IMPORTANT POINT
The proviso to Section 28 of the Customs Act can be invoked where the payment of duty has escaped by reason of collusion or any wilful mis-statement or suppression of facts. There has to be an intention on the part of the assessee to evade the duty.

Headnote:Customs Act—Section 28, Proviso —Power to invoke extended period of limitation—Proviso to Section 28 can be invoked where payment of duty has escaped by reason of collusion or any wilful mis-statement or suppression of facts—There has to be an intention on the part of assessee to evade the duty—When appellants were not put to notice which of the various omissions or commissions were committed by them to extend period of limitation from six months to five years—Whether Department was justified in invoking the extended period of limitation—(No)—Appellants would be liable to pay the duty for a period of six months only.
       Held : The proviso to Section 28 can be invoked where the payment of duty has escaped by reason of collusion or any willful mis-statement or suppression of facts. So far as ‘mis-statement or suppression of facts’ are concerned, they are qualified by the word “willful” . The word “willful” preceding the words “misstatement or suppression of facts” clearly spells out that there has to be an intention on the part of the assessee to evade the duty.(Para 20)
       In the present case we find that in the show cause notice it is not alleged that duty of custom could not been levied or paid by reason of collusion or willful mis-statement or willful suppression of facts. The appellants were not put to notice which of the various omissions or commissions stated in the proviso were committed by them to extend the period of limitation from six months to five years. The appellants having not been put to notice did not have the opportunity to meet the case of the Department.(Para 23)
       Tribunal in its order while accepting the appeals filed by Aban Loyd Chiles Offshore Limited and Essar Oil Limited (two of the appellants) and dealing with the point regarding confiscation of goods has held that the ONGC had intimated the department of its operations from the Nhava Base. That the Department would in any case have been aware of the general nature of the activities at Nhava base from the fact that the goods which were imported as ship stores were escorted by the preventive officers of the customs. That Commissioner himself in his order has recorded that the Department was aware of this fact and fault lies with the ONGC and the Department. If that be the case, the appellants who were working on behalf of ONGC and as per its directions cannot be accused of willful suppression of facts. All these facts were already to the knowledge of the Department. If all these facts were to the knowledge of the Department then the Department was not justified in invoking the extended period of limitation. Accordingly, it is held that the Department would not be entitled to invoke the proviso to Section 28 of the Customs Act and avail of extended period of limitation.(Para 24)

JUDGMENT

Bhan, J.—These appeals have been filed by Aban Loyd Chiles Offshore Limited, Essar Oil Limited and Amarship Management Ltd. against the common order dated 15.01.2001 passed by the Customs Excise & Gold (Control) Appellate Tribunal, West Regional Branch at Mumbai (for short “the Tribunal”) by which the Tribunal has allowed the appeals of the appellants in part. The appeals are directed against the part of the order which has gone against the appellants. Revenue has not come up in appeal against the part of the order which has gone against it.

FACTS

2. In the year 1970, Oil and Natural Gas Corporation (ONGC) commenced offshore operations of exploration and exploitation of oil and natural gas etc. ONGC entered into contracts with various companies, which were contractors acting for and on behalf of ONGC for the exploration and exploitation of oil and natural gas etc. The contractors carried on offshore operations with their oil rigs as per the directions and instructions of ONGC. Between 1970 and 1987. ONGC carried on operations from its facilities at 12, Victoria Docks, Mumbai. The customs department permitted the clearance of goods to and from 12, Victoria Docks and the oil rigs, without compliance of any customs formalities and without the payment of duty of customs, i.e., goods were permitted to be transferred to the rigs from 12, Victoria Docks and were permitted to be removed from the rigs to the shore, without payment of customs duty.

3. In the year 1987, ONGC shifted its offshore operations from 12, Victoria Docks to Nhava Base. This was done because the facilities at 12, Victoria Docks were not sufficient to meet the increased offshore operations being carried on by the ONGC. Operations at Nhava Base are large scale operations and are carried on from five berths. Large warehousing and other facilities are also available at Nhava Base.

4. Appellants entered into separate contracts with appellants between 27.5.1987 to 30.6.1987. The appellants were engaged in exploration and exploitation of offshore oil, gas and other related services as contractors for the ONGC. Pursuant to the contracts the appellants were to carry out offshore operations for and on behalf of the ONGC. These contracts were extended from time to time.

5. An oil rig is a floating vessel which is towed to its required drilling location (appointed by ONGC), and then is jacked up on four legs which rests on the ocean floor. An oil rig, as an integral part thereof, includes drilling machinery to penetrate and drill into the ocean floor. Appellants carried drilling operations with its oil rigs beyond 12 miles from India (i.e. outside the territorial waters of India), on the Continental Shelf.

6. The procedure which was being followed as culled out by the Tribunal in its judgment is as under:

“The background to the notices that were issued to the appellants resulting into the impugned orders is the same. Each of the appellants was engaged in oil exploration in the waters of Bombay. They carried out exploration under contract with Oil and Natural Gas Commission (ONGC for short). Their rigs were positioned in areas referred to as Bombay High, Panna etc. There was considerable movement of goods between the shore and the rigs. The extensive machinery in the rigs often requires repair and replacement. It was the practice in the custom house to treat the replacement of parts or machinery on the rigs as shop stores and not to levy duty on them in terms of the provisions of the Act. Items which required repair or replacement were to be disposed from the rigs are also brought back from the rigs on to the main land. Such activities were carried out by a procedure centralized through the ONGC. ONGC was conducting such operations from shed No. 12 Victoria Docks. The goods which were repaired and required to be fitted as ship stores were cleared from customs without payment of duty on transshipment permits and generally escorted by an officer of the Customs to 12 Victoria D

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2006 Supreme(SC) 704

IMPORTANT POINTThe proviso to Section 28 of the Customs Act can be invoked where the payment of duty has escaped by reason of collusion or any wilful mis-statement or suppression of facts. There has to be an intention on the part of the assessee to evade the duty.

Cases Referred (1)

IMPORTANT POINT
The proviso to Section 28 of the Customs Act can be invoked where the payment of duty has escaped by reason of collusion or any wilful mis-statement or suppression of facts. There has to be an intention on the part of the assessee to evade the duty.