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TMI Blog2021 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... or a direction to the Assistant Commissioner, Central Excise, Customs & Service Tax, Balasore Division, Orissa (Opposite Party No.3) and the Commissioner, Central Excise, Customs & Service Tax, Bhubaneswar-1 (Opposite Party No.4) not to deny Petitioner No.1 permission to convert the vessel 'Jag Arnav' to 'coastal status' and not to charge customs duty. The third is to prohibit Opposite Party No.3 from withholding permission to convert the foreign going vessels of Petitioner No.1 to 'coastal run' and from demanding any customs duty on all of the vessels of Petitioner No.1, including 'Jag Arnav', imported into India prior to 17th March, 2012. Background 2. Petitioner No.1 is stated to be a private sector shipping service provider involved in transportation of crude oil, petroleum products, gas and dry bulk commodities. It is stated to be a member of the Indian National Ship Owners Association (INSA). 3. Petitioner No.1, on 3rd July, 2001 acquired from Panama, a motor ship, 'Jag Arnav'. In terms of Section 406 of the Merchant Shipping Act, 1958 (MS Act), a general licence for 'Jag Arnav' to undertake worldwide trade and coastal trade in Indian waters was obtained by Petitioner No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r home consumption". 7. In relation to ships, vessels, etc. Chapter 89 of the CT Act is relevant since it deals with the classification of 'ships, boats and floating structures.' The Customs Tariff Heading (CTH) 8901 relates to 'vessels for transport of persons and goods.' Two broad types of duties are leviable. One is the Basic Customs Duty (BCD) under Section 2 of the CT Act and the other is the Countervailing Duty (CVD), a duty in lieu of Excise Duty levied under Section 3 of the CT Act. Prior to 1st March, 2011 BCD in respect of the import of ships was 'nil' in terms of Serial No.352 of Notification No.21/2002-Cus. The CVD too was nil in terms of prescribed tariff rate for CTH 8901. 8. This position continued till 16th March, 2012 as far as BCD is concerned. As far as CVD was concerned, the position of 'nil' duty continued under Clause 129 of the Finance Act, 2012 read with Notification No.6/2006-CE and 38/2011-CE. Therefore, till 16th March, 2012 there was no requirement of payment of customs duty on foreign going vessels imported into India. 9. Under Section 46 of the Act, in respect of goods other than goods intended for transit or transshipment, a Bill of Entry (BOE) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption, under section 46 of the Customs Act, 1962 (52 of 1962), on the date of the presentation of such fresh bill of entry, for the purposes of break-up of such goods. Condition 82-If, the importer files a bill of entry under section 46 of the Customs Act, 1962 (No.52 of 1962) at the time of conversion of vessel for coastal run subsequent to import and pays the applicable duty of customs on: (a) full lease or contract value, if the import is under a lease agreement or contract; (b) 1/120th of the applicable duty, for each month or part thereof, of stay in India as coastal vessel. Explanation-For the purpose of this entry. (1) "Foreign going vessel" shall have the same meaning as assigned to it under clause (21) of Section 2 of the Customs Act, 1962 (No.52 of 1962); (2) "Conversion to coastal Vessel" shall include the vessel granted a license for coastal trade under Section 407 of the Merchant Shipping Act, 1958 (44) of 1958) by the Director General Shipping and the vessel granted permission for carrying coastal goods, under the provisions specified in Chapter XII, of the Customs Act, 1962, (No.52 of 1962) by the proper officer of the customs: (3) "applicable duty" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erim orders passed by the High Court of Gujarat as well as the High Court of Madras under Annexures-5 & 6 to the present writ petition. After hearing the learned counsel for both the parties, this Court is of the considered view that the interest of justice would be best served, if a direction is issued to the opposite parties, to permit the entry of the petitioners' vessel i.e. 'Jag Arnav' (which was imported into India on 30th April 2013 by the petitioners-company) into 'Dhamra Port', without insisting on their Bills of Entry and further, the opposite parties shall not insist on payment of Countervailing Duty by the petitioners-company in respect of the aforesaid vessel while entering into Dhamra Port and also while considering the application for conversion of the foreign run vessel, into a coastal run vessel. This Court orders accordingly. It is further directed that the opposite parties shall not cause any unnecessary hurdles in processing the application of the petitioners-company for reversion of the vessel into foreign vessel as and when such circumstance so arise subject to, the petitioners-company depositing a sum of Rs. 5,00,000/- (rupees five lakhs) before the Registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior counsel assisted by Mr. S. Mohanty, learned counsel for the Petitioner and Mr. Subash Chandra Mohanty, learned counsel on behalf of Opposite Parties 3 and 4. Submissions of counsel 18. The trigger for the filing of the present petition is the stand of Opposite Parties 3 and 4 that since no BOE was filed with the Customs Authorities when 'Jag Arnav' entered India at Paradeep, Orissa on 30th April 2003, Petitioner No.1 is liable to pay customs duty at the time of conversion of 'Jag Arnav' from a foreign going vessel to a coastal run vessel. The case of the Opposite Parties, as submitted by Mr. Mohanty, learned counsel appearing for them, is that Petitioner No.1 is eligible to avail exemption from payment of BCD subject to fulfillment of the condition that CVD will be paid at the time of conversion of the foreign going vessel into a 'coastal run' vessel. The contention is that every 'entry' of such vessel into India from outside India, even after the date of its first arrival in Indian waters, is an import. According to the Opposite Parties, the contention of Petitioner No.1 that the first time when 'Jag Arnav' came into India is the point at which customs duty can be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Opposite Parties to justify the insistence on payment of customs duty on the vessel in question at the time of its conversion from foreign going vessel to coastal run vessel. Notwithstanding that it was imported which was in fact imported way back on 13th April, 2003, no customs duty was payable thereon and in support thereof reliance has been placed on the Notification 16/2012-Cus dated 13th June, 2012, the Court proposed to legally by examining that circular in some due date. The subject matter of the said circular issued by the CBEC "procedure followed for import of Indian vessels and filing of import general manifest, bill of entry-regarding". 22. The circular explains in detailed that the context in which it is being issued since the difficulties was brought to the notice of the CBEC by the INSA stating that the customs field formations are insisting on filing of Import General Manifest (IGM) and BOE "even in respect of those vessels that were imported in the past and which were exempt from payment of import duty." The circular then proceeds to examine the various categories of vessels imported into India. These includes: "(1) Foreign flag vessels, i.e. vessels th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sels which are being converted for coastal trade was initially imposed from 1-3-2011, and subsequently retrospective exemption has been provided for the period 1-3-2011 to 16-3-2011 vide clause 129 of the Finance Act, 2012, the requirement for filing IGM and Bill of Entry may be insisted in all such cases w.e.f. 17-3-2012, that is the date from which levy of CVD has come into force. 5. It is also clarified that all vessels including foreign going vessels for its entry into/exit from the country during its journey as foreign going vessel and the Indian flag vessel/Indian Ship for subsequent use as foreign going vessel would not require filing of IGM and Bill of Entry as conveyance, since the same are not imported goods to be cleared for home consumption. 6. Accordingly, the field formations may adjudicate the cases involving any violation where the IGM or Bill of Entry in respect of vessels were not filed at the time of import, on its first arrival in India or on its conversion into coastal trade and appropriate penal action be taken against the offenders." 25. A careful reading of the above circular reveals that it does not support the contention of Opposite Parties that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual narration, after the interim order of this Court dated 11th January, 2013 a provisional BOE was filed by Petitioner No.1 on 15th January, 2013 and it was provisionally assessed on 10th February, 2013. 'Jag Arnav' re-converted to foreign status at Mundra on 1st February, 2013 and to coastal run status at Paradeep on 10th February, 2013. Provisional BOE was filed on 15th February, 2013 and provisional assessment took place. On 9th March, 2013 it reconverted to foreign status at Mundra. 32. Mr. Shah points out how 'Jag Arnav was in foreign status at the time of import and thereafter for nearly ten years. It converted to coastal run status for the first time at Dhamra on 6th January, 2013. It had called on Indian ports on various occasions in 2003, 2008 and 2009. 33. A similar list of dates have been filed for the two other vessels, i.e., 'Jag Ratan' and 'Jag Rani' both of which arrived at Indian port, i.e., Paradeep for the first time on 13th November, 2007 and 26th August, 2011 respectively. Both these vessels have been converted several times from coastal run status to foreign going status depending on the journeys undertaken. On 2nd March, 2013, 'Jag Ratan' reverted to for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempt from payment of customs duty it cannot be made amenable to such duty nine years later by virtue of a condition in another exemption notification of March 2012. 37. One of the contentions of the Opposite Parties is that after the Notification dated 17th March 2012 was issued, customs duty is leviable on every occasion when the vessels in question entered India as a 'conveyance' carrying cargo. In relation to Indian flagged vessels, as the three in question in this case, at the time of their first entry into Indian waters they are considered as imported 'goods'. Thereafter every time they re-renter these vessels conduct their activity as 'conveyance' as defined under Section 2 (9) of the Act. Such conveyances are not re-imported into India every time they enter Indian waters since they were never 'exported' from India. Section 20 of the Act would, therefore, have no applicability. Only their cargo would be amenable to customs duty, if at all. This position has been explained in Commissioner of Customs, Mumbai v. Aban Loyd Chiles Offshore Ltd. (2017) 3 SCC 211 as under: "13. To appreciate the controversy, it is necessary to understand certain concepts as envisaged under th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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