Legal principle

In an exemption notification the eligibility clause must be strictly construed, but once eligibility is established the conditions may be construed liberally, and non-fulfilment at the time of importation of a condition dependent on public functionaries outside the importer's control is not a condition precedent permanently barring the exemption.

Court decision

The Supreme Court held that the Tribunal committed no illegality in remitting the matter and dismissed the Commissioner's appeal, Civil Appeal No. 5900 of 2004 (against Tullow); it remitted the ONGC matter to the Commissioner for fresh consideration on the same lines, leaving other contentions (including the 'IT Software' issue) open, and adjourned Civil Appeal Nos. 1882 of 2004 and 854 of 2005 sine die. The outcome favoured the assessees on the certificate-timing question.

Facts

ONGC and Tullow conducted 3-D seismic surveys (ONGC in Heera, South Heera and Neelam areas; Tullow in the Gulf of Kutch), and the resulting seismic data tapes/cartridges were imported and processed at a Central Processing Centre on Indian territory using 'Seismos' software. The importers claimed duty exemption under General Exemption No. 121 dated 28.2.1999 issued under Section 25(1) of the Customs Act, claiming the goods under Sl. Nos. 182/184 (goods for petroleum operations) and Sl. No. 231 ('IT Software'). Customs, Mumbai issued a show-cause notice to ONGC proposing classification of the tapes under CTH 8524.99 and vessel M.V. GECO SAPPHIRE under CTH 8905.20, valuation under Section 14, duty demand of Rs. 160,46,18,960 under Section 12, confiscation under Sections 111(m) and 111(o), and penalty under Section 112(a). The DGH essentiality certificate applied for in April 1999 was not available at importation, so the tapes were provisionally cleared on 6.9.1999; ONGC's certificate came only on 23.6.2004 while Tullow produced its certificate before the Tribunal. CESTAT held the exemption could not be denied merely because certificates were required at the time of importation, dismissed ONGC's appeal (certificate not produced even before it) and allowed Tullow's appeal with a remand to the Commissioner, leading to these appeals.

Key provisions

• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 151A, Customs Act, 1962 — Instructions to officers of customs
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 3(1), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods