S.S. Sekhon, Member (T)
1. M/s. PSL Pipe Coates Pvt. Ltd. hereafter referred to as (PSL for brevity sake) filed Bills of Entry filed on behalf of M/s. Oil & Natural Gas Commission of India (hereinafter referred to as ONGC for brevity sake) and cleared. Pips declaring benefit of Notfn. 13/S1 read with notification 93/93 as amended and also 208/99 - Cus. to their branded warehouse. PSL have a licence to operate and Manufacture under Bond vide Section 65 of the Customs Act, 1962.
2. The BES were assessed provisionally under Section 18 of the Customs Act, 1962. At the time of finalisation of the assessments on observing the following points--
(i) PSL is not the actual importer, as ONGC is the actual importer/owner.
(ii) PSL merely coating the pipes on behalf of ONGC and after coating the same return them to ONGC for use in S.B.H.T. project, i.e, PSL was merely during job work of coating and goods were not sold to ONGC.
(iii) The essentiality certificate granted by Oil Industry Development Board refers to Notfn. 333/88 in BE No. 126/4.1.94 to Ntfn. 198/89 dated 30.2.89 for recurring Bills of Entry.
(iv) Bond was jointly executed by PSL & ONGC under Section 65. On inspection, it was revealed that ONGC do not possess any warehouse or Manufacture in Bond License, thus they appeared to be not eligible to the benefit of the Notification No. 208/92
(v) Mere coating of Pipes does not amount to manufacture as per Section 2(f) of Central Excises and Salt Act, 1944.
(vi) Duty exemption under Section 208/92 was not available to ONGC as they did not have Section 65 Customs Act, 1962 licence or 100 EOU licence.
(vii) Since PSL is not selling the pipes to ONGC, but as are only costing them, they are not entitled to duty exemption under Notfn. 13/81.
(viii) the pipes were therefore not entitled to duty except under Notfn. 333/88 & 196/89.
Therefore duty demand of Rs. 80,83,77,037 on finalising the assessment under notification 333/88 & 196/89 was proposed to be made on PSL by denying PSL the benefit of Notfn. 13/81.
2. The Commissioner after hearing the appellants on the issues, found--
(a) (i) Claim of Notfn. 333/88 & 196/89 as made will not disentitle them from the benefit of Notfn. 208/92 if the claim there under is established as available.
(ii) They have demonstrated with evidence that they are eligible to benefit of Notfn. 208/92, having fulfilled the condition and sale of goods or ownership thereof was not relevant. Therefore, demand was not sustainable.
(iii) As regards mere coating resulting/not resulting in manufacture under Section 2(f) of Central Excises & Salt Act, 1944 from the process undertaken, it was found that it could be demonstrated that Bare-line-Pipes as imported are totally different from such Line Pipes emerging by a highly technical process. Therefore, manufacture did take place.
(b) Revenue is in appeal, aggrieved, by these findings, on the grounds--
(i) Both parties have failed to squarely establish the claim for benefit for Notfn. 208/92.
(ii) ONGC the owner of pipes were given the certificate by Oil Industry Development Board under Notfn. Nos. 333/88 and 196/89 and they had not sought the import claim under Notfn. 208/92 and they could not get the same as they had no intention to manufacture in a Branded Warehouse. They entered into job work Contract with PSL & BE were filed.
(iii) Claims were made under Notification 13/81 and since Notification 13/81, conditions could then were not complied the stand was shifted.
(iv) Notfn. 208/92 was to be claimed by owner of the imported goods with proof. As owner i.e. ONGC did not take out Section 65 licence. Therefore, conditions of Notfn. 208/92 were not satisfied. Section 65 facility is only for owner and job worker PSL was not entitled without getting ownership of the pipes.
(v) Process employed by PSL do not amount to manufacture.
3. After hearing both sides & considering the issue it is found--
(a) Notfn. 208/99 reads as follow--
In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, being satisfied that it is necessary in the public enlist so to do, hereby exempts raw materials and components falling under the first sealed to the Customs Traffic Act, 1975 (51 of 1975) used in the manufacture of goods in accordance with the provision of Section 65 of the said Customs Act to be supplied in connection with the purpose of offshore oil exploration or off--oil exploration from-
A plain reading of the above would indicate that the exemption is to Raw Material & Components used in manufacture in accordance, with the provision of Section 65 of the Customs Act, 1962, which are thereafter to be supplied in connection with the purposes mentioned in the notification. There is no dispute about the subsequent supply for the purposes as mentioned. Manufacture in accordance with Section 65 of the Customs Act, 1962 is required to be met. This Section, permits an owner of the warehouse goods to carry out 'any manufacturing process or other operations in the bond the words 'other operations' would apply to all such operations which form a genre with 'manufacturing operations' and not restricted to 'manufacture' concept under Section 2(f) of the Central Excise Act, 1944. The coating carried out in this case would fall under that if not manufacture. The adjudicator has found the operation to result in emergence of a new product viz 'Marine Line Pipes', which are commercially known differently in the market. In the grounds taken, there is no material to upset this finding. Therefore, 'manufacture' as understood under Section 2(f) of the Central Excise Act, 1944 has to be held to have taken place. In any case, even if it has not, "manufacture" under Section 65 of the Customs Act, 1962, or Notfn. 208/62 cannot be interpreted to be as per the definition under Section 2(f) of the Central Excise Act, 1944. It has to be given a wider meaning to include 'other operations' cannot be last (sic, lost) sight off. No grounds can be found to upset the Commissioner orders as regards the manufacture or other operations "Permissible as per Section 65". As regards, the "ownership", goods no doubt are and were in the ownership of ONGC, at all times. They are warehoused goods under the Customs Act, 1962. They have been deposited in a Warehouse, pending duty. The Warehouse is of PSL. Deposit of ONGC goods in Bonded Warehouse of PSL, is permitted under Section 58; that ONGC & PSL have executed a bond envisaged under Manufacture and Other Operations in Warehouse Regulations 1966, presented vide its Regulation 4. There is no ground taken of violation of any of the provision of these Regulations in the appeal filed by Revenue. A reading of these regulations would not debar goods in ownership of ONGC, warehoused as deposited in the Warehouse of PSL under Section 58, to be denied the benefit of the operations under the Regulation or Section 65. The warehoused goods coated for eventual use in the permissible activities under Notfn. 208/92 cannot be denied the benefit of the notification. The benefit has been correctly allowed by the Commissioner.
(b) The other grounds taken by Revenue of eligibility claims made under other notifications will not upset the order, since it is well settled that benefit of an alternative, notification 20.8.92 in this case, if eligible, would have to be granted by the assessing officer. Merely because Oil Industrial Development Board has granted as regards to Notification No. 333/85 for BE 126/4.1.94. Notfn. 198/89 dated 30.6.89 for other Bills of Entry, cannot deprive and call for levy of duty, if that duty is not leviable by an alternate Notification No. 208/92 found to be eligible, even without their Oil Industry Development Board approval.
(c) No merits are found in the ground taken by Revenue to upset the order of the Commissioner. The order is upheld. The appeal dismissed.