ESSAR OIL LIMITED Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) Of five appeals before us, two are by M/s. Essar Oil Limited (Essar for short), two by M/s. Aban Lloyd Chiles Offshore Limited (Aban for short) and one by M/s. Amership Management Limited (Amership for short). Appeal C/394 -V/98 -Bom. of Aban and appeal C/395/98 -Bom. of Essar are against the orders of the Commissioner ordering confiscation of the goods belonging to them, with an option to redeem them on payment of fine and demanding duty on the goods. The other two appeals by Essar and Aban and the appeal by Amership are against the order of the Commissioner confirming the demand for duty on goods removed from rigs and brought to Nhava base of the ONGC and cleared therefrom without payment of duty, and imposing penalties on them under Section 112 of the Act for such acts.

(2.) 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 centralised 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 transhipment permits and generally escorted by an officer of the Customs to 12 Victoria Docks. From there the goods used to be sent by supply boats under the operation of the ONGC to the rigs in question. Similarly these supply boats used to bring from the rigs unserviceable material or machinery requiring repair or replacement into the Victoria Docks according to law. For example, scrap which was to be disposed of on payment of duty, a machinery part requiring replacement was cleared on machinery passes issued by the department so as to enable it to be brought back to the rigs for use. Around July, 1988 ONGC decided to shift its operations to Nhava, some distance away from Bombay Port. The procedure that was being followed at Nhava base is elaborated in the show cause notice. Essentially it is this. The contractor's i.e., the operators of the oil rigs applied to the Chief Engineer of ONGC for permission to transport goods from the base to the rigs or to the base from the rigs. After obtaining his permission transport of the goods took place. The transport took place by the supply vessels. The ONGC issued gate passes on application by the contractor for movement of the goods from the base to the rigs after their receipt in the base. These gate passes indicated the name of the contractor, description of the material and name of the rig. They also signed by the personnel of the Central Industrial Security Force at the gate as also by the contractor's representative.

(3.) The notices issued to the appellants contended that the Nhava base was not an area specified in Clause (a) of Section 8 of the Act for the unloading of any goods. They therefore proceeded to say that the goods had been unloaded there from the rigs were liable to confiscation. Duty was demanded on the ground that such movement amount to imports of the goods from the rigs into India. Penalty being proposed for failure to file bill of entry and to observe other formalities. In the impugned orders the Commissioner has confirmed the demand for duty after accepting partially the contention with regard to the value of the goods on the rate of duty applicable. He has held the goods liable to confiscation and the importer liable to penalty.