Benefit of exemption cannot be denied even if not claimed by assessee earlier

PJ/CASE LAW/20014-15/2402

Case:-COMMISSIONER OF CUSTOMS, KANDLA Vs PSL LTD COMMISSIONER OF CENTRAL EXCISE, RAJKOT

Citation:- 2014-TIOL-1937-CESTAT-MUM

Brief facts:-Revenue is in appeal against Order-in-Original No. KDL/COMMR/13/10-11 & KDL/COMMR/14/10-11 both dated 30/11/2010 passed by Commissioner of Customs, Kandla. Vide the first order, a Customs duty demand of Rs.309.45 crore has been dropped by the adjudicating authority and vide the second order mentioned, a duty demand of about Rs.3.07 crores has been dropped by the adjudicating authority.

The respondent, M/s. PSL Ltd., is a manufacturing of coated pipes and the manufacturing is undertaken under Customs bonded/warehouse in terms of provisions of Sections 58 & 65 of the Customs Act, 1962. The respondent acted as a sub-contractor to contractors, such as, L&T, Punj Lloyd Ltd. and National Petroleum Construction Co. Ltd., who were awarded contracts by ONGC for lying of pipelines, etc. in connection with the oil exploration /exploitation activities undertaken in the Bombay High. The bare pipes imported by the ONGC were supplied to the respondent for coating and the coated pipes were supplied back to ONGC through the contractor and essentiality certificate for use of these pipes was also furnished and the respondent claimed the benefit of Serial No. 215 of the table annexed to the Notification No.21/2002-CUS dated 01/03/2002 which provides exemption on raw-materials and computer parts which provides exemption on raw-materials and computer parts used in the manufacture of goods supplied for oil exploration/exploitation subject to production of an essentiality certificate from Directorate General of Hydrocarbon. The department was of the view that the appellant did not submit any certificate with respect to the finished products, namely, coated pipes and in the absence of such a certificate from DGHC, the coated pipes, which are manufactured under bond is liable to import duty at the time of clearance from bond and accordingly issued show-cause notices proposing to demand Customs duty on the entire value of the coated pipes. The learned adjudicating authority observed the coated pipes themselves are eligible for exemption; so also the raw materials used in the manufacture of coated pipes are eligible to exemption. Therefore, the question of any duty demand would not arise, since in both the situations exemptions are available.

Appellant’s contention:-The learned Special Consultant for the Revenue submits that even though the Customs duty exemption is available on coated pipes as such, subject to production of essentiality certificate from DGHC, the respondent had not claimed exemption and without claiming the exemption, the benefit cannot be extended. On the other hand the respondent had supplied coated pipes to Bombay High and hence the supply of coated pipes is an import transaction and liable to duty. Since the entire SEZ has been declared as part of the territory of India vide Notification issued under Sections 6 & 7 of the Management of Territorial Waters and Special Economic Zones and other Maritime Zones Act, 1976, the places where Bombay High and its installations are located, are part of India and therefore, supply of pipes form the bonded warehouse to another part of India cannot be considered as an export transaction. Therefore, the learned Special Consultant submits that when the goods are cleared form the bonded warehouse it has to be considered as an import transaction and the goods should be assessed at the applicable rates of duty and view from this prospective, the dropping of demand of duty by the adjudicating authority is incorrect in law.

Respondent’s contention:-The learned Counsel for the respondent submits that when the appellant cleared the goods from the bonded warehouse, they have considered the same to be an export transaction and filed the shipping bills which were assessed by the Customs authorities. Therefore, the entire transaction was known to the department and hence, extended period of time could not have invoked for confirmation of duty demand especially, the demand in respect of Rs. 9.45 crore, which pertained to the period April 2005 to October 2008 for which show-cause notice issued only in April 2010. Similarly in respect of demand pertaining to the period November and December 2008 vide notice dated 17/07/2009, the same would also be time-barred. As regards the demands for the period March to April 2009 amounting to Rs. 1.27 crore, though the demand is in time, as rightly observed by the adjudicating authority, the finished products are eligible for the benefit of table annexed to Notification No.21/2002 and even if the transaction is considered as an import transaction, the benefit of exemption would be available. He reiterates the contention that since the goods has been manufactured in India, supply from the bonded warehouse to Bombay High would amount to export. In either case, the respondent would not be liable to pay any duty.

Reasoning of judgment:-In the present case, it is not in dispute that both the bare pipes as well as the coated pipes were for use for oil exploration/exploitation and the essentiality certificate issued by the DGHC clearly evidence this fact. Though, the certificate specifically mentions serial No.215 of the Notification No.21/2002, the finished products are also specified therein and the said finished products figure in List 12 to Notification No.21/2002, which also exempts the said goods from import duty vide Serial No. 216 subject to production of essentiality certificate from DGHC. Since the end use not in dispute, the appellant would be entitled the benefit of Serial No. 216 even though they have not specifically claimed the exemption. Since the assessment of duty liability has to be done by the Customs, notwithstanding the fact that the appellant did not claim the benefit of exemption, the same should have been extended to the respondent importer. Further, we observe that the demands covered under show-cause notice dated 07/04/2010 and 17/07/2009 are clearly time barred, inasmuch as the entire transactions were fully known to the department and the respondent's clearance of coated pipes to Bombay High under shipping bills were also approved by the Customs authorities concerned.

In view of the above findings, the appeal filed by the revenue is dismissed as devoid of merits.

Decision:- Appeal dismissed.

Comment:- The gist of the case is that as theassessment of duty liability has to be done by the Customs, notwithstanding the fact that the appellant did not claim the benefit of exemption, the same should have been extended to the respondent importer.

Prepared by:- Lovina Surana

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PJ/CASE LAW/20014-15/2402

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