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Issues: (i) Whether the continental shelf and exclusive economic zone, when covered by notifications under the Maritime Zones Act, 1976 extending the Customs Act, are to be treated as part of India for customs purposes; (ii) Whether oil rigs operating in such designated areas are foreign-going vessels entitled to the benefit of Section 86 read with Section 87 of the Customs Act, 1962.
Issue (i): Whether the continental shelf and exclusive economic zone, when covered by notifications under the Maritime Zones Act, 1976 extending the Customs Act, are to be treated as part of India for customs purposes.
Analysis: The scheme of the Constitution, the Customs Act and the Maritime Zones Act, 1976 was read together. Territorial waters form part of India, while the continental shelf and exclusive economic zone are areas over which India has limited sovereign rights. However, Sections 6(6) and 7(7) of the Maritime Zones Act, 1976 authorise extension of an enactment to those areas, and the notifications issued under that Act extended the Customs Act and Customs Tariff Act to the designated areas. The deeming provisions therefore made those areas part of India for the limited purpose of the extended fiscal legislation.
Conclusion: Yes. For customs purposes, the designated areas in the continental shelf and exclusive economic zone were treated as part of India by virtue of the statutory extension.
Issue (ii): Whether oil rigs operating in such designated areas are foreign-going vessels entitled to the benefit of Section 86 read with Section 87 of the Customs Act, 1962.
Analysis: The exemption for stores under Sections 86 and 87 depends upon consumption on board a foreign-going vessel. Although oil rigs were recognised as vessels, once they operated in designated areas to which the Customs Act had been extended, the area of loading, unloading and consumption was legally within India for customs purposes. Reading Section 2(21) of the Customs Act with the Maritime Zones Act, 1976, the Court held that the rigs in such areas could not retain the status of foreign-going vessels for the purpose of claiming the exemption. The prior view in Amership Management was distinguished because the effect of the later notifications and the Maritime Zones Act had not been considered there.
Conclusion: No. Oil rigs operating in the designated areas were not entitled to the exemption under Sections 86 and 87 of the Customs Act, 1962.
Final Conclusion: The customs authorities were justified in levying duty on imported stores consumed on oil rigs stationed in the designated continental shelf and exclusive economic zone, and the appeals failed.
Ratio Decidendi: Where Parliament, through the Maritime Zones Act, 1976 and valid notifications, extends the Customs Act to designated areas in the continental shelf or exclusive economic zone, those areas are deemed part of India for customs purposes and imported stores consumed there do not qualify for the foreign-going vessel exemption under Sections 86 and 87 of the Customs Act, 1962.
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