1998 (3) TMI 134 - SC - Customs

Transhippers qualify as ocean-going vessels and entitled to benefits under 1958 Notification despite cargo transfer operations

UNION OF INDIA Versus VM SALGAONCAR & BROS. (P) LTD.

UNION OF INDIA Versus VM SALGAONCAR & BROS. (P) LTD. - 1998 (99) E.L.T. 3 (SC), 1998 AIR 1367, 1998 (2) SCR 293, 1998 (4) SCC 263, 1998 (2) JT 490, 1998 ... ISSUES PRESENTED and CONSIDEREDThe primary issue considered was whether vessels used as transhippers can be classified as 'ocean-going vessels' and thus exempt from customs duty as per the notification issued by the Ministry of Finance on 11-10-1958. This issue arose due to conflicting interpretations in previous judgments and necessitated a review by a larger bench.ISSUE-WISE DETAILED ANALYSISLegal Framework and Precedents:The Customs Act, 1962, requires importers to present a Bill of Entry for home consumption. However, a notification from 1958 exempts 'ocean-going vessels' from customs duty. The term 'ocean-going vessels' was not defined in the notification, leading to disputes over its interpretation. The case of Chowgule & Co. Pvt. Ltd. v. Union of India previously held that transhippers were not ocean-going vessels. This decision was challenged, prompting the current appeals.Court's Interpretation and Reasoning:The Court examined the definition of 'foreign-going vessel' under Section 2(21) of the Customs Act, which includes vessels engaged in operations outside Indian territorial waters. The Court reasoned that if vessels engaged in operations outside territorial waters are considered foreign-going, transhippers, which operate in the open sea, should similarly be considered ocean-going.Key Evidence and Findings:Transhippers are designed and equipped to operate in the open sea, carrying cargo from harbors to larger vessels in the high seas. The Court noted that these vessels are certified as competent for high-seas operations by maritime authorities. The Court also considered dictionary definitions and common maritime understanding of 'ocean-going vessels' as ships capable of traveling on the open sea.Application of Law to Facts:The Court applied the broader interpretation of 'ocean-going vessels' to include transhippers, given their design, equipment, and actual use in the open sea. The Court also noted the issuance of a subsequent notification by the government, which exempted all vessels, including transhippers, from customs duty, indicating a legislative intent to include transhippers as ocean-going vessels.Treatment of Competing Arguments:The Court considered the argument that transhippers were not imported for 'home consumption' since they retained their identity after use. However, it rejected this narrow interpretation of 'consumption,' adopting a broader fiscal law perspective that includes any utilization within India.Conclusions:The Court concluded that transhippers meet the criteria for ocean-going vessels and are entitled to the customs duty exemption under the 1958 notification.SIGNIFICANT HOLDINGS'It is reasonable to take the view that merely because transhippers are used for carrying cargo for loading into the bulk carriers (those being unable to touch the Port) they cannot be excluded from the category of ocean-going vessels.'The Court established the principle that transhippers, due to their design and operational use in the open sea, qualify as ocean-going vessels. The final determination was that transhippers are entitled to the benefits of the 1958 notification, exempting them from customs duty.