinion given by World Customs Organization in regard to classification of goods have great persuasive value considering the purpose for which it was set up. It was held that the purpose of setting up of the council was not only to assemble executive machinery required for implementation of the specialised convention in a single international organisation, but to entrust that organisation with general responsibility to secure the highest degree of harmony and uniformity in customs systems. It was also held that the Harmonized Convention System consists of nomenclature comprising the headings and sub-headings and their related numerical codes, the section, chapter and sub-heading notes and the general rules for the interpretation of the Harmonized System. The Explanatory Notes and compendium of classification opinions are complementary publications. The Explanatory Notes and classification have persuasive value.


(b) The decision of the Delhi High Court in Manisha Pharma Plasto Pvt. Ltd. v. Union of India reported in 1999(05)LCX0161 Eq 1999 (112) ELT 0022 (Del.), was cited for the proposition that the opinion and recommendation of the Harmonized System Committee which was the high powered body to ascertain international practice of classification of a particular product referred to it, cannot just be brushed aside and that the opinion of the Harmonized System Committee has lot of weight and should ordinarily be taken as binding.


(c) The decision of this Tribunal in Jindal Drilling and Industries Ltd. v. Collector of Customs, Bombay, reported in 1998(12)LCX0049 Eq 2001 (138) ELT 1335 (Tri.), was cited to point out that in a case where no bill of entry was filed before removal of goods and goods were removed without permission of the proper officer and the appellant had not applied for essentiality certificate before removal of goods, it was held that their getting the bill of entry (which was filed later) assessed as duty free could not have the effect of wiping away the illegality already committed by them, and that in the face of the factual situation therein and on the plain term of the Notification No. 134/89-Cus., they would not have been entitled to the refund of duty even if they had been detected and made to pay duty on the removal of the goods from customs area.


(d) The decision of the Supreme Court in Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd. reported in 2005(10)LCX0006 Eq 2005 (189) ELT 0401 (S.C.) (supra) was cited to point out from Paragraphs 30 to 36 of the judgment that the Supreme Court held that the essentiality certificate must be treated to be a proof of the fact that the importers have fulfilled the conditions enabling them to obtain the benefit under the exemption notification, and that whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. In Paragraph 30 of the judgment, it was held that the conditions referred to in subsection (1) of Section 25 as regards time when such certificate is to be produced would, thus, mean those which were within the control and power of the importer. If it is not within the power and control of the importer and depends upon the acts of other public functionaries, non-compliance of such condition, subject to just exception cannot be held to be a condition precedent which would disable it from obtaining the benefit therefrom for all times to come.



(e) The decision of the Supreme Court in Eagle Flask Industries Ltd. v. Commissioner of Central Excise, Pune, reported in 2004(09)LCX0235 Eq 2004 (171) ELT 0296 (S.C), was cited for the proposition that for availing the benefits under an exemption notification, the conditions have to be strictly complied with.


(f) The decision of the Gujarat High Court in Union of India v. Urvish Snuff Factory reported in 1994(09)LCX0067 Eq 1995 (077) ELT 0823 (Guj.), was cited for the proposition that the Central Excises and Salt Act was complete Code and if relief against excessive or erroneous taxing was to be obtained by an assessee under the provisions of the Act, the jurisdiction of the Civil Court to entertain a suit would be excluded. The High Court referred to the decision of the Supreme Court in Union of India v. Narasinhulu reported in 1969 (2) SCC 659, in which the Supreme Court had observed that liability to pay duty of Customs is not a common law liability and it arises by virtue of the Customs Act in respect of any grievance arising in consequence of enforcement of that liability, machinery has been provided by that Act and having regard to the complicated nature of the questions which arise in the determination of liability to pay duty of Customs the Legislature has invested the power of determining the liability and the manner of enforcement thereof upon a specially authorised hierarchy of tribunals and, therefore, the jurisdiction of the civil court was barred by the clear implication of the statute.
Reasons:


8. The appellant had filed bill of entry No. 14315, dated 28-4-1993 seeking clearance of the "second-hand jack up rig deepsea matdrill". Since the deep-sea matdrill was more than seven years old, import licence was required which was produced by the importer under its letter dated 28-12-1993 after obtaining it on 20-12-1993. Though initially the appellant claimed assessment of the rig under Tariff Entry 8430.49, it subsequently claimed by its letter dated 29-7-1993 that the earlier indication was wrong and the classification was now claimed under Heading 8905.90 claiming the benefit of the Customs Notification No. 133/87 attracting 'nil' rate of duty.


8.1 The Tariff Heading 89.05 reads as under : -
"Light vessels, fire floats, dredgers, floating cranes and other vessels, the navigability of which is subsidiary to their main function; floating docks, floating or submersible drilling or production platforms.
8905.01 - Dredgers
8905.20 - Floating or submersible drilling or production platforms
8905.90 - Others"


7.2 The appellant has claimed that the rig fell under Heading 8905.90, on the strength of the opinion of the Chief Engineer (Drilling) ONGC in which it was stated as under : -


"STATEMENT OF FACT
The Mat Supported Jackup Rig Deepsea Matdrill is not floating or submersible drilling or Production Platform. This is being issued on the request of M/s. Jagson International Limited vide their letter dated 28-7-1993.
(A. VAZEERULLAH) CHIEF ENINEER (DRILLING)"
It will be seen that the Chief Engineer simply asserted that the mat-supported jack up rig deepsea matdrill was not a floating or submersible drilling or production platform, without indicating any reason for such assertion. It is this opinion which constituted the basis of the endorsement which was subsequently obtained below the licence and therefore, that endorsement cannot add any weight to what was asserted in the opinion. In the letter dated 2-11-1995 of the Government of India, Ministry of Petroleum and Natural Gas it was observed that as per the description given in subsequent paragraphs of HSN of 89.05 CTA, 1975 the deepsea matdrill can also fall under Para C(1) with minor variations.


7.3 It is needless to say that such opinions regarding the nature of the goods though having evidentiary value, cannot be conclusively binding on the adjudicating authority, if it comes to the conclusion that they do not correctly represent the nature of the goods in question. The HSN/Explanatory Notes have a special significance in the context of understanding as to what articles are intended to be covered under a particular heading. We are concerned with the Tariff Heading No. 8905.20 which reads as under : -


"Floating or submersible drilling or production platforms"
The general Heading 89.05 includes - light vessels, fire floats, dredgers, floating cranes, and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms. It is this last category of floating or submersible drilling or production platforms which is specifically included in Heading 8905.20.
7.4 India is a contracting party to the International Convention on the Harmonized Commodity Description and Coding System which was devised, inter alia, to facilitate international trade and to facilitate the standardization of trade documentation and the transmission of data. The Harmonised System was intended to be used for the purposes of freight tariffs and transport statistics and intended to be incorporated into commercial commodity description and coding systems to the greatest extent possible, as contemplated by the preamble to the Convention. It was undertaken by its "Contracting Parties" that from the date on which the convention entered into force in respect of it, its customs tariff and statistical nomenclatures shall be in conformity with the Harmonised System. Each contracting party undertook in respect of its Customs tariff and statistical nomenclatures that: -


"(i) it shall use all the headings and subheadings of the Harmonised System without addition or modification, together with their related numerical codes;


(ii) it shall apply the General Rules for the interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes, and shall not modify the scope of the Sections, Chapters, headings or subheadings of the Harmonised System; and


(iii) it shall follow the numerical sequence of the Harmonised System."
As indicated in Article 7 of the Convention one of the functions of the Harmonised System Committee was to prepare Explanatory Notes, classification opinions or other advice as guides to the interpretation of the Harmonized System.


7.5 Thus, the Harmonized System Explanatory Notes are the authentic material which can be used for understanding the commodity description. When reliance is placed on HSN Explanatory Notes, which are duly published and known in the field concerned, there can arise no question of any opportunity to cross-examine the members of the Harmonized System Committee which prepares the Explanatory Notes, classification opinions or other advice. Therefore, the contention raised on behalf of the appellant that the Commissioner could not have referred to the opinion of the World Customs Organization Committee has absolutely no basis. The Commissioner, in fact, relied upon the HSN Explanatory Notes while also referring to the opinion of the Committee, which confirmed the classification of the goods in question under Heading 8905.20.


7.6 The HSN Explanatory Notes in the context of Heading 8905.20, even in absence of any confirmation from the Council, clearly indicated that the goods in question fell under Heading 8905.20. The HSN Explanatory Notes in the context of Heading 8905.20 read as under: -


"(C) Floating or Submersible drilling or production platforms-Such platforms are generally designed for the discovery or exploitation of offshore deposits of oil or natural gas. Apart from the equipment required for drilling or production, such as derrick, cranes, pumps, cementing units, silos, etc., these platforms are living quarter for the personnel.
These platforms, which are towed or in some cases self-propelled to the exploration of production site and are some time capable of being floated from one site to another, may be divided into the following main group:

(1) Self-elevating platform which apart from the working platform itself, are fitted with devices (hulls, caissons, etc.) which enable them to flat, with retractable legs which are lowered on the work site so that they are supported on the sea bed and raise the working platform above the water level.


(2) Submersible platform, the sub structures of which or submerged over the work site with their ballast stand resting on the sea bed in order to provide a high degree of stability to the working platforms which is kept above the water level. The ballast tank may have skirts or piles which penetrate more or less deeply into the sea bed.


(3) Semi submersible platform which are similar to submersible platform, but differs from them in that the submerged part does not rest on the sea bed. When working, these floating platforms are kept in a fixed position by anchor lines or dynamic positioning.

Fixed platform used for the discovery or exploration of off shore deposit of oil or natural gas, which are neither floating nor submersible, are excluded from the heading (Heading 84.30). The heading also excludes ferry boats (Heading 89.01), factory ships for processing fishery products (Heading 89.02), cable ships and weather ships (89.06)."


8.7 The description of the rig imported by the appellant as given by the appellant shows that the deepsea matdrill is a jack up drilling platform. It is stated in the "Introduction" part of the literature placed on record by the appellant that the company is the proud owner of a rig called Deepsea Matdrill which can operate under the following conditions: -
"Water depth-250
Drilling Depth-20,000
Huli- 191'x 132' x 16'
V Load-1560 Short Tons"
On the page entitled "Technical Data" the legs of the rigs are described as: -
"Three tabulars, 10 ft. diam. by 235 ft. can be extended to 255 ft. or 325 ft. long."

Admittedly, the rig has self-elevating platform. The legs of the rig and the mat, rest on the sea bed when drilling is performed. The legs are drawn back vertically and then the mat is also drawn back and the rig becomes capable of floating and can be towed away. The rig has clearly a working platform. It is capable of drilling. It is capable of floating. It has legs along with the mat for resting on the sea bed when the drilling function is to be performed. The legs can be drawn back (i.e. retracted) in vertical direction and they go vertically above the platform level when the rig is to be brought into a floating state. Therefore, all the characteristics of a floating and drilling platform as contemplated under Tariff Heading No. 8950.20 are present in this rig as indicated in the HSN Explanatory Notes, even without reference to the subsequent advice given by the Committee of the World Customs Organization confirming that the rig fell within the description of the said Heading No. 8905.20.


7.8. The Harmonized System Committee in its document No. 41.295 E issued on 28th May, 1997 had examined the classification of deepsea matdrill jack up drilling rig and had unanimously decided that the drilling rig was classifiable under sub-heading 8905.20. The Committee instructed the Secretariat to prepare for its 20th Session, a draft classification opinion for consideration by the professional working party. After the draft opinion was prepared, the Committee was invited to approve the appended amendment to the compendium of classification opinions. The amendment to the compendium of classification opinions, as reflected in the annexure to the said document 41.925 E reads as under : -


"8905.20 1. Jack-up drilling platform designed to operate at sea depth of up to 250 feet. It sets on a mat (ballast tank) on the seabed via three tabular columns, and a hydraulic elevating unit keeps the platform above sea level while in operation. When the unit is to be moved to another location, the water in the mat is partially drained, enabling the mat to rise up. The drilling platform, along with the mat, is then towed to the next working site."



7.9. Thus, there is absolutely no scope for any doubt over the said rig being of the nature that would fall under Customs Tariff Heading 8905.20. The opinion of the Chief Engineer (Drilling) was rendered without giving any reason and in ignorance of the HSN Explanatory Notes. That opinion was retracted by the Chief Engineer when he was pointed out the HSN Explanatory Notes. The contention that the altered opinion was not communicated, is baseless, in view of its clear reference in the communication dated 4-9-1995 which was addressed to the consultant of the appellant and a copy of which has been placed on record. The fact of the altered opinion was also mentioned in detail in the show cause notice. The appellant was informed on 4-9-1995 that there was discussion with the Chief Engineer on 1-2-1994 and that he had stated that originally when he gave the certificate to the effect that jack up rig deepsea matdrill is not a floating or submersible drilling or production platform, he was not certifying in terms of the Customs Tariff Heading. The extract of the oral discussion recorded by the office was reproduced in that letter as under : -


"The issue has been discussed with the Chief Engineer, ONGC on 1-2-94. He said, originally when he gave the certificate to the effect that 'Jack-up rig Deepsea Matdrill' is not a floating or submersible drilling or production platform, he was not certifying in terms of the customs tariff heading. Normally, in international oil trade, Drill-ships/barges are called floaters, since they float on sea while drilling, Jack-up rigs are not grouped as floaters since they do not float while drilling but with the help of retractable legs/mat, they are lowered on the work-site and supported on the sea bed. Therefore, when he was asked to certify that Jack-up rigs are not floating platforms, he gave the above certificate since 'jack-up' fall under separate category in international trade parlance. However, when the Chief Engineer was given the HSN Explanatory Notes, he went through them. On finding that self-elevating platforms are grouped under the sub-heading of 'floating or submersible drilling platforms', he said that the present rig also would be covered by this sub-heading. At the time of giving the certificate to M/s. Jagson International Ltd. he was not aware that self-elevating platforms are categorised as floating platforms in customs tariff and hence, he said he gave such a certificate solely based on the terminology used in international oil trade."


7.10. We are, therefore, of the view that the Commissioner was right in holding that the rig in question fell under Heading 8905.20 and was fully justified in not relying upon the certificate of the Chief Engineer, the letter of the Ministry of Petroleum as well as the endorsement on the licence.


8. If the rig in question was not covered by Heading 8905.90 of the Customs Tariff, it would not be entitled to the benefit of the Notification No. 133/87 attracting 'nil' rate of duty. During the proceedings before the adjudicating authority, the appellant had put up the alternative claim of the benefit of the Notification No. 196/89, if the rig was held to be falling under Heading 8905.20. The Commissioner while considering the claim of the appellant in the context of the Notification No. 196/89, held that the appellant was not entitled to its benefit because the "essentiality certificate" ought to have been produced at the time of clearance of the goods and that the certificate had been issued in May, 1999 when the said Notification No. 196/89 already stood rescinded.


9.1. It appears from the record that the appellant had produced the "essentiality certificate" dated 28-5-1999, copy of which is at Annexure 11 to the memo of appeal. That certificate was issued by the Directorate General of Hydrocarbons showing that the signatory, Additional Director (EC) was the duly authorized officer. The essentiality certificate was issued for import of goods in terms of Notification No. 196/89, dated 30-6-1989, as amended by various notifications issued thereafter. It was certified that the imported goods described in the attached statement (i.e. Rig "Deepsea Matdrill") are considered essential for the purpose of the offshore oil exploration or exploitation. The essentiality certificate was issued with reference to the said goods cleared by Customs under bill of entry No. 14315, dated 28-4-1993. The certificate was valid for a period of three months from the date of issue. The Commissioner has recorded in the order that the additional claim of the importer was made at a subsequent date to the effect that they were entitled to the benefit of the Notification No. 196/89, dated 30-6-1989 and in this connection they had also produced the "essentiality certificate" issued by the Additional Director (EC) for the purpose of claiming the benefit. It is also stated that the certificate was produced in May, 1999. As per the said Notification No. 196/89 issued by the Central Government under Section 25(1) of the Customs Act, 1962, "off-shore drilling Rigs including Jack/up Drilling, Drilling Rigs, Drilling Drillships spares" were described at S.No. 1 amongst the goods which were entitled to partial exemption when imported into India in connection with the purposes of off-shore oil exploration or off-shore oil exploitation. These were exempted from so much of the portion of duty of Customs leviable thereon which is specified in the first schedule to the Customs Tariff Act, 1975, as was in excess of the amount calculated at the rate of 30% ad valorem and from the whole of the additional duty, if any, leviable thereon under Section 3 of the Customs Tariff Act subject to the condition that the importer produces, at the time of clearance of the goods, a certificate, issued by a duly authorized officer of the Directorate General of Hydrocarbons in the Ministry of Petroleum and Natural Gas, Government of India, certifying that the said goods are essential for the purposes of the said off-shore oil exploration or off-shore oil exploitation. In the present case the purpose for which the said rig was imported has not been dis puted before us. It is also not disputed that the essentiality certificate was issued by a duly authorized officer. Though the essentiality certificate was issued in May, 1999, it was in connection with the said rig imported at the relevant time under the bill of entry dated 28-4-1993, which is referred to therein. Therefore, even though the notification No. 196/89 was rescinded on 1-3-1997, while the "essentiality certificate" was issued on 28-5-99, since it was in connection with the goods covered by bill of entry No. 14315, dated 28-4-1993 the rescission of the notification subsequent to the entitlement tor the benefit in connection with the import made during its currency, was of no consequence. The "essentiality certificate" has to be treated as a proof of the fact that the importer had fulfilled the conditions enabling them to obtain the benefit under the exemption notification, as held by the Hon'ble the Supreme Court in Paragraph 35 of the judgment in TuHow India Operations Ltd. (supra). The certificate only reflected the eligibility for the benefit of the exemption notification by showing the purpose for which it was imported. The eligibility for the exemption under the said Notification No. 196/89 could not be disputed because the rig fell within the description of goods at S.No. 1 of the said notification and it was imported into India in connection with the purpose of off-shore oil exploration or off-shore oil exploitation, as contemplated by the notification while the notification was operative. However, the certificate was not produced at the time of clearance of the goods and the rig was not cleared by the proper officer, but was removed purportedly on the strength of interim injunction granted by the civil court. ' The rig was removed on 9-10-1993.


9.2. It is evident from the record that the appellant had relied on the essentiality certificate in the context of the Notification No. 196/89 for claiming the benefit of reduced rate of duty. As per the settled legal position, the production of the essentiality certificate, which only reflected the purpose for which the rig was imported and which purpose has not been disputed at any point of time, entitled the appellant to claim the benefit of the notification, when it was held by the Commissioner that the rig in question was covered by Heading 8905.20 of the Customs Tariff. The reasons given by the Commissioner for holding that the goods were not eligible for the benefit of the Notification No. 196/89 cannot, therefore, be sustained. The appellant is, therefore, liable to pay duty in respect of the said rig at the reduced rate as contemplated by the Notification No. 196/89, under Section 28 of the said Act.


10. It has been contended that the confiscation of the rig in question was not justified because the provision of Section 111(j) of the said Act was not specifically mentioned in the show cause notice which only referred to the provision of Section 111 (d) of the said Act in the context of confiscation of the rig.


11. The rig in question has been confiscated under Section 111(j) of the said Act with an option to the appellant to redeem the same on payment of a fine of Rupees Five Crores. The learned Commissioner has held that the Customs at no stage had assessed the bill of entry only due to the fact that the importer had at every stage approached the civil courts and stalled the process, as was clearly indicated in the facts of the case. Eventually, the goods had been removed apparently on the basis of an interim order dated 24-8-1993 passed by the Commercial Judge, Delhi in suit No. 481/93. The rig was removed on 9-10-1993 without approaching the proper officer as was contemplated by the stipulation in the order dated 24-8-1993 to the effect that "...the plaintiff shall be bound by the observation and to pay Customs duty, if any, under the Heading 8905.90".


10.2. Under Section 47(1) of the said Act, it has been provided that where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, as such thereon and any charges payable under the Act in respect of the same, the "proper officer" may make an order permitting clearance of the goods for home consumption. Neither the Port nor the Court was such "proper officer". Therefore, even under the order of the civil court made on 28-4-1993, the appellant was bound to pay Customs duty, if any, under the Heading 8905.90 by approaching the "proper officer" for a provisional assessment/assessment for payment of the import duty, if any, as contemplated by Section 47 before clearing the goods and the contravention of the provisions of the said Act, which is clearly established, made the goods liable for confiscation under Section 111(j) of the said Act. Section 111 (j) is applicable where any dutiable goods are removed from a customs area without the permission of the proper officer. The order of the civil court passed on 28-4-1993 did not affect the powers of the proper officer under Section 47 of the said Act nor the obligation of the appellant to pay Customs duty, if any, under the Heading 8905.90, as was contemplated in the order of the civil court, by approaching the proper officer under the said provision. In other words, even under the interim order of the civil court, the rig could not have been removed by the appellant who was bound to observe the provisions of the Customs Act and pay Customs duty, if any, under the Heading 8905.90, as mentioned in that order itself. The appellant had claimed the benefit of the Notification No. 133/87 in the context of the tariff entry 8905.90 and whether such benefit was admissible was yet to be decided by the proper officer and which could have been done only if the appellant had approached the proper officer under Section 47 of the Act, as contemplated by the order of the civil court.


10.3. There was a specific allegation made in the show cause notice that the goods had been cleared without payment of duty and were liable for confiscation. It appears that the provisions of Section 111(d) were referred to in the show cause notice in the context of requirement of a valid licence, because, initially the appellant had not produced the licence as was required in respect of second hand capital goods which were more than seven years old under Para 28 of the EXIM Policy 1992-97. The show cause notice, however, clearly referred to the suit No. 481/93 and to the fact that the goods were removed without payment of duty. The removal of goods without payment of duty entailing confiscation was a sufficient averment in the show cause notice so as to bring in the provisions of Section 111(j) of the Act. Mere non-mention of the statutory provision, namely, 111(j) could not be fatal in the present case where the allegations were specifically made to the effect that the rig was cleared by the appellant without payment of duty which was required to be done in the context of the provisions of Section 47 of the said Act by paying duty, if any, as assessed by the proper officer. Mere non-mention of the provision of law would not invalidate the action where the requisite ingredients of the provision are set out in the show cause notice. In the present case, the appellant who obtained the order of the civil court had removed the goods by simply sending a letter dated 27-8-1993 to the Collector of Customs enclosing copy of the order of civil court and stating that in terms of the directions of the court, they were moving the rig for operation purposes to the work sight. It was stated that the communication was sent for the information of the Collector. No offer to pay duty, if any, was made in the said letter as was required pursuant to the order of the civil court, and the appellant unilaterally removed the rig without complying with the provisions of Section 47 of the said Act. Having regard to the facts and circumstances of the case, it is clear that the appellant had sufficient opportunity to comply with the provisions of Section 47 and was indeed expected to comply with it even under the order of the civil court on the strength of which the rig was removed. The fact of the appellant having removed the rig without payment of duty and contravention of Section 47 were clearly alleged in the show cause notice, as a result of which it cannot be said that any prejudice was caused to the appellant in the matter of confiscation of the rig by mere non-mention of the provision of Section 111(j) in the show cause notice. The contentions raised on behalf of the appellant against the validity of the confiscation order cannot, therefore, be accepted.


11. It was then contended by the learned counsel for the appellant that the redemption fine of Rupees Five crores imposed on the appellant was excessive, and that normally the redemption fine should not exceed ten percent of the market value of the goods. The value declared by the appellant in respect of the said goods, in the bill of entry No. 14315, dated 28-4-1993 was US$ 340000 (C&F) equivalent to Rs. 10,79,55,397.50 (CIF). By the impugned order, the said goods, namely, second hand jack-up rig deepsea matdrill were confiscated under Section lll(j) of the said Act, but the appellant was given the option to redeem the same on payment of a fine of Rupees Five crores in lieu of confiscation.


11.1 Section 125 of the said Act provides for option to pay fine in lieu of confiscation. Under the proviso to Section 125(1), it is, inter alia, provided that such fine shall not exceed the market price of the goods confiscated, less, in the case of imported goods, the duty chargeable thereon. Under subsection (2) of Section 125, where any fine in lieu of confiscation of goods is imposed under subsection (1), the owner of such goods or the person referred to in sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods. By Section 126 of the Act, it has been provided that if any goods are con fiscated under this Act, such goods shall thereupon vest in the Central Government, and that the officer adjudging confiscation shall take and hold possession of the confiscated goods. Since by virtue of confiscation, the goods vest in the Central Government, there is a clear justification for imposing fine in lieu of confiscation which is to the extent of market price of the goods confiscated. In other words, the rationale behind this provision lies in giving the equivalent in terms of the value of the goods to the Central Government which would become the owner of the goods by virtue of confiscation. This rationale is required to be kept in mind while considering the ambit of the discretion that may be exercised by the adjudicating officer while fixing the amount of fine in lieu of confiscation to enable the owner of the goods to exercise the option. Ordinarily, the assessing officer has to ascertain the market value of the offending goods, but no enquiry would be necessary where the fine to be imposed is equivalent to the CIF value of the goods, as the market value is normally more than the CIF value of the goods plus duty.
In the present case, the Commissioner of Customs has imposed a fine of only Rupees Five crores in lieu of confiscation which is less than even one-half of the CIF value declared by the appellant in the bill of entry. Therefore, there is absolutely no warrant for any interference with the quantum of fine which is fixed in lieu of confiscation to enable the appellant to exercise the redemption option. We also find absolutely no valid reason for interfering with the amount of penalty of Rupees Two crores imposed on the appellant under Section 112(a) of the said Act.
Final Order:

12. For the foregoing reasons, we modify the impugned order only to the extent of reducing the duty demand of Rs. 13,30,22,640/- (Rupees Thirteen Crores Thirty Lakhs Twenty Two Thousand Six Hundred and Forty only) under Section 28 of the Customs Act, 1962 to an amount that may be worked out by the Commissioner by granting the benefit of the Customs Notification No. 196/86 of concessional rate of duty to the appellant in respect of the said goods, which have been correctly classified under Heading No. 8905.20 of the Customs Tariff Act, 1975. Subject to this modification the appeal is dismissed.


13. We direct the Registry to send a certified copy of this judgment and order to the Hon'ble the High Court, Delhi for being placed on the administrative side of the Hon'ble High Court, in view of the fact that prima facie the Courtsinferior to the Hon'ble High Court have entertained the civil proceedings and granted interim reliefs, as pointed out in this judgment, which had a bearing on the matters relating to the classification of the goods and payment of Customs duty in respect thereof under the provisions of the Customs Act, 1962, for their lordships information.
(Pronounced on 27-2-2006)

Equivalent 2006 (199) ELT 0553 (Tri. - Del.)