O.N.G.C. Ltd Vs. Commnr. of Customs, Mumbai  Insc 524 (24 August 2006)
Sinha & Dalveer Bhandari
APPEAL NO. 854 OF 2005 S.B. SINHA, J :
Appellant before us is an undertaking wholly owned and controlled by the
Central Government. It obtained the services of M/s. SEDCO Forex Int. Drilling
Inc. for exploitation of oil and gas on shore and off shore. A contract was
awarded by it to a company known as M/s. SEDCO Forex Int. Drilling Inc
specializing in finding out the possibility of oil or gas by carrying out
seismic surveys. The information gathered by reason of such survey was recorded
in 3-D Seismic Tapes.
question arose as to whether the same would attract the exemptions from payment
of custom duty in terms of the entries contained in Sl. Nos. 182, 184 and 231
of the notification dated 28.2.1999.
the aforementioned purpose, indisputably, an essentiality certificate was
required to be issued by the Directorate General of Hydrocarbons.
Pre-requisites for grant of such certificate also was a valid Petroleum
granted by the Central Government in favour of the Appellant in that behalf was
initially valid upto 14.11.1997. The Appellant applied for renewal thereof on
7.10.1997. An application for grant of Essentiality Certificate was filed on
5.4.1999. The same was returned to the Appellant on 12.04.1999. By an order
dated 18.08.2000, the said licence was renewed with retrospective effect from
14.11.1997 by the Central Government. Immediately, thereafter i.e. on 20th August, 2000, the Appellant filed an application
for grant of essentiality certificate in continuation of its earlier
application dated 5.04.1999. It also sent reminders therefor on 26.03.2001,
13.04.2001, 27.12.2001 and 8.07.2003. The Appellant was asked to resubmit the
application in a new format which requirement was also complied with by it on
said application also, the Appellant categorically stated that the same was in
continuation of its earlier application dated 5.04.1999 whereafter the
essentiality certificate was granted on 26.03.2004.
the said 3-D Seismic Tapes were treated to be the 'goods' within the meaning of
the provisions of the Customs Act, 1962.
said goods were cleared provisionally but in view the fact that the Appellant
had failed to produce the essentiality certificate, a notice to show cause was
issued as to why the said data tapes should not be classified under CTH8524.99
and charged to duty on the basis of the amount paid by the Appellant to the
matter ultimately came up before the Customs, Excise and Service Tax Appellate
Tribunal which was heard along with a similar case of Tullow India Operations
Ltd. (Tullow). Whereas Tullow could produce the essentiality certificate before
the Tribunal, the Appellant could not.
matter came up before this Court at the instance of the Appellant. It filed an
application for urging additional grounds inter alia relying on or on the basis
of the said Essentiality Certificate granted in its favour on 26.3.2004. This
Court, opining that grant of essentiality certificate should be treated to be a
proof of the fact that the Appellants had fulfilled the conditions enabling
them to obtain the benefits under the aforementioned exemption notification,
remitted the matter to the Commissioner for consideration thereof afresh having
regard to the similar directions issued by the Tribunal in the case of Tullow.
to or in furtherance of the said directions, the Commissioner has passed an
order dated 28.2.2006 holding:
hold that the EC dated 26.3.2004 cannot be accepted and accordingly exemption
under serial number 182 of notification no. 20/99-Cus dated 28.2.1999 (since
rescinded), is not available on the data tapes imported by M/s ONGC vide Bills
of Entry Nos. 9888 dt. 22.6.99 and No. 12443 dt. 28.5.99.
therefore, confirm the duty demand of Rs. 49,68,70,160 on M/s ONGC. Since an
amount of Rs. 25,00,00,000/- had already been paid by M/s ONGC towards the
principal amount on 14.9.2004, the balance amount of Rs. 24,68,70,160/- is now
payable by them.
ONGC are also liable to pay interest under section 28AB of the Customs Act,
1962, which comes to Rs. 25.06 crores as on 31.3.2006 after taking into account
interest amounts already paid/ adjusted as indicated in the Annexure to this
order." The learned Commissioner in forming the aforementioned opinion
proceeded on the basis that the Directorate General of Hydrocarbons cannot be
faulted for not disposing of the Appellant's application for grant of the
Essentiality Certificate within a reasonable time as the application therefor
had been returned. It further proceeded on the basis that the Appellant is
guilty of concealment of certain facts, viz., return of the said application in
absence of a valid petroleum exploration licence granted in its favour by the
learned Commissioner further attributed malice on the part of the Directorate
General of Hydrocarbons stating that such essentiality certificate was granted
in order to facilitate the Appellant's case before this Court observing:
the above background, the EC dated 26.03.2004 cannot be accepted because,
ONGC were not
eligible for the EC on the date of import of the data tapes;
for the EC was pending with the DGHC on the date of import of the data tapes
(in fact, the application had been rejected)
The EC dt.
26.3.2004 was a solicited document, solicited for the sole purpose of winning
the case before the Supreme Court.
They had not raised
this issue before the CESTAT which is the final authority for going into facts
of the case, and
ONGC have not
approached the Hon'ble
Apex Court with clean
hands by not disclosing the full facts.
important point to note is that when the imports took place in the year 1999
the duty exemption could have been availed by M/s ONGC on the strength of an EC
as per the conditions of notification No. 20/99-Cus dt 28.2.1999 (Sr no. 182).
However, on the date of the present EC was issued, i.e. 26.3.2004, the
notification was no longer in existence and had already been rescinded on
1.3.2000 by notification no. 22/2000-Cus dated 1.3.2000. A certificate issued
under a rescinded notification can have no legal sanctity. When the relevant
notification itself does not exist how can a certificate issued under the
authority of the said notification have any legal validity? Action taken under
a rescinded notification can be saved under a saving clause of appropriate
legislation; but fresh action cannot be initiated or revived under a rescinded
notification. (In the case of Tullow India, which was also a subject matter
before the Apex Court in CA No. 5900 of 2004, the certificate was produced by
them within the validity period of the Customs notification, though whether the
certificate produced by Tullow India was proper/ genuine/ valid/ applicable or
not is a subject matter of separate proceedings)." It further opined that
another reason why the Appellant disentitled itself from grant of the benefit
of the said exemption notification was that production of the essentiality
certificate was necessary at the time of importation and not thereafter.
Appellant is a public sector undertaking. The exemption notification inter alia
was issued in its favour by the Central Government.
be true that on the date when the goods were provisionally cleared the
Appellant did not have the essentiality certificate with it, but this Court in
its judgment dated 28th October, 2005 [since reported in (2005) 13 SCC 789]
categorically held that in a case of this nature, unless a final order of
assessment is passed, production of a delayed essentiality certificate may not
come in the way of the importers obtaining the benefit of the exemption
Commissioner in passing the impugned order failed to notice the findings of
this Court. It posed unto itself wrong questions. It did not address itself the
issues required to be gone into.
be true that grant of the essentiality certificate was itself dependent upon
the question as to whether the Appellant was possessed of a valid oil
exploration licence or not. It is, however, equally true that right to renewal
of a licence is a valuable right. [See D. Nataraja Mudaliar v. The State
Transport Authority, Madras, AIR 1979 SC 114] The Appellant
applied for grant of renewal of the said licence before its expiry. The said
renewal has been granted with a retrospective effect. In law, thus, the
Appellant had been holding a valid licence continuously.
factual events as noticed hereinbefore clearly show that the Appellant's
application for grant of essentiality certificate by the Directorate General of
Hydrocarbons was not entertained in absence of renewal of the licence. The
application was returned only for that purpose. The Appellant filed its
application for grant of essentiality certificate within two days from the date
of grant of the licence with retrospective effect and then thereafter sent
several reminders. The conduct of the Appellant must, therefore, be judged from
the factual matrix obtaining therein. We, therefore, are unable to agree with
the opinion of the learned Commissioner that the Appellant made any
misrepresentation before this Court or that the Directorate General of
Hydrocarbons had shown any favour to it. Once it is held that the Ministry of
Petroleum had renewed the licence and the Directorate General of Hydrocarbons
had issued the essentiality certificate, the conditions precedent for obtaining
exemption in terms of the exemption notification stood fully satisfied.
Court, times without number, has construed such exemption notifications in
liberal manner. [See Commissioner of Customs (Imports), Mumbai v. Tullow India
Operations Ltd., (2005) 13 SCC 789, [See Tata Iron & Steel Co. Ltd. v. State of Jharkhand and Others, (2005) 4 SCC
272, Government of India and Ors. v. Indian Tobacco
Association, (2005) 7 SCC 396, Commnr. Of Central Excise, Raipur v. Hira Cement, JT 2006 (2) SC 369.
and P.R. Prabhakar v. Commnr. Of Income Tax, Coimbatore, 2006 (7) SCALE 191] If, thus, the Appellant was entitled
to the same, it should not be denied the benefits thereof. It is directed
therefore, do not agree with the findings of the learned Commissioner.
view of our findings aforementioned, we do not think it necessary to advert to
the other contentions raised by the Appellant.
the reasons aforementioned, the impugned order cannot be sustained which is set
aside accordingly. The appeals are allowed. No costs.