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2017 (2) TMI 294 - SUPREME COURT OF INDIA

2017 (2) TMI 294 - SUPREME COURT OF INDIA - 2017 (346) E.L.T. 513 (SC) - Import of rigs for repair and reexport - non filing of Import General Manifest of the towing rigs - Confiscation of goods - foreign going vessel - imposition of redemption fine and penalty - benefit of N/N. 153/94-Cus - whether foreign going vessels cease to be so when they enter into Indian territorial waters only for repairs? - goods for the purposes of Section 46(1) of the Act - Held that: - the vessel was in operation a .....

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imarily used in India or used occasionally for short period in India and whether in such situation, the vessel should be treated as a good for home consumption. As the vessel in the said case was brought in India and was primarily used as a transshipper and occasionally in the open seas, it was held to be a good imported for home consumption. - Release of foreign exchange, approval and licence, etc. are prior to the import. Import may not take place in spite of this aforesaid clearances/lice .....

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seas. This was not treated as the date of import or home consumption. The import as per the authorities had taken place when the rig was brought for repairs. The evaluation of the rig has been done on the basis of the last visit of the rig for repair in 1998. - While we are disposed to accept that there was no import, we would not on the said finding hold that the owner had not violated the provisions of the Act, which are much broader and wider in scope. The Act regulates and mandates compl .....

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F 2004 - Dated:- 2-2-2017 - Dipak Misra And Prafulla C. Pant, JJ. For the Appellant: Mr. B. Krishna Prasad, AOR M/s. Khaitan and Co. For the Respondent : M/s. O. P. Khaitan and Co. Mr. E.C. Agrawala, AOR JUDGMENT Dipak Misra, J. The present appeals have been preferred against the judgment and order dated 30th June, 2003 passed by the Customs, Excise and Service Tax Appellate Tribunal (for short, the tribunal ) in Application Nos. C/MA (Ors.) 945/01-Mum in C/716, 781, 782, 814/01-Mum by the reven .....

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Gas Corporation Limited (ONGC) had obtained the approval of the Government of India on 25.03.1987 for the import of a Rig for such oil field services. It was granted a Special Import Licence bearing number P/CG/2103211 dated 24.04.1987 for the import of the said Rig along with certain drilling equipments. A confirmed irrevocable Letter of Credit amounting to US $ 1,521,000/- for the shipment of Capital goods covered under L/C No. ICICI/RF/87/2 dated 08.05.1987 was given by ICICI Bombay against .....

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as towed directly to the drilling site at Bombay High in October 1987. In February 1996, the importer wrote to the Commissioner of Customs, Mumbai, seeking permission to import the rig into Mumbai for carrying out repairs and re-export in terms of the provisions of Notification No. 153/94-Cus. 3. It is not in dispute that the rig was towed into the waters comprising Mumbai Port on 12.11.1996 and after it was repaired, taken out of the territorial waters of India. It was once again imported to In .....

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9 but subsequently was released following the order passed in writ petitions filed by the assessee before the Bombay High Court, permitting the rig to be used on payment of an amount of ₹ 1.0 crore and execution of a bond for its value. Thereafter, a notice was issued on 23rd September, 1999 to the assessee alleging that the import that took place in 1996 and 1998 were contrary to the provisions of law, and proposing confiscation of the rig under clauses (a), (b), (g), (h), (j) and (o) of .....

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. After considering the explanation offered by the assessee, the Commissioner passed an order wherein he recorded a finding that the rig was carried and brought to Mumbai on three occasions; in February, 1996, on 9th November, 1996 and on 9th December, 1998. It was not declared in the Import General Manifest of the towing rigs, as was required under Section 46 of the Act. Such formalities as filing the bill of entry were not undertaken and, therefore, the rig was ordered for confiscation under c .....

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. The authority exonerated P.A. Abraham, Managing Director of the Company, imposed penalties of ₹ 50,000/- each on P. Venkateswaran, Vice President and A.P.S. Sandhu, General Manager, ordered confiscation of three towing vessels but permitted them to be redeemed on payment of fine of ₹ 1.0 lakh each and imposed penalties on ONGC, and Benny Ltd., the importer s agent. 4. Aggrieved by the said order, assessee preferred appeal before the tribunal. On the foundation of the judgments, nam .....

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y enter into Indian territorial waters only for repairs. Alternatively, it was contended that method adopted by the Commissioner by starting with the originally built cost in 1982 and determining depreciation was totally incorrect. According to the assessee, there was no contravention of any aspect contained in Section 111 and hence, no penalty could be imposed. 5. On behalf of the department, it was propounded that the decision of the Bombay High Court was not relevant inasmuch the Court had no .....

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seriously opposed. 6. The tribunal took note of the undisputed fact that when the rig was engaged in drilling and such activities outside Indian territorial waters and while not being in areas under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other maritime Zones Act, 1976 (for short, the 1976 Act ), it was a foreign going vessel. The question that was posed by the tribunal was whether the vessel ceases to be a foreign going vessel when it enters into Indian territoria .....

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ions were made to carry the cargo to foreign ports, it did not cease to be a foreign going vessel. The tribunal referred to the authority in Pride Foramer(supra) wherein the Bombay High Court taking note of the judgment in Amership Management Pvt. Ltd. (supra) had opined that the imported stores supplied to a rig located in an area designated under the Act 80 of 1976 would not fall within Section 86 of the Act. The tribunal appreciated the fact that in the said decision reliance was placed on th .....

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covered by the first part of the definition and would be as such a foreign going vessel throughout the length of its voyage, if, during its voyage between these two ports, it touches other Indian Ports. It further opined that a rig had been held in Amership Management Pvt Ltd. (supra) as a foreign going vessel because it was engaged in the operations outside Indian territorial waters in view of clause (2) of the extended definition, but it would not be appropriate to apply the first part of the .....

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territorial waters for purposes of repairs, it is obviously not engaged in any operation outside India and loss its character of foreign going vessel. It may no doubt resume its character as a foreign going vessel when it leaves Indian territorial waters and resumes its operation. This is in fact that the view taken in Salgaonkar Engineering v. OJF Games. We, therefore, do not find it possible to say that the rig, on the occasion when it entered Indian territorial waters, was a foreign going ve .....

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nd theses completed only when the goods merge with the mass of the goods in the country. 8. After stating so, the tribunal dealt with the contention of the department that when the rig came into India, it lost its character as rig and became goods and its importation is complete. The revenue had placed reliance on UOI v. Mustafa and Najibhai Trading Co. 1998 (101) ELT 529 SCThe tribunal found that the said decision had been distinguished by the tribunal since the import as understood by this Cou .....

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he vessels which were to be used in Indian territorial waters for topping of bulk carriers could be said to be vessels for home consumption merely on that account. It said that for the purposes of levy of customs duty, it is necessary to determine whether imported goods are goods for home consumption . The Court in that case after analysing the statutory provisions held thus:- 15. In our view, for the purpose of the levy of customs duty, in order to determine whether any imported goods are goods .....

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India also fall within the meaning of the expression goods for home consumption has not been examined by us. We have only considered the question whether goods brought into India for use primarily in India are goods for home consumption notwithstanding that they are occasionally or incidentally used outside India. We are of the view that they are. 9. After referring to the dictum laid down in the said authority, the tribunal further referred to the authority in UOI v. V.M. Salgaonkar& Bros. .....

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ey are goods for home consumption and even if the vessel is used occasionally for short periods in India it would be goods for home consumption; that the rig under consideration was not intended to be used in India as it was only brought into India for the purposes of repair; and that it cannot be said that a rig brought into India for repairs and taken out after the repairs was intended to be used in India because it could not be properly put to use as repairs became necessary. 10. The tribunal .....

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in the country. It further opined that that the rig under consideration in Sedco Forex (supra) was brought into India in the course of fulfilment of a contract with the ONGC and later on with Enron Power and Gas Co. and in the present case, the rig under consideration had not entered the territorial waters for purposes of oil exploration or exploitation but only had entered the territorial waters for purposes of repair. The tribunal also observed that the rig was not in the process of transit t .....

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hence, it is deducible that import had not been completed. On the aforesaid basis, it concluded that in the circumstances payment of duty on the rig did not arise and even if the rig was liable to duty. 11. After so holding the tribunal addressed to the contravention of the provisions of clauses (f), (g) and (j) of Section 111 of the Act. Analysing various aspects, it opined that the provisions of Section 111 would be attracted and, therefore, contravention of clause (f) had been established. It .....

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been followed. Having regard to the facts, it reduced the fine for redemption of the rig. That has compelled the revenue to prefer Civil Appeal Nos. 1784-1787 of 2004 and M/s AbanLoyd Chiles Offshore Ltd. to file Civil Appeal Nos. 4342-4345 of 2004. 12. We have heard Mr. A.K. Panda, learned senior counsel along with Mr. B. Krishna Prasad, learned counsel for the appellant-department and Mr. Ramesh Singh, learned counsel appearing for respondent No. 1 assessee in all the appeals. 13. To apprecia .....

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en a vessel is used as a conveyance of an imported good, the position would be different. In this context, reference to Section 43 of the Act would be profitable. It reads as under:- 43. Exemption of certain classes of conveyances from certain provisions of this Chapter.- (1) The provisions of sections 30, 41 and 42 shall not apply to a vehicle which carries no goods other than the luggage of its occupants. (2) The Central Government may, by notification in the Official Gazette, exempt the follo .....

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orollary, it would not include a ship or vessel. Sub-section (2) to Section 43 states that the Central Government may by notification in the Official Gazette exempt the different classes of conveyances from all or any other provisions of the Act. However, we do find some difficulty as taxation or taxability of the foreign going vessels when they enter Indian territorial waters is not directly addressed in the fasciculus of the Sections from 29 to 43 of the Act. These provisions do make a distinc .....

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ngers between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not, and includes - (i) any naval vessel of a foreign Government taking part in any naval exercises; (ii) any vessel engaged in fishing or any other operations outside the territorial waters of India; (iii) any vessel or aircraft proceeding to a place outside India for any purpose whatsoever; 16. The aforesaid expansive definition by way of deeming ficti .....

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side India, is not of any relevance. Consequently, a rig which is engaged in operations outside the territorial waters of India would be a foreign going vessel. However, a rig carrying on operations within the territorial waters of India would not be a foreign going vessel. Be it clarified, it is not necessary to dilate and examine the issue whether rigs are vessels, for it is an accepted and admitted position settled beyond doubt. 17. Coming to the core issue, we have to refer to the word impor .....

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t; means any goods which are chargeable to duty and on which duty has not been paid; x xxx (27) "India" includes the territorial waters of India; x xxx 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The prov .....

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has been paid, the goods cease to be dutiable goods. Section 12 of the Act begins with the words Except as otherwise provided in this Act or any other law for the time being in force . Thus, it gives primacy to any other law being in force, and records that the said provision would apply when otherwise not provided in the said Act. Therefore, when any other provision of the Act or other law for the time being provides differently, that would not attract customs duty under Section 12. Duty of cu .....

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t defines that unless the context otherwise requires, goods includes - (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of moveable property . Import is defined as meaning bringing into India from a place outside India . India is defined as including the territorial waters of India . Imported goods are defined to mean any goods brought into India from a place outside India but not including goods which have been cleared .....

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report is defined to mean the manifest or report required to be delivered under Section 30 . Stores are defined to mean goods for use in a vessel or aircraft and includes fuel and spare parts and other articles of equipment whether or not for immediate fitting . And again:- 8. Chapter VI of the Customs Act is concerned with provisions relating to conveyances carrying imported or export goods , Chapter VII deals with clearance of imported goods and export goods . Chapter VIII deals with goods in .....

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in India; or (b) at any time while carrying passengers or cargo brought in that vessel or aircraft, at any place other than a customs port or a customs airport, as the case may be. Section 30 imposes a duty on a person in charge of the conveyance carrying imported goods to deliver to the proper officer, within twenty-four hours after arrival, an import manifest in the case of a vessel or aircraft or an import report, in the case of a vehicle, in the prescribed form. Section 31 prohibits the mast .....

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by the proper officer granting entry outwards to such vessel. Section 41 prescribes that an export manifest in the case of a vessel or an aircraft and an export report in the case of a vehicle should be filed by the person in charge of a conveyance before the departure of the conveyance from a customs station. Section 42 prohibits the departure of a conveyance which has brought any imported goods or has loaded any export goods to depart from that customs station without a written order of the p .....

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mport manifest or import report as to be for transit in the same conveyance, to a place outside India. Section 54 of the Act deals with transshipment of goods and the requirement to furnish bill of transshipment or declaration of transshipment. 21. Subsequently, dealing with the question of levy of custom duty, the Court scanning the anatomy of Section 46 of the Act held that under the scheme of the Act the goods which are imported into India from a place outside India or enter India, can be cla .....

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me consumption. Goods for home consumption are required to be cleared on payment of duty. Elucidating on the issue of charge to tax, i.e., the liability to pay customs duty, the Court held as under:- 12. Section 46(1) which we have extracted earlier requires the importer of any goods for home consumption or warehousing to present to the proper officer a bill of entry in the prescribed form. The question, which arises for consideration, therefore, is whether the vessels in the two cases before us .....

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sion goods is used in Section 46 of the Act requires the expression to be interpreted for the purpose of Section 46(1) as excluding a vessel, aircraft or vehicle. In answer to a direct question by us, Shri Setalvad confessed that if a vessel, aircraft and vehicle are required to be excluded from the meaning of the expression goods in Section 46(1) of the Act, he was unable to suggest what other purpose was to be served by the inclusive definition of the expression which expressly brought within .....

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e vessels, aircrafts and vehicles, we must take it that the object of the inclusive definition was to bring within the net of taxation vessels, aircrafts and vehicles which are imported into India. It is undisputed and indeed it is indisputable that Section 46(1) is a prelude to the levy of duty or a first step in that direction. It must, therefore, follow as a necessary sequitur that vessels, aircrafts and vehicles are goods for the purpose of Section 46(1). Any other interpretation may lead to .....

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goods which are warehoused are naturally goods which are openly imported into India without concealment. The expression other goods mentioned in Section 15(c) is obviously meant to cover other imported goods such as goods imported clandestinely and goods which have otherwise escaped duty. 22. Explicating on whether there was a difference between carriers which carry the goods and the goods, it was observed that Section 46(2) and elsewhere the word goods may be used in a way that it does not inc .....

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for topping-up bulk carriers, can be said to be vessels for home consumption merely on that account, even though when they entered Indian territorial waters they came under their own power as oceangoing vessels and notwithstanding that they are still capable of being used as oceangoing vessels and are in fact so used during the off-season when it is not practicable to do topping-up operations and, for that matter, even during the fair season when they have necessarily to go into the open sea to .....

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during off-season, that is when because of inclement monsoon weather topping-up operations cannot be done in MormugaoHarbour, the vessels do go out into the open sea sometimes from one Indian port to another and at other times to foreign ports. Of course, even in the course of topping-up operations during the fair season, it is necessary for the trans-shippers to go into the open sea to reach the bulk carriers. But, in our view these operations do not make these vessels oceangoing vessels when t .....

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aters of India and was not used as an ocean going vessel. As a sequitur, it was held that the vessel were goods imported into India for home consumption for they were primarily to be used as a vessel in India, i.e., in the territorial waters. However, the Court was conscious and expressly guarded the said proposition clarifying that it was not pronouncing any dictum as to what would be the position if these goods (the vessel) were not intended to be primarily used in India or used occasionally f .....

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rig was used for operations within the territorial waters of India, the rig would meet the requirement and satisfy the condition that it was an imported good meant for home consumption. There would be no doubt on the said legal position in view of the subsequent pronouncement in V.M. Salgaoncar(supra), wherein dwelling on the question of home consumption it was held that the expression consumption does not involve complete using up of the commodity and would include putting the commodity to use .....

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equipment, transhippers are intended to be used mostly to carry the cargo from harbours to the high seas and vice versa. That such transhippers often move into the open sea is also not disputed by the department. Thus considering the question from all the different angles, it is reasonable to take the view that merely because transhippers are used for carrying cargo for loading into the bulk carriers (those being unable to touch the port) they cannot be excluded from the category of ocean-going .....

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6. In the result we accept the contention of the owners of the trans-shippers that such vessels are entitled to the benefit of the notification dated 11-10-1958. The appeals are disposed of in the above terms. 25. The aforesaid passage refers to the Government s decision that had brought out a new notification to envelop all vessels including a transshippers within the ambit of ocean going vessels immediately after the pronouncement in Chowgule and Co. Pvt Ltd (supra). 26. The decision in V.M. S .....

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continental self and exclusive economic zones, which have been declared by the notification to be a part of the territory of India for limited purpose. The natural consequence of the said notification was to extend the Customs Act and the Customs Tariff Act to the designated areas outside the territorial waters to introduce the custom regime in such areas resulting in levy and collection of custom duty. The issue raised in the said case related to consumption of goods or stores imported by the .....

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e issue of chargeability and liability to pay customs duty has been on different precepts and grounds. 29. The adjudication order refers to and is predicated on the rig being brought to the port for repairs in February, 1996 for which permission was sought from the Commissioner of Customs vide letter dated 12th February, 1996 under the provisions of notification No. 153/94 Cus. The rig subsequently moved out of the port after repairs. The rig was brought for the second time to the Mumbai port fo .....

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rs for repairs. The adjudication order does not record that the rig was in operation within the territorial waters of India. On the other hand, the adjudication order does not spell out that the rig did not operate outside the territorial waters of India. The contention raised by the owner in this regard was neither specifically rejected not a different finding was recorded. The finding was that the rig when it is repaired in India, it is imported into India for home consumption. The adjudicatio .....

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a. Thus, it cannot be said that the vessel, i.e., the rig, was imported into India when it had anchored twice in 1996 and once in 1998 for the purpose of repair, for the element of home consumption is missing even when the vessel, i.e., the rig, had entered the territorial waters. Thus, it would be incorrect to hold that mere repair of the vessel in 1996 or in 1998 would constitute taxable import. 30. The authorities have laid emphasis on the factum that the rig was purchased for being used in t .....

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