2017 Supreme(SC) 107

SUPREME COURT OF INDIA
Dipak Misra, Prafulla C. Pant, JJ.
COMMISSIONER OF CUSTOMS, MUMBAI – APPELLANTS
VERSUS
M/S ABAN LOYD CHILES OFFSHORE LTD. & ORS. – RESPONDENTS
CIVIL APPEAL NOS. 1784-1787 OF 2004 WITH CIVIL APPEAL NOS. 4342-4345 OF 2004
Decided On : 02-02-2017

IMPORTANT POINTS
A rig carrying on operations within the territorial waters of India would not be a foreign going vessel.
Mere repair would not constitute taxable import.
Import may not take place in spite of clearances/licence and release of foreign exchange.

Headnote:(a) Customs Act, 1962 – Section 2(22), (21) and 43 – Foreign going vessels – Includes any vessel engaged in fishing or any other operations outside the territorial waters of India. By legal fiction, a vessel engaged in fishing outside the territorial waters of India or any other operations outside the territorial waters of India – However, a rig carrying on operations within the territorial waters of India would not be a foreign going vessel. (Para 16)

       (b) Customs Act, 1962 – Section 12 – Vessel, rig, brought to port for repairs – Repairs are carried on the vessel – Not to utilize the vessel – Mere repair would not constitute taxable import. (Para 29)

       (c) Customs Act, 1962 – Section 12 – Import – May not take place in spite of clearances/licence and release of foreign exchange. (Para 30)

       (d) Customs Act, 1962 – Section 12, 46 – Rig engaged in drilling activities outside Indian territorial waters and not in areas under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other maritime Zones Act, 1976 – Tribunal rightly holding the rig not to be a foreign going vessel – It also rightly held that the rig was not intended for home consumption – It also rightly held that import of rig has not been completed – Thus rig was not liable to duty. (Para 8, 9, 10, 32)

       (1987) 1 SCC 730; (2008) 11 SCC 439 – Relied upon

       AIR 2001 Bom 332 – Cited with approval

       1996 (86) ELT 15; 1988 (36) ELT 581; 2001 (135) ELT 625 (Tri-Mumbai); 1984 (86) Bom LR 127; 1998 (101) ELT 529 SC – Referred

       (e) Customs Act, 1962 – Section 111(f), (g) and (h) – On facts Tribunal holding contravention of these provisions – Tribunal finding the contraventions unintentional – Therefore holding the rig liable for confiscation but reducing the fine for redemption of the rig – No error. (Para 11, 32)

       Facts of the case:

       The first respondent, M/s Aban Loyd Chiles Offshore Ltd., engaged in business of offshore oil and gas exploratory drilling and related activities on contract basis, inter alia, for the Oil and Natural Gas Corporation Limited (ONGC) had obtained the approval of the Government of India for the import of a Rig for such oil field services. It was granted a Special Import Licence for the import of the said Rig along with certain drilling equipments. A confirmed irrevocable Letter of Credit amounting to US $ 1,521,000/-for the shipment of Capital goods was given by ICICI Bombay against the said Import Licence.

       The assessee purchased a rig, Griffin Alexander III, from Griffin Alexander Drilling Co. for a price of US $ 5.39 million. The rig was towed directly to the drilling site at Bombay High in October 1987. In February 1996, the importer wrote to the Commissioner of Customs, Mumbai, seeking permission to import the rig into Mumbai for carrying out repairs and re-export in terms of the provisions of Notification No. 153/94-Cus.

       The rig was towed into the waters comprising Mumbai Port on 12.11.1996 and after it was repaired, taken out of the territorial waters of India. It was once again imported to India on 9th December, 1998, being towed into Indian territorial waters by two tugs of the ONGC, Malaviya IV and SCI-05. After repairs, the rig was again towed out of the Indian territorial waters.

       Investigations by the Customs authorities into these two cases of importation led them to conclude that there had been contravention of certain provisions by the assessee and others with regard to these two acts of bringing the rig into India. The rig was formally placed under seizure on 27th March, 1999 but subsequently was released following the order passed in writ petitions filed by the assessee before the Bombay High Court, permitting the rig to be used on payment of an amount of Rs. 1.0 crore and execution of a bond for its value.

       Thereafter, a notice was issued on 23rd September, 1999 to the assessee alleging that the import that took place in 1996 and 1998 were contrary to the provisions of law, and proposing confiscation of the rig under clauses (a), (b), (g), (h), (j) and (o) of Section 111 of the Customs Act, 1962 and clause (a) of Section 113 of the Act, demanding duty amounting to Rs. 27.91 crores, proposing interest under Section 28A on the duty amount and penalty on the importer under Section 112 of the Act. Penalty was also sought to be levied upon ONGC under Section 112 and confiscation under Section 115 of the three vessels, and Malaviya IV owned by Great Eastern Shipping Co. Ltd. which was utilized for towing the rig in 1996 and 1998.

       After considering the explanation offered by the assessee, the Commissioner passed an order wherein he recorded a finding that the rig was carried and brought to Mumbai on three occasions; in February, 1996, on 9th November, 1996 and on 9th December, 1998. It was not declared in the Import General Manifest of the towing rigs, as was required under Section 46 of the Act. Such formalities as filing the bill of entry were not undertaken and, therefore, the rig was ordered for confiscation under clauses (f), (g), (j), (h) and (j) of Section 111. The Commissioner also held that the rig was imported for home consumption and hence, the assesses were liable to pay duty on the value of Rs. 44,40,28,320/-, determined after depreciating the value by 70% from the built cost of the rig. Being of this view, the said authority confirmed the demand for duty amounting to Rs. 27.91 crores, confiscation of the rig and had given the option of redeeming it by payment of fine of Rs. 2.0 crores. The authority exonerated P.A. Abraham, Managing Director of the Company, imposed penalties of Rs. 50,000/-each on P. Venkateswaran, Vice President and A.P.S. Sandhu, General Manager, ordered confiscation of three towing vessels but permitted them to be redeemed on payment of fine of Rs. 1.0 lakh each and imposed penalties on ONGC, and Benny Ltd., the importer’s agent.

       Assessee preferred appeal before the tribunal.

       The Tribunal opined that the provisions of Section 111 would be attracted and, therefore, contravention of clause (f) had been established. It was also held that clause (g) would also be attracted as the goods were unloaded without the permission of the competent authority as required under Section 32 of the Act. It was also held that clauses (h) and (j) would be applicable. Being of this view, the tribunal opined that the rig was liable for confiscation. However, it opined that as there was no deliberate intention on the part of the importer to contravene the said regulations although there had been clear negligence and rules had not been followed. Having regard to the facts, it reduced the fine for redemption of the rig. That has compelled the revenue to prefer Civil Appeal Nos. 1784-1787 of 2004 and M/s Aban Loyd Chiles Offshore Ltd. to file Civil Appeal Nos. 4342-4345 of 2004.

       Finding of the Court:

       There is no error in conclusions of the Tribunal.

       Result: Appeals dismissed.