Ship stores exemption depends on vessel eligibility, while immaterial valuation errors cannot justify denial or extended limitation.

Ship stores supplied to a chartered vessel were treated as eligible for duty-free clearance under Section 54(2) of the Customs Act where contemporaneous evidence, including a certificate that the vessel operated in a non-designated area, supported eligibility and no contrary material existed. The alleged misdeclaration of value did not affect entitlement to the exemption because valuation had no bearing on the benefit claimed, and the invoice disclosed the contractual structure and instalment basis, making deliberate suppression difficult to infer. On that reasoning, the challenge to denial of exemption and invocation of the extended period failed, and the impugned order was set aside.

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Issues: (i) Whether ship stores supplied to a chartered vessel were eligible for duty-free clearance under Section 54(2) of the Customs Act; (ii) whether the alleged misdeclaration of value could justify denial of the exemption and invocation of the extended period.

Issue (i): Whether ship stores supplied to a chartered vessel were eligible for duty-free clearance under Section 54(2) of the Customs Act.

Analysis: The vessel was on charter to ONGC during the relevant period, and ONGC had furnished a certificate to Customs stating that the vessel operated in a non-designated area. That constituted positive evidence of eligibility, and there was no material contradicting it. The earlier and continuous supply of ship stores also supported the conclusion that the vessel was in eligible waters.

Conclusion: The ship stores were eligible for duty-free clearance, and the finding denying the benefit was unsustainable.

Issue (ii): Whether the alleged misdeclaration of value could justify denial of the exemption and invocation of the extended period.

Analysis: The value of ship stores had no bearing on entitlement to the exemption. The invoice itself disclosed the contractual structure, total value, and instalments, making it difficult to infer any deliberate suppression or intent to misdeclare value. The alleged wrong declaration therefore could not support denial of the benefit or justify extended limitation on the basis of intent to evade duty.

Conclusion: The alleged misdeclaration did not defeat the exemption and did not justify invocation of the extended period.

Final Conclusion: The appeal succeeded and the impugned order was set aside, with the appellant succeeding on both the eligibility for duty-free ship stores and the challenge to the alleged misdeclaration.

Ratio Decidendi: Positive contemporaneous evidence establishing that a vessel operated in a non-designated area is sufficient to sustain duty-free ship-stores benefit, and an alleged valuation error that is immaterial to exemption entitlement cannot by itself justify denial of the benefit or extended limitation.

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