SUPREME COURT OF INDIA
M/s. O.N.G.C. Limited
Vs
Commissioner of Customs, Mumbai
Appeal (Civil) 1882 of 2004; Civil Appeal No. 854 of 2005
(S. B. Sinha and Dalveer Bhandari, JJ)
24.08.2006
S. B. SINHA, J.
The 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.
A 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.
For 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
Exploration licence.
The licence 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 25.03.2004.
In the 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.
Admittedly, the said 3-D Seismic Tapes were treated to be the 'goods' within
the meaning of the provisions of the Customs Act, 1962.
The 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 said SEDCO.
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.
The 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.
Pursuant to or in furtherance of the said directions, the Commissioner has passed an order dated 28.2.2006 holding:
"I 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.
I, 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.
M/s 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 Central
Government.
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:
"In the above background, the EC dated 26.03.2004 cannot be accepted
because,
(i)ONGC were not eligible for the EC on the date of import of the data tapes;
(ii)No application for the EC was pending with the DGHC on the date of import
of the data tapes (in fact, the application had been rejected)
(iii)The EC dt. 26.3.2004 was a solicited document, solicited for the sole
purpose of winning the case before the Supreme Court.
(iv)They had not raised this issue before the CESTAT which is the final
authority for going into facts of the case, and
(v)ONGC have not approached the Hon'ble Apex Court with clean hands by not
disclosing the full facts.
Another 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.
The Appellant is a public sector undertaking. The exemption notification inter alia was issued in its favour by the Central Government. It may 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 (relied on)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 notifications.
The 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.
It may 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, 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. The 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.
This 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, , Commnr. Of Central Excise,
Raipur v. Hira Cement, 2006 (2) JT 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 accordingly.
We, therefore, do not agree with the findings of the learned Commissioner.
In view of our findings aforementioned, we do not think it necessary to advert
to the other contentions raised by the Appellant.
For the reasons aforementioned, the impugned order cannot be sustained which is
set aside accordingly.
The appeals are allowed. No costs.