Customs duty on oil rig supplies in designated areas denied transit and store exemption

When the Customs Act is extended by notification to designated areas under the Maritime Zones Act, goods delivered to oil rigs operating there are treated as imported into India for customs purposes. In that setting, the rig is not regarded as a foreign going vessel, so the transit, transhipment and store provisions do not apply to spare parts, equipment and fuel brought for use on the rig. The result is that customs duty is payable on such goods, and clearance without duty is not available.

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Issues: Whether spares, spare parts, equipment and fuel imported for use on oil rigs operating in designated areas could be transhipped and consumed as stores without payment of customs duty by treating the rig as a foreign going vessel.

Analysis: The Customs Act levies duty on goods imported into India under the charging provision. The Maritime Zones Act, 1976 distinguishes territorial waters from the continental shelf and exclusive economic zone, but also empowers the Central Government to extend enactments to designated areas, and the Customs Act was so extended by notification. Once extended, those notified areas are deemed to form part of India for the purposes of the Customs Act. In that statutory setting, goods brought for delivery to rigs operating in the designated areas are not goods in transit to a place outside India. The rig, while operating there, is not a foreign going vessel for the purposes of Sections 53, 54, 86 and 87 of the Customs Act. The earlier decision treating oil rigs as vessels and foreign going vessels did not consider the effect of the Maritime Zones Act notifications on the meaning of import and foreign going vessel.

Conclusion: The claim for clearance and transhipment without customs duty was rejected, and the benefit of the transit and store provisions was held inapplicable to the goods supplied to rigs operating in designated areas.

Final Conclusion: Customs duty was held payable on the goods imported for use on the oil rig in the notified designated areas, and the petition was dismissed.

Ratio Decidendi: Where the Customs Act has been extended by notification to designated areas under the Maritime Zones Act, goods delivered to an oil rig operating there are treated as imported into India and the rig is not a foreign going vessel for claiming exemption as transit goods or stores.

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