Customs duty on a cleared rig, territorial jurisdiction, and confiscation rules fail for later movements without cargo.

A customs rig, once imported, assessed and cleared for home consumption, ceases to be imported goods and is treated as a vessel; its later movements into and out of India, including return after repairs abroad, do not attract fresh customs duty, shipping bill or bill of entry obligations, or confiscation merely because it re-enters without cargo. The article also states that customs action taken by an officer outside the notified territorial jurisdiction is void, including seizure, show cause notice and adjudication in the Exclusive Economic Zone. On the same footing, alleged breaches of import policy or sale conditions could not sustain penalty where the policy restrictions had been relaxed and permissions had been obtained.

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Issues: (i) Whether the Commissioner of Customs (Preventive) had territorial jurisdiction to seize the rig, issue the show cause notice, and adjudicate the demand and confiscation proceedings in the Exclusive Economic Zone; (ii) whether customs duty could be demanded on the rig on its subsequent movements into and out of India, including return after repairs abroad, after it had been cleared once on a bill of entry in 1987; (iii) whether the rig was liable to confiscation and penalty for non-filing of shipping bills or bills of entry and for alleged breach of the import policy or licence conditions on sale in 1996.

Issue (i): Whether the Commissioner of Customs (Preventive) had territorial jurisdiction to seize the rig, issue the show cause notice, and adjudicate the demand and confiscation proceedings in the Exclusive Economic Zone.

Analysis: The proceeding turned on whether the seizure and subsequent action were taken by the proper officer within the notified territorial jurisdiction under the Customs Act. The relevant notification confined the jurisdiction of the Commissioner of Customs (Preventive) to specified districts, and the Exclusive Economic Zone, especially non-designated locations where the rig was seized, was not shown to fall within that territorial limit. The deeming provisions of the maritime zones law did not expand the district jurisdiction of the State customs formation. Concurrent jurisdiction with the Commissioner of Customs (Imports) could not be assumed for areas beyond the notified territorial limits.

Conclusion: The seizure, show cause notice, and adjudication were without jurisdiction and therefore void.

Issue (ii): Whether customs duty could be demanded on the rig on its subsequent movements into and out of India, including return after repairs abroad, after it had been cleared once on a bill of entry in 1987.

Analysis: Once the rig was imported, assessed, and cleared for home consumption, it ceased to be imported goods. The decision treated the rig as having acquired the character of a vessel or foreign going vessel, and relied on the long-standing customs practice, affirmed in prior precedent, that such vessels are not subjected to fresh customs duty on every inward or outward movement. The same position applied whether the movement was from a non-designated area, a foreign country, or after repairs abroad, because the rig had already undergone initial customs assessment and no cargo was shown to have been carried so as to attract repeated manifest or entry requirements. A contrary view would also create a recurring duty and drawback cycle inconsistent with the scheme of the Customs Act.

Conclusion: No customs duty was payable on the subsequent movements or on the repair-related re-entry of the rig.

Issue (iii): Whether the rig was liable to confiscation and penalty for non-filing of shipping bills or bills of entry and for alleged breach of the import policy or licence conditions on sale in 1996.

Analysis: The alleged procedural contraventions proceeded on the footing that the rig remained goods, whereas the rig was treated as a vessel after its initial clearance. The customs authorities themselves had accepted the rig's movement through manifests and port clearances, and no export or import cargo was shown to have been carried to trigger the statutory filing obligations relied upon by the Revenue. The alleged breach of the no-sale condition also failed because the policy regime had changed, the relevant transfer restrictions had been relaxed for freely importable second-hand capital goods, and permission from the licensing authorities had been obtained. In the absence of a valid duty demand or sustainable confiscation, penalties and consequential duty under the confiscation provisions could not survive.

Conclusion: The rig was not liable to confiscation, and no penalty could be sustained against any appellant.

Final Conclusion: The appeals succeeded in full, with all duty demands, confiscation, redemption fine, and penalties set aside as unsustainable in law.

Ratio Decidendi: Once a rig imported and cleared for home consumption ceases to be imported goods and is treated as a vessel, subsequent movements without cargo do not attract fresh customs duty, manifest or entry obligations, confiscation, or consequential penalties, and action taken beyond the officer's territorial jurisdiction is void.

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