2025 (7) TMI 1091 - AT - Customs

Bunker fuel - Levy of Customs duty as per Section 87 of the Customs Act 1962/ demand of differential duty - penalty imposed u/s 114A of the Customs Act 1962 - consumption of fuel oil (Bunker) and provisions (Consumable Stores) during its costal run from Cochin to Alang - Nature of vessel MV TABA - foreign going vessel or coastal vessel - HELD THAT - The nature of the voyage whether it was foreign run or it was reverted to coastal run should not depend upon the filing of Bill of Entry as it was allegedly presented on direction of the Customs officers. The appellant claims that they went ahead with the process of Bill of Entry and payment of Customs duty in order to speed up the process of import of vessel which was legally not payable - the goods which are consumed by the vessel in question MV TABA was a foreign going vessel and it was not on coastal run during its voyage between two Indian ports i.e. Cochin to Alang and therefore the goods consumed by it are excluded from the levy of Customs duty as per Section 87 of the Customs Act 1962. The learned Commissioner erred in holding that the appellant is liable to pay differential duty alongwith applicable interest since the nature of the vessel is the coastal run from Cochin to Alang. It appears that the Commissioner (Appeals) has only relied on the fact that the appellant filed Bill of Entry and paid the Customs duty and the Commissioner failed to take into consideration other relevant facts. There are sufficient force in the arguments of the learned Counsel for the appellant that the vessel in question MV TABA was a foreign going vessel and goods consumed during its voyage from Cochin to Alang should have been exempted from Customs duty. Therefore there is no question of demanding differential Customs duty as the entire payment of Customs duty was not legally necessary. Therefore the demand of differential duty cannot be sustained and should be set-aside. The law laid down in the judgment in the case of Lotus Danship Pvt. Limited vs. C.C. Jamnaga (Prev.) 2024 (6) TMI 1015 - CESTAT AHMEDABAD agreed upon that the vessel in question M.V. Anupama functioned as a daughter vessel to lighten the mother vessels (super-tankers) which had brought cargo from abroad and which because of their big size were unable to come alongside of Indian ports. The vessel functioned only to continue and complete the task of the mother vessels that of bringing cargo from abroad and unloading them at Indian Ports. There is no evidence that during this period the vessel picked up any Indian cargo from one Indian port to unload it at another Indian port. The demand of differential duty of Customs amounting to Rs. 96, 136/- is not tenable. The learned Commissioner erred in holding that appellant is liable to pay differential duty alongwith applicable interest since the nature of voyage is coastal run from Cochin to Alang and the learned Commissioner has ignored other facts and just relied on the appellant s submission of Bill of Entry and payment of Customs duty and wrongly came to the conclusion that it ceased to be in the nature of foreign going vessel and can be considered in the nature of coastal run - there seems to be no intention of the appellant to evade payment of Customs duty. Therefore penalty imposed on the appellant under Section 114A of the Customs Act 1962 is not sustainable and is liable to be set-aside. The demand of differential Customs duty amounting to Rs. 96, 136/- alongwith interest is set-aside. Penalty of Rs. 96, 136/-imposed under Section 114A of the Customs Act 1962 is also set-aside - appeal allowed.

Summary

ISSUES:

Whether the Customs authorities at the port of Alang had jurisdiction to demand customs duty on bunker fuel and consumable stores consumed by a vessel during its voyage between two Indian ports.Whether the vessel in question was a 'foreign going vessel' or a 'coastal vessel' for the purposes of customs duty liability on consumed stores during the voyage between Indian ports.Whether the filing of a Bill of Entry and payment of provisional customs duty by the appellant converts the vessel's status from 'foreign going vessel' to 'coastal vessel' thereby attracting customs duty on consumed stores.Whether goods consumed by a 'foreign going vessel' during its voyage between two Indian ports are exempt from customs duty under Section 87 of the Customs Act, 1962.Whether the demand of differential customs duty and imposition of penalty under Section 114A of the Customs Act, 1962 is sustainable in the absence of intention to evade duty and where the show cause notice is barred by limitation.Whether the benefit of exemption under customs law can be claimed at a later stage notwithstanding non-claim at the time of import.

RULINGS / HOLDINGS:

The Customs authorities at Alang lacked jurisdiction to demand duty on goods not imported at that port; the order demanding duty was contrary to Section 12 of the Customs Act, 1962.The vessel was held to be a 'foreign going vessel' during its voyage from Cochin to Alang, and therefore, the goods consumed on board are excluded from the levy of customs duty as per Section 87 of the Customs Act, 1962.The filing of the Bill of Entry and payment of customs duty does not alter the nature of the voyage or vessel status; the nature of the voyage should not depend upon the filing of Bill of Entry purportedly presented on direction of Customs officers.The demand of differential customs duty and interest is not tenable and is set aside because the entire payment of customs duty was not legally necessary.The penalty imposed under Section 114A of the Customs Act, 1962 is not sustainable in the absence of intention to evade payment of customs duty and is liable to be set aside.The benefit of exemption under customs law must be allowed even if not claimed at the time of import; the government cannot retain excess payment of duty not required by law.

RATIONALE:

The Court applied Section 87 of the Customs Act, 1962, which exempts imported stores consumed on board during the period the vessel is a 'foreign going vessel', thereby excluding such consumption from customs duty.Precedents were relied upon, including decisions holding that vessels functioning solely to continue the task of mother vessels bringing cargo from abroad and not undertaking coastal operations retain their status as 'foreign going vessels' and enjoy exemption on consumed stores.The Court emphasized that the nature of the voyage and vessel status is a question of fact and law independent of procedural acts such as filing a Bill of Entry or provisional payment of duty, particularly when such filings were made under compulsion or direction of Customs officers.The Court noted the principle that exemption benefits under customs law can be claimed retrospectively, citing authority that "ignorance of law is no excuse" applies equally to the government and the importer.The penalty under Section 114A was set aside due to absence of any finding of intention to evade duty, and the demand for differential duty was held barred by legal principles governing jurisdiction and exemption.