2006 (4) TMI 370 - AT - Customs

Customs Commissioner lacks jurisdiction to seize rig in Exclusive Economic Zone, nullifying proceedings

The Tribunal held that the Commissioner of Customs (Preventive) lacked jurisdiction to seize the rig in the Exclusive Economic Zone, leading to the ... Interpretation of statute - Indian Territorial Water - Adjudication - Demand - Vessel/Oil rigs - Duty liability - Customs duty - Confiscation - EXIM - Second-hand capital goods - Interpretation of statute - Oil rig Issues Involved:1. Jurisdiction of the Commissioner of Customs (Preventive).2. Liability for payment of customs duty on the rig.3. Applicability of customs practice for rigs and vessels.4. Demand for duty under Section 125(2) of the Customs Act.5. Obligation to file Shipping Bills and Bills of Entry.6. Confiscation of the rig under Sections 111 and 113 of the Customs Act.7. Penalties on appellants.Detailed Analysis:Jurisdiction of the Commissioner of Customs (Preventive):The Tribunal held that the Commissioner of Customs (Preventive), Mumbai, did not have the jurisdiction to seize the rig in the Exclusive Economic Zone (EEZ) or issue a notice and adjudicate the case. The territorial jurisdiction of the Commissioner of Customs (Preventive) is confined to the districts of Mumbai, Thane, and Raigad. The seizure of the rig and subsequent proceedings were thus declared null and void.Liability for Payment of Customs Duty on the Rig:The Tribunal found that once the rig was assessed to duty and cleared for home consumption in 1987, it ceased to be imported goods and acquired the characteristic of a foreign-going vessel. Therefore, no duty could be demanded on its subsequent movements in and out of India. The Tribunal emphasized the established practice of not levying duty on vessels once they have been cleared for home consumption.Applicability of Customs Practice for Rigs and Vessels:The Tribunal referred to the established customs practice as recorded in the Sedco Forex case, which states that no duty is payable on the movement of rigs once they have been cleared for home consumption. The Tribunal held that this practice should apply equally to all movements of the rig, whether within the EEZ or to foreign countries, as the rig had acquired the characteristic of a foreign-going vessel.Demand for Duty Under Section 125(2) of the Customs Act:The Tribunal held that duty under Section 125(2) could only be demanded from the owner or the person from whose possession the goods were seized. Since Essar was neither the owner nor in possession of the rig at the time of seizure, the demand for duty against Essar was not sustainable.Obligation to File Shipping Bills and Bills of Entry:The Tribunal held that there was no obligation on Essar or Noble to file Shipping Bills or Bills of Entry for the inward and outward movements of the rig, as it had acquired the characteristic of a vessel. The rig was only required to file an Import General Manifest (IGM) or Export General Manifest (EGM) if it was carrying cargo, which was not the case here.Confiscation of the Rig Under Sections 111 and 113 of the Customs Act:The Tribunal found that the rig was not liable for confiscation under Sections 111 or 113 of the Customs Act, as there were no violations of the customs provisions. The Tribunal held that the established practice of treating the rig as a vessel should be followed, and no Shipping Bill or Bill of Entry was required for its movements.Penalties on Appellants:The Tribunal held that since there was no violation of customs provisions, no penalties could be imposed on the appellants. The Tribunal emphasized the principle of legitimate expectation, stating that the appellants had a reasonable expectation to be treated in accordance with the established customs practice.Conclusion:The appeals were allowed, and the seizure of the rig, the demand for duty, and the penalties imposed were set aside. The Tribunal ordered consequential relief to the appellants.