Customs import of vessels begins on entry into territorial waters, limiting scrap duty and later clearance requirements.

For customs purposes, a vessel is treated as imported when it enters Indian territorial waters, even if later used as an ocean-going vessel. On that basis, the later absence of bills of entry or cargo manifests did not alter the original import character, and any duty on scrapping had to be assessed by reference to the law and value prevailing at that time. A subsequent canalising requirement could not be applied to vessels already imported before the agency came into existence, so prior clearance for scrapping was not required under the later public notice.

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Issues: (i) Whether the two vessels were imported into India in 1968, so that customs duty on scrapping was chargeable with reference to the rate and value prevailing at that time; (ii) Whether prior clearance from M.S.T.C. was required for scrapping the vessels under the 1984 public notice.

Issue (i): Whether the two vessels were imported into India in 1968, so that customs duty on scrapping was chargeable with reference to the rate and value prevailing at that time.

Analysis: The vessels entered Indian territorial waters in 1968 and were purchased for use in India as ocean-going vessels. The Court treated the entry into territorial waters as the relevant point of import, and held that the vessels were imported as goods and not merely as conveyances. Their later use as ocean-going vessels, the absence of bills of entry, and the filing of manifests for cargo did not alter the legal character of the original import. The exemption notification covering ocean-going vessels showed that such vessels were treated as imported goods for customs purposes. Once the import was fixed in 1968, the liability on eventual scrapping had to be worked out on that footing.

Conclusion: The issue was decided in favour of the petitioners. The vessels were held to have been imported in 1968, and duty was payable only with reference to the position prevailing in that year.

Issue (ii): Whether prior clearance from M.S.T.C. was required for scrapping the vessels under the 1984 public notice.

Analysis: The Court held that M.S.T.C. became the canalising agency only in 1978, whereas the vessels had already been imported in 1968. Since the import pre-dated the constitution of M.S.T.C. as canalising agency, the public notice issued in 1984 could not be applied to require a no objection certificate for their scrapping. The procedural requirement could not override the legal position flowing from the earlier import.

Conclusion: The issue was decided in favour of the petitioners. Prior clearance from M.S.T.C. was not required.

Final Conclusion: The petition succeeded. Customs authorities were directed to assess duty only on the basis that the vessels were imported in 1968, and the petitioners were entitled to scrap the vessels without obtaining M.S.T.C. clearance.

Ratio Decidendi: For customs purposes, a vessel is imported when it enters Indian territorial waters, and a later requirement for scrapping cannot be imposed by a subsequent canalising regime where the import had already occurred before that regime came into existence.

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