TMI Blog2003 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 India on 9th December, 1998, being towed into Indian territorial waters by two tugs of the ONGC, MV Malaviya IV and SCI-05. After repairs, the rig was again towed out of the Indian territorial waters. Investigations by the Customs authorities into these two cases of importation lead them to conclude that there has been contravention by these appellants and others with regard to these two acts of bringing the rig into India. The rig was formally placed under seizure on 27th March, 1999 but subsequently, following writ petitions filed by these appellants before the Bombay High Court, permitted to be used on payment of an amount of Rs. 1.0 crore and execution of a Bond for its value. A notice was issued on 23rd September, 1999 to these appellants, alleging that the importation 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 Section 111 of the Act and clause (a) of Section 113 of the Act, demanding duty amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The long-standing practice in the Customs Department was recognized by the Tribunal in its decision in Sedco Forex International Drilling Inc. v. CC, for a manifest and bill of entry not to be filed on importation of drilling rigs. Therefore, no duty is payable and no penalty is imposable. Alternatively, the value determined by the Commissioner by depreciation from the cost of construction is incorrect. The method, adopted by the Commissioner, of starting with the originally built cost in 1982 of US $ 34.50 million and allowing depreciation to the extent of 70% is incorrect. The appellant purchased the rig in 1987 at Rs. 7.11 crores approx. and, by applying Rule 3 of the Customs Valuation Rules, this transaction value should be accepted. It is further contended that the benefit of drawback under Section 76 of the Act, which would be available as the rig was exported after import on each occasion, has not been considered. Confiscation of the vessels is questioned on the ground that permission was sought by appellant's letter dated 12th February, 1996 for importing the rig into India for repairs and re-exporting it and the notice itself acknowledges that permission was granted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts of drilling rigs imported into Mumbai for transhipment to the places and locations of the oil rigs. It was a contention the writ petition that the oil rigs were foreign going vessels and, therefore, by application of Section 86(2) of the Act, these parts, which were ship's stores, were liable to duty. The Court noted that a vessel, as commercially understood, would also include a sailing vessel or other vessels not necessarily fitted with mechanical means of propulsion. It noted the requirement for an international loadline certificate for a rig and its description in the insurance policy and the fact that foreign Governments have considered oil rigs and other factors to be vessels, and concluded that oil rigs were vessels. It noted that a rig stationed beyond Indian territorial waters, engaged in any other operation, satisfied the definition contained in Section 2(21) of Foreign Going Vessels Act. It concluded that the spare parts imported for transhipment and shipment to these rigs would therefore be stores and entitled to be cleared without payment of duty. This judgment therefore is the authority for the proposition that a drilling rig, when engaged in drilling operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsoever. A vessel may be termed a foreign going vessel either because it falls within the first part of the definition or within any of the three clauses of the latter part. 7.In Amership Management Pvt. Ltd., the Bombay High Court evidently found that a rig engaged in drilling or survey operations outside Indian territorial waters was a foreign going vessel, because of clause (2) of Section 24. The ship which came in for repairs, which was under consideration in Scindia Steam Navigation Co. Ltd. was held to be a foreign going vessel, not because it is engaged in any operation outside India but because it fell in the first part of the definition, that it was for the time being engaged in the carriage of goods or passengers between any port in India or any port outside India. Thus, a ship that is engaged in carriage of cargo or passengers between Mumbai and Abu Dhabi is a foreign going vessel 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. The judgment in Scindia Steam Navigation Co. Ltd. is based on the view that, despite bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Co. - 1998 (101) E.L.T. 529. 10.In the latter judgment, the Supreme Court said at page 542 that a vessel which arrived at the outer anchorage of the Bombay port had come into port because the anchorage was part of that port. This judgment has no particular relevance to the facts before us. It is not the appellant's case that the rig had not entered the Bombay Port but that despite such entry, the import, as defined by the Supreme Court, has not taken place. In its judgment in Chougule and Co. v. UOI - 1987 (28) E.L.T. 39, the Supreme Court had for consideration whether two transhipers which entered India were goods intended for home consumption and a bill of entry was required to be filed with regard to it. The Court could not find any justification for holding the vessels were not goods for the purposes of Section 46(1) of the Act and therefore addressed the question as to whether the 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 in order to determine whether imported goods are "goods for home consumptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forex was brought into India in the course of fulfilment of a contract with the Oil and Natural Gas Commission and later on with Enron Power and Gas Co. Unlike in that case, the rig under consideration here had not entered the territorial waters for purposes of oil exploration or exploitation. It had entered the territorial waters for purposes of repair. It was not in the process of transiting through Indian waters for the purpose of going from one point to another for drilling. This being the case, it cannot be said that the rig was goods imported for home consumption and the goods covered by Section 46(1) of the Act. So also, the ratio of the Supreme Court's judgment holding that while the act of importation commences when the goods enter the territorial waters, it continues and is completed only when it merged with the mass of the goods in the country will apply to the facts before us. The rig entered the country without such entry being planned due to circumstances beyond the control of its owners or charterers. Therefore, applying the common ratio of these judgments, it will follow that its import had not been completed. The question of payment of duty on the rig also will not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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