Court Rules Customs Duty Exemption for Imported Vessels; Import Duties Apply at Time of Import

The court held that Condition No. 82 of Notification No. 12/2012-Cus could not be applied retrospectively to vessels imported before the notification date, exempting 'Jag Arnav' from customs duty. It ruled that customs duty could not be imposed on the conversion of foreign-going vessels to coastal status if exempt at the time of import. The court emphasized that duties applicable at the time of import are relevant, and subsequent notifications cannot impose new duties retrospectively. The petition was allowed, directing the release of deposited funds and rejecting the demand for Countervailing Duty for vessel conversions.

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Issues Involved:

1. Validity of Condition No. 82 of Serial No. 462 of Notification No. 12/2012-Cus.
2. Denial of permission to convert the vessel 'Jag Arnav' to 'coastal status' and charging customs duty.
3. Withholding permission for conversion of foreign-going vessels to 'coastal run' and demanding customs duty retrospectively.

Issue-wise Detailed Analysis:

1. Validity of Condition No. 82 of Serial No. 462 of Notification No. 12/2012-Cus:

The petitioners sought a declaration that Condition No. 82 of Serial No. 462 of Notification No. 12/2012-Cus dated 17th March 2012, which retrospectively made the import of the vessel 'Jag Arnav' amenable to customs duty, is ultra vires under Sections 12, 25, and 46 of the Customs Act, 1962, and Articles 14, 19(1)(g), 265, and 300A of the Constitution of India.

The court noted that the vessel 'Jag Arnav' was imported on 30th April 2003 when it was exempt from customs duty under Notification No. 21/2002-Cus. The court held that Notification No. 12/2012-Cus dated 17th March 2012 is prospective and cannot be applied retrospectively to the vessel imported prior to this date. The court referenced several judgments, including State of Madhya Pradesh v. G.S. Flour Mills and Thirumalai Chemicals Ltd. v. Union of India, which established that an exemption notification cannot have retrospective application unless explicitly stated. The court concluded that Condition No. 82 could not be applied to 'Jag Arnav' as it was imported before the notification date.

2. Denial of Permission to Convert the Vessel 'Jag Arnav' to 'Coastal Status' and Charging Customs Duty:

The petitioners sought a direction to the customs authorities not to deny permission to convert 'Jag Arnav' to 'coastal status' and not to charge customs duty. The court observed that the vessel had been operating as a foreign-going vessel since its import in 2003 and had undertaken several voyages, both international and coastal, without filing a Bill of Entry (BOE) as it was exempt from duty at the time of import.

The court held that the customs authorities could not insist on the payment of customs duty at the time of conversion from foreign-going to coastal run status, as the vessel was imported when it was exempt from such duty. The court cited the decision in SEAMEC Ltd. v. Union of India, which supported the view that customs duty cannot be levied at a later stage if the vessel was exempt at the time of its first arrival.

3. Withholding Permission for Conversion of Foreign-Going Vessels to 'Coastal Run' and Demanding Customs Duty Retrospectively:

The petitioners sought to prohibit the customs authorities from withholding permission to convert their foreign-going vessels to 'coastal run' and from demanding customs duty on vessels imported before 17th March 2012. The court reiterated that the notification dated 17th March 2012 is prospective and cannot be applied to vessels imported before this date.

The court referenced Circular No. 16/2012-Cus dated 13th June 2012, which clarified that there is no requirement for filing an Import General Manifest (IGM) and BOE for vessels imported before 17th March 2012. The court emphasized that the customs duty applicable at the time of import is the relevant duty, and subsequent notifications cannot impose new duties retrospectively.

Conclusion:

The court concluded that the exemption notification dated 17th March 2012 is only prospective and does not apply to the import of the vessels 'Jag Arnav', 'Jag Ratan', and 'Jag Rani', which were imported before this date. The customs authorities were not justified in insisting on the payment of Countervailing Duty (CVD) for the conversion of these vessels from foreign-going to coastal run status. The court ordered the release of the sum of Rs. 5,00,000 deposited by the petitioner with interest and allowed the writ petition with no order as to costs.

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