TMI Blog2020 (3) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... sel was berthed in Cochin for most of the time during the disputed period and thus it ceases to be foreign going vessel. Moreover, we find that the vessel was anchored in Cochin Port and was under the watchful eyes of Customs and Port authorities. Many times, Customs authorities have boarded the Vessel as demonstrated by the counsel for the appellants. Customs officers were supervising the bonded stores of the vessel. It was well within the right and mandate of Customs authorities to advise the appellants to ensure that there were no procedural and other infractions. No proof of such efforts and correspondence, if any, has been placed on record before us. It can be seen that the arguments of adjudicating authority were controverted and we are inclined to hold that the impugned vessel is foreign going vessel and as such the exemption in terms of Section 87 of the Customs Act, 1962 is available to the appellants, despite the fact that it was lying berthed at Cochin for most part of the time. The impugned vessel ASEAN Explorer is a foreign-going vessel, within the ambit of (ii) of Section 2(21) of the Customs Act, 1962, being engaged for performing repair/cable laying activities in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion occurred 5-20 nautical miles of India, during the period 4.10.2007 to 6.10.2007. Revenue argued that out of 1750 days under consideration, the vessel was out for repairs only for 301 days and as such it cannot be considered as a Foreign Going Vessel (FGV) and exemption availed for ship stores Bunkers etc is not available to the vessel. The vessel was seized on 17-02-2012 and was provisionally released on 27-02-2012. A show cause Notice dated 10-07-2012 along with a corrigendum dated 14-08-2012 was issued to the Appellant M/s Asean Cable Ship Pvt Ltd and Too Talk Leong, Master CS of the vessel. The Show Cause Notice was adjudicated by Commissioner of Customs, Cochin vide OIO 1/2013 dated 04-04-2013 where in the Commissioner confiscated the Vessel but allowed the same to be redeemed on payment of Redemption fine of ₹ 8,00,00,000; confirmed duty of ₹ 9,98,58,697, along with Interest, on spares, stores and Bunkers and imposed equal penalty under Section 114A. Hence, Appeal No. 27102 of 2013 was filed by M/s Asean Cable Ship Pvt Ltd and Appeal No. 27115 of 2013 was filed by Mr. Too Talk Leong, Master CS of the vessel. 2. Shri Rohan Shah, Advocate, appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian ocean, with the major portion of such cables (over 99.7%) being outside the Indian territorial waters; since first berthed at the Kochi port in the year 2003, AE has undertaken only a single repair activity within the Indian territorial waters. The definition is in two parts, which are independent, and if a case falls within the inclusive part of the definition above, it would still be considered as an FGV; the term engaged in covers not only a period when there is direct participation or activities, it also includes the period between such participation or activity and the time spent in preparation or readiness to undertake the activity. Foreign going vessels as per precedent, also cover situations where there is a repair of a ship for which purpose it may remain dry docked/ berthed for many months; there is a transshipment vessel engaged in loading/ offloading cargo from mother vessels which are too large to come closer to the port; such transshipment vessels carrying foreign cargo to and from mother vessels, also pick up domestic cargo and carry the same from one Indian port to another. Therefore, as per the undisputed facts and the settled law, the vessel AE is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law declared by the Hon'ble Supreme Court in Bharat Cooperative Bank (Mumbai) Limited vs. Coop. Bank Employees Union [AIR 2007 SC 2320], when the word includes is used in the definition, the Legislature did not intend to restrict the definition to its natural meaning, but extends the definition to cover what is enumerated even if it is beyond the natural meaning of the word. (ii). Hon'ble Calcutta High Court, in the case of Scindia Steam Navigation vs. CCE [1988 (36) ELT 581, held that repairs of a vessel in dry docks to enable the vessel to proceed to foreign port with export cargo, cannot not take away the status of the vessel being an FGV. The Court held that 13... Steps taken in proceeding to foreign ports with export cargo could not prevent the vessel from being a foreign going vessel within the meaning of the provision of Section 2(21) of the Customs Act, 1962. Necessary repairs in the dry docks were one of such steps to enable the vessel to proceed to foreign port with export cargo. (iii). Similarly, it was held in CCE Vs Shipping Corporation of India [1987 (29) ELI 182], that an FGV does not lose its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the definition; it is noteworthy that the words 'engaged in' are set out only in context of the main clause of the definition of FGV, i.e. in respect of vessels engaged in the carriage of goods or passengers between any port in India and any port outside India; impugned Order has erred in extending the scope of the same to even the inclusive limb of Section 2(21), i.e. for vessels engaged for operations outside India. Reliance is this regard can be placed on the judgment of the Hon'ble Supreme Court in Commissioner Of Customs, Mumbai Vs Aban Lloyd Chiles Offshore Ltd (2017 (346) E.L.T. 513 (S.C.)], wherein it has been clearly set out that each of the limbs of the definition set out in Section 2(21) is independent of each other, and the words set out in the main limb of the definition of FGV cannot be extended to the inclusive limb. The descriptive part and all three limbs of the inclusive part of the decision of FGV are satisfied. Commissioner failed to appreciate that the definition does not use the word Principally/Primarily . The benefit of provision should not be denied by reading such condition of exclusivity in such legal provision. He relies upon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that the said fighter jet is not engaged in the defence of the nation; it is evident that that merely because AE is not carrying out repair activities or cable-working exercises at a given moment in time, cannot take away its classification as an FGV. The issue is barred by Limitation 10. Shri Seth submits that invocation of extended period of limitation unsustainable in present facts; there has not been any suppression of facts by the Appellant in the present facts; Customs Department was always aware of the fact that AE has been stationed at Cochin port during its engagement under the SEAICOMA, which emerges from the various correspondences with the Customs Department; such information was not only provided to the Customs authorities, but also to the relevant police officials at the Cochin port, clearly setting out that AE has berthed and that it will be berthing at the Cochin port for a long period of time; sample correspondences tabulated below are had with authorities at Cochin port. Date Addressed to Context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact or misrepresentation which can be associated with the stay of AE at Kochi Port or its activities under the SEAICOMA; in the absence of such suppression of facts or misrepresentation, the Hon'ble Commissioner has erred in invoking the extended period of limitation; it was held by Hon'ble Supreme Court, in Pahwa Chemicals Private Limited Vs Commissioner (2005 (189) ELT 257 (SC), that mere failure to declare does not amount to willful misdeclaration or suppression; there must be some positive act on the part of the party to establish either willful misdeclaration or suppression; where facts are known to both the parties, it cannot be said that there has been any willful misdeclaration or suppression. As all relevant facts regarding AE, including its stay at the Cochin port and its FGV status, were known to the Customs department, the invocation of extended period of limitation is not available and bald allegations of the Customs Department on this count cannot sustain. Obtaining of coastal Licences from DG Shipping will not change the character of the vessel: 12. Learned Counsel for the appellants submits that the Impugned Order (at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular statute to other statutes, especially when pertaining to tax statutes. Hon'ble Supreme Court, in UOI Vs Association of Unified Telecom Service Providers of India [2019(14) SCALE513], reiterated the well-established legal principle that when a term has been defined in the Statute, it ought to prevail over meaning from any other sources. Therefore, in the present case, wherein AE qualifies as an FGV on account of being contractually mandated to undertake operations outside India, the pre-emptive obtaining of a licence under Section 407 of Merchant Shipping Act cannot impede its classification as an FGV. (iii). Hon'ble Bombay High Court in UOI Vs BPCL 1987 (30) ELT 383 (Bom), held that a status of a vessel as an FGV cannot cease merely because it had obtained a licence under Section 407 of the Merchant Shipping Act; on the contrary, the requirement to obtain such licence would by itself show that the vessel had retained the character of an FGV. The Impugned Order has sought to erroneously rely on the judgment in the case of Marco Shipping Services P. Ltd. vs. Commissioner of Customs, Ahmedabad 2008 (224) E.L.T. 93 (Tri- Ahmd) to arrive at the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single repair activity within the territorial waters of India, the status of AE ought to be considered to be that of an FGV even for such one-off activity within the Indian territorial waters of India, since the vessel was engaged in operations outside India throughout. However, without prejudice, the Appellant is willing to discharge the applicable Customs duty on the stores which have been consumed onboard during such period when the repair activity was undertaken, viz. 04.10.2007 to 06.10.2007, in Indian territorial waters. Shri Roshan Seth concludes his argument by submitting that in view of his arguments, the OIO may be set aside giving consequential reliefs. 14. Shri Gopa Kumar, Joint Commissioner, AR, arguing on behalf of the department, submits that C.S ASEAN Explorer cannot be categorized as foreign going vessel; the vessel was operating within the territorial waters of India without reverting into a vessel on coastal run; the vessel was carrying out cable repair in the Indian waters; the same is evident from the following. (i). the master of the vessel stated, on 06.02.2012, that the vessel had discharged functions within the territorial wate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the services of repair and maintenance at distances from 5 nautical miles to 145 nautical miles into sea off the Mumbai coast; these services have been rendered in the territorial waters and the exclusive economic zone/contiguous zone of India which extend up to 200 nautical miles in to the sea; the vessel was put into operations in India without having been first converted into a vessel on coastal run prescribed under CBEC circular 58/97 dt.06.11.1997; (ix). the vessel was utilized for discharge of such services in India has been put to use in India and therefore, ought to have been converted into one on coastal run before applying the same to rendering of services in India; the vessel received, during its stay in India on board, spares and consumables essentially meant for submarine cable repair activity and fuel and ship spares as stores during the period from 11.07.2007 to 24. 04.2012. Despite the above clear facts, appellant has been arguing that the vessel qualified to be a foreign going vessel; in all their declarations before the Customs authorities, they had declared the vessel as foreign going vessel only; this amounts to suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Offshore Ltd. Others 2017 (346) ELT 513(SC) that 24. As long as the 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 to any type of utility within the territory of India. Even when this condition is satisfied, it would amount to home consumption. 31. The Customs Act regulates and mandates compliance by the foreign going vessels when they enter the territorial waters. Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a 'good' meant for home consumption. Learned Authorised Representative further submits that the judgments support the department's view that when ASEAN Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEAIOCMA which contains areas bound by either scheduled cables or by great circle lines connecting Djibouti in the West, Perth in the South, Guam in the East and Toucheng in the North which covering scheduled area 1,05,000/- KMs. The cables are owned by various telecom companies (Maintenance Authorities); these telecom companies form a consortium to enter into a contract for maintenance of these cables; three cable ships have been placed at three berth points i.e. (a) Cochin, India (b) Singapore and (c) Subic Bay, Philippines; whenever a fault is noticed any of these cables, the relevant ship berthed closest the fault area is contractually required to undertake repairs; they also attend to cable working exercises on such scheduled cables. There is a necessity to undertake repair activities in a time-bound manner as these cables are used for the purpose of telecommunication and data transmission and a fault somewhere can catastrophically affect global trade and commerce and security communications between Defence establishments. As such the cable ships are required to undertake repairs quickly and efficiently and therefore, the cable ships are required to be in operational prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and C.S. ASEAN Explorer shall be based at port of Cochin (India) (as and when it comes into operation). We find that Article 5 speaks of provision cable ships, ROV and Depot (s) are as under: (a) On and from the Effective Date, the repair and maintenance of the Scheduled Cables shall be carried out by three Cable ships and ROVs, such Cable ships and ROVs being as specified in Schedule G and Schedule N. (b) .. (c) .. Cable ship Operator shall exercise due diligence to maintain is Cable ship to ensure that it is equipped with the necessary Operator to fulfil its obligations under this Agreement. (d) The Cable hip Operators shall carry out repairs and maintenance work expeditiously and in accordance with internationally accepted standards and in consultation with the relevant Maintenance Authority . The cost of such additional facilities provided directly in respect of a particular repair or maintenance operation shall be charged directly to that operation in accordance with Clause 19(g). Article 7(b) states that: (b) Under the Reduced Manning arrangement, each Cab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression does not necessarily signify active and continuous participation in the actual transaction of the day-to-day business of the firm; it is flexible enough to take in the case of a partner who devotes time, attention and labour to some activity or assignment calculated or designed to lead to the preservation, growth or advancement of the business of the firm. We also find that Hon ble Apex Court in the case of Regional Provident Fund Commissioner, Bombay Vs Sree Krishna Metal Manufacturing Co, Bhandara Oudh Sugar Mills Ltd., AIR 1962 SC 1536 held that: 8. In our opinion, this argument is not well-founded. The expression all factories engaged in any industry specified in Schedule I does not lend itself to the construction that it is confined to factories exclusively engaged in any industry specified in Schedule I. What exactly is meant by the clause, we will have occasion to deal with later on. For the present, it would be enough to say that when the Legislature has described factories as factories engaged in any industry, it did not intend that the said factories should be exclusively engaged in the industry specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are convinced that the impugned vessel is an FGV in terms of (ii) of Section 2(21) of the Customs Act, 1962. 23. We find that Learned Commissioner has argued that the appellants have obtained licenses from DG Shipping for Coastal run whenever repair activities were undertaken within the territorial waters of India. The appellants contend that such permission was obtained four times; however, actual repair operations within the Indian territorial waters were undertaken only once from 4th October 2007 to 6th October 2007. We find that Tribunal, in the case of Scindia Steam Navigation Vs CCE, 1998 (360) ELT 581, held that intermissions in the operations do not take away the status of a vessel as a foreign going vessel. The Tribunal observed that: 12. The only question involved in the instant application is as to whether the vessel concerned M.V. Jala Durga was a foreign going vessel within the meaning of Section 2(21) of the Customs Act, 1962. The learned Counsel appearing on behalf of the respondents submitted that the word for the time being pre-supposes that period on time is the material factor. It means or pre-supposes a vessel at the relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad-II, 2006 (205) ELT 726 (Tri. Bang.) Further, in the following cases, it was held that daughter vessels carrying goods from mother vessels, from a foreign Port to the Indian Port, would not lose its character as an FGV: (i) Trustees of the Port of Madras Vs K.P.V. Sheik Mohd. Rowther Co. Pvt. Ltd., 1996 (82) ELT 174 (SC). (ii) Turner Morrison Co. Ltd. Vs Asst. Collector of Customs For Exports (II), 1999 (110) ELT 484 (Cal.). (iii) South India Corporation (Agencies) Ltd. Vs Collector of Customs and Others, 1987 (30) ELT 100 (Cal.) (iv) CCE Vs Shipping Corporation of India, 1987 (29) ELT 182. 24. From the above decisions, it is clear that the status of any foreign going vessel does not change for the reason that it has had one or two incursions or engagements in the territorial waters of India. Moreover, the status does not change from day-to-day depending on the work the vessel attended that particular day. Such a finding would lead to absurd conclusions. We find that the status of the impugned vessel is decided by the terms of Agreement of SEAIOCMA as the vessel is engaged in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applies or extends, the aid of Section 2(21) of the Customs Act cannot be taken to get the benefit under Sections 86 and 87 of the same Act. The principle underlying under Sections 86 and 87 is that the stores are consumed on board by a foreign going vessel. If the so-called foreign going vessel is located within a territory over which the coastal State has complete control and has sovereign right to extend its fiscal laws to such an area with or without modifications and the stores were consumed in the area to which the Customs Act has been extended, reference or reliance to the vessel being a foreign going vessel shall be of no consequence and the customs duty would be leviable as the goods are consumed within the territory to which the Customs Act has been extended as per the Maritime Zones Act, 1976 and the International Convention UNCLOS, 1982. From the above, we find that though the status of an FGV is not altered by the fact that such vessel or aircraft has run to a domestic Port or Airport during such time, duty on the stores consumed when the vessel was involved in operations within Indian territorial waters, needs to be collected in view of the above ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l within the right and mandate of Customs authorities to advise the appellants to ensure that there were no procedural and other infractions. No proof of such efforts and correspondence, if any, has been placed on record before us. It can be seen that the arguments of adjudicating authority were controverted and we are inclined to hold that the impugned vessel is foreign going vessel and as such the exemption in terms of Section 87 of the Customs Act, 1962 is available to the appellants, despite the fact that it was lying berthed at Cochin for most part of the time. However, in view of the Hon ble Apex court s decision in Aban Loyd Case (supra), we find that the duty on the ship stores consumed while the vessel was performing operations within Indian territorial waters requires to be paid by the appellants. Learned Counsel for the appellants has fairly conceded the same and expressed willingness to pay the same. 28. Learned Counsel for the appellants submits that a major portion of the demand is barred by limitation. He submits that declarations about the registry of the vessel, cargo, crew and nature of the vessel as a cable laying/repair vessel were declared in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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