| SooperKanoon Citation | sooperkanoon.com/44573 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | Jan-11-2007 |
| Judge | T Anjaneyulu |
| Appellant | Boc India Ltd. |
| Respondent | Commissioner of Customs (i) |
2. The appellants herein had filed three bills of entry viz. (1) No.889275 dt. 5-9-2006, (2) No. 918091 dt. 3-10-2006 & (3) No. 938246 dt.
19-10-2006 for import of 1660 Nos. of second hand cylinders having water capacity of 46.6 Ltrs and 9.4 Ltrs and sought clearance of the same upon payment of duty. The appellants also enclosed two certificates dated 20-10-2006 & 12-4-2006 issued by the Petroleum and Explosives Safety Organisation (formerly - Department of Explosives), Nagpur. On enquiry, the authorities found that the importation of the cylinders was in violation of the Gas Cylinder Rules 2004 and held that the cylinders were liable for confiscation. They have also found that cylinders imported cannot be treated as capital goods and hence they are restricted for imports in accordance with Para 2.17 of the FTP 2004-09 as only Second hand capital goods are allowed in accordance with Para 2.33 of the FTP 2004-09 of the Handbook of Procedures Vol. 1.
3. Adjudicating authority has passed an order holding that the cylinders imported did not satisfy the conditions of Rule 45 of the Gas Cylinder Rules, 2004 since imported cylinders were filled with nitrogen gas and Rule 45 ibid places restriction on filling of empty cylinder unless the cylinder and its valve and other fittings have passed the examination and test specified in Rule 35 and this was made amply clear in condition 2 of the license which categorically prohibits the cylinder from being refilled with any compressed gas without obtaining prior approval of the licensing authority. Accordingly, vide the impugned order the goods were confiscated under Section 111(d) of the Customs Act, 1962 with an option to redeem the same, for purpose of re-export only, on payment of redemption fine of Rs. 2,50,000/-. A penalty of Rs. 25, 000/- was also imposed under Section 112(a) of the Customs Act, 1962 which was paid on 8-12-2006.
4. The Commissioner of Customs (I) observed, in the impugned order, that Petroleum and Explosives Safety Organisation, Nagpur, vide letter dated 20-10-2006, permits the use of nitrogen gas contained in the subject cylinders provided relevant provisions of the Gas Cylinder Rules, 2004 are strictly complied with. The letter categorically prohibits the cylinders in question from being refilled with any compressed gas without obtaining their prior approval. Thus in effect the empty cylinders imported are not covered by a license. As column No.6 of the said licence shows "Filled with Nitrogen". Rule 45 of Gas Cylinder Rules, 2004 categorically places restriction on filling of empty cylinders unless the cylinder and its valve and other fittings have passed the examination and test specified in Rule 35. This is made amply clear in the condition No. 2 of the license which categorically prohibits refilling of the empty cylinders except after obtaining prior concurrence of the licensing authority. No such license/permission has been produced. In these circumstances he has constrained to observe that import of the empty cylinders are in contravention of the Gas Cylinder Rules, 2004 and hence liable for action in terms of Section 111(d) of the Customs Act, 1962. However in the given circumstances of the case that the cylinders when absolutely confiscated would serve no purpose. Commissioner (I) has inclined to take a lenient view and permit the importer to redeem the goods for the specific purpose of re-export only. The importer was held to be a person concerned with the offence and was liable for penalty. Again in the facts of the case he has inclined to take lenient view in the matter. However, he has declined to discuss on the issue whether the imported goods are capital goods or not and no finding is given thereon.
(a) The licensing authority granted the certificate dated 12-10-2006 after they have fulfilled the provisions of Rule 3 of Gas Cylinder Rules. 2004 and that the imports were confirmed to Schedule I. The appellants submitted the test and inspection certificates dated 10-8-2006 and 31-8-2006 issued by the inspecting authority. M/s.
Jakson Keay in respect of cylinder and its valve, to the Chief Controller and his prior approval was obtained and licenses dated 20-10-2006 and 12-4-2006 were issued by the Chief Controller.
Therefore, provisions of Rule 3 have been fully satisfied.
(b) The Commissioner (I) has ignored Rule 3 and its compliance by the appellants and only relied upon two riders, which were ingrained in the license. It is an admitted fact that at the time of import of the empty cylinders, there were traces of nitrogen gas inside the cylinders. This fact was not disputed and the license itself suggests so.
(c) The Commissioner (I) has observed that Rule 45 of Gas Cylinder Rules, 2004 places a restriction on filling of empty cylinders and its valve and other fittings have passed the examination and test specified in Rule 35 ibid. The appellants submit that the findings of the Commissioner (I) are applicable only after the cylinders were subject to filling in India i.e. Post Importation. This would mean simplicitor, that even if the cylinders were to be imported containing traces of nitrogen gas, as in the present case, yet, being pre-importation, Rule 45 would not apply.
6. The ld. Advocate appearing for the appellants has further raised the following contentions.
(a) The whole confusion has arisen because of the interpretation on of condition 2 of the License. The condition prescribes that filled cylinders on becoming empty shall not be refilled with any gas except after obtaining prior concurrence of the licensing authority.
This, the ld. Commissioner concludes that it was violation of Rule 45 of the Gas Cylinder Rules, 2004. The reasons afforded by the ld. Commissioner in his order was that since the cylinders at the time of importation were found to be filled with 99.9999% of Nitrogen, the license dated 20-10-2006 did not cover the cylinders at hand.
The ld. Advocate submitted that this finding of the ld. Commissioner was erroneous & based on incorrect facts.
(b) He further submits that had the cylinder been found containing nitrogen, the Appellants would not have themselves declared the same to be empty, for, that purpose, the goods would have been declared under SH 2804.30 and cleared as such. There is no whisper of the same anywhere in the Order to that extent. In any event, the Appellants had merely imported empty cylinders for filling of gas in India.
7. The ld. JDR Shri U.H. Jadhav, fairly conceded that the goods imported were in fact second hand capital goods. Upon being asked, Shri Jadhav, the ld. JDR conceded that had the cylinders been filled with nitrogen gas, specific permission of the Gas Authority would have been required & in that case, the Appellants would have had to obtain a license for importing gas filed cylinders, which was not so in this case. Shri Jadhav, the ld. JDR, also conceded upon perusing the license-dated 2-10-2007 that condition No. 2 was a condition wherein the same was applicable only for a license to distribute the gas from the place of storage. He however made a plea that this aspect i.e.
whether the gas filled with nitrogen of purity 99.9999% as deposed by the deponent in the affidavit required verification. The ld. JDR made a fervent plea to refer the matter back to the Commissioner to have the facts verified so that a final view in the matter could be taken.
8. While opposing the grounds for remanding the matter back to the ld.Commissioner, the ld. Advocate Shri M.S. Murthy submitted that this is not permissible as that would amount to reinvestigation of the case. In any view of the matter, the ld. Advocate submitted that there was enough evidence available before this Bench to hold that the cylinders were empty for all purposes to come. He, therefore, requested that the matter be decided on merits.
9. I have heard both sides at length in the matter and also perused the records. Appellants have a license for the manufacture, storage and distribution of liquefied compressed gases located all over India.
Cylinders are required for the distribution of the liquefied compressed gas. These are not normal type of cylinders but are specially designed for storage of compressed gas. These cylinders are required to be fitted with a mechanical device for regulating the pressure of compressed gas for which a specific permission is required to be obtained from the Petroleum and Explosives Safety Organisation (formerly - Department of Explosives), Nagpur as the cylinders should have specific standards prescribed under the provisions of Gas Cylinder Rules, 2004. Appellants have complied with the provisions of the Gas Cylinder Rules, 2004 and based on this compliances, the Petroleum and Explosives Safety Organisation (formerly - Department of Explosives), Nagpur vide their certificates dated 20-10-2006 and 12-4-2006 granted specific approval for import of the same in India for home clearances.
The point raised by the ld. Commissioner relates only to the cylinders covered by the Certificate dated 20-10-2006. These cylinders of UEF Chesterfield Cylinders, UK make contain 99.9999% Nitrogen and referred to serial No. 6 of the License. He however observed that in case of the other type of cylinders i.e. 9.4 Lts, Faber Industry SPA, Italy make, these cylinders imported were empty and hence these were covered by the license dated 12-4-2006.
10. The point for consideration in this appeal is that whether the goods in question are covered by the License dated 20-10-2006 and 12-4-2006; and whether the goods could be cleared for home consumption on payment of customs duty. To arrive at the finding prima facie it is to be seen whether there existed a dispute in between the parties over the subject matter. It is not under dispute that the goods were second hand in as much as the cylinders were used and therefore the contentions of the ld. Commissioner that these are not capital goods is incorrect.
11. Appellants have produced two licenses covering the imports of the said cylinders. These cylinders are of Chesterfield & Faber make. It is the Chesterfield make cylinders, which was filled with Nitrogen of purity 99.9999%. While the Faber make cylinders were empty cylinders. I find that the ld. Commissioner has failed to note this fact and has ordered confiscation of all the cylinders imported. The Faber cylinders would not come within the findings of the ld. Commissioner. Hence, the case of the entire 660 cylinders of Faber make would have to be separated from the Chesterfield cylinders. Accordingly, I hold that the 660 empty cylinders of Faber make are required to be cleared for home consumption on payment of Customs duly on the strength of the License dated 2-1-2007. I accordingly order so. However, since a formal license has been issued on 2-1-2007, which shows the serial numbers of the Faber make cylinders, I direct that the proper officer may verify serial numbers of 660 empty cylinders at the time of clearance.
12. Both sides have relied upon the Gas Cylinder Rules, 2004. While, the ld. Commissioner has held that the import of the 1000 pcs of Chesterfield cylinders filled with 99.9999% Nitrogen was in violation of Rule 45 ibid, on the other hand, the Appellants have submitted that Rule 3 governed the import. I have gone through the said Rules and find force in the submissions of the Appellant that in the matter of import of the said goods, irrespective of whether the cylinders were empty or otherwise, so long as they confirmed to the said Rule 3 and the Schedule to the said Rule, the import of the cylinder would be covered under the license dated 20-10-2006. I find that the 1000 pcs of cylinders filled with 99.9999% Nitrogen of Chesterfield duly satisfied conditions of Schedule I and as a consequence the said authority issued the License dated 20-10-2006. Therefore, I hold that the provisions of Rule 3 have been fully satisfied and that invocation of Rule 45 was incorrect as it pertained to filling up of cylinders where storage of gas was permitted by the appropriate authority.
13. In order to clarify the position about the licences granted, the appellants herein have procured an affidavit of their Technical Services Manager, Shri Vutukuru Venkata Ramana, wherein he has clearly stated that these cylinders are meant for refilling high purity Nitrogen Gas and in order to maintain the high purity, these cylinders are purged with 99.999% Nitrogen Gas. As a result, these cylinders contain a small quantity of traces of Nitrogen Gas. Therefore, the cylinders for all practical and technical purposes are a gas filled with 99.999% Nitrogen Gas. However, the quantity may be in traces as stated above. The traces or purged Nitrogen Gas present in such cylinders do not have any commercial bearing. The goods imported are empty cylinders only and they are required to be stated as filled because the contents are Nitrogen Gas occupying the storage space within the cylinder and gas of any quantity when present in the cylinder the same can technically be called as filled gas cylinder and when only cylinder is transacted the same is called as empty cylinder, the traces of small amount of gas present in the cylinder has no commercial bearing. Moreover, if CCE has already approved the importation of the cylinders in filled state, the cylinders within the meaning of Gas Cylinder Rules, 2004 automatically stands approved for it being empty as well, because, what is approved by the CCE authorities is the cylinder and not the gas. As seen from the above clarification coupled with the licences on record and in view of the fact that import of empty cylinders is not in dispute, it is an erroneous view that the ld. Commissioner reached to the conclusion that there existed no license to import the cylinders, and accordingly the same is liable to be set aside.
14. In the result the appeal is allowed while setting aside the impugned order with a consequential relief to the appellants. The Respondents are directed to assess the Bill of entry Nos. 889275 dtd.
5-9-2006 (2) 918091 dtd. 3-10-2006 & (3) 938246 dtd. 19-10-2006 & permit the appellants to clear the goods in question on payment of appropriate duties of customs & the amount of Rs. 2,50,000/- paid as redemption fine and Rs. 25,000/- as penalty be released back to them.