Import of Indian flag vessel treated as taxable supply requiring customs filings and IGST under the notified rate.

A first time arrival Indian flag vessel entering territorial waters for loading or unloading is treated as import/home consumption, requiring filing of an arrival/import manifest and bill of entry and attracting customs duties. The vessel qualifies for the HSN based basic customs duty exemption under the applicable notification entry but does not qualify for lease/transfer exemptions; IGST on import applies under the IGST rate notifications. The entry event constitutes a taxable supply for IGST purposes and the importer is liable to pay IGST under the notified rate subject to applicable conditions.

---

---

Issues: (i) Whether Vessel-Kashi on entering Indian waters for loading/unloading is liable to file bills of entry and pay customs duty; (ii) Whether Vessel-Kashi is covered by entries no. 551 and 557B of Notification No.50/2017-Customs dated 30.06.2017 and liable to pay customs duty; (iii) If entry 557B is not applicable, what is the applicable IGST rate under section 3(7) of the Customs Tariff Act, 1975 read with notifications; (iv) Whether Vessel-Kashi's entry into Indian waters for loading/unloading qualifies as a 'supply' attracting IGST under section 3(7) of the Customs Tariff Act, 1975.

Issue (i): Whether Vessel-Kashi on entering Indian waters for loading/unloading is liable to file bills of entry and pay customs duty.

Analysis: Relevant statutory definitions treat vessels as "imported goods" unless cleared for home consumption. Board instructions and circulars address first-time arrival of Indian-flag vessels and require filing of import manifest and bill of entry where an Indian-flag vessel enters India for the first time. Territorial waters form part of India and loading/unloading in territorial waters brings the vessel within customs area concepts and the scope of home consumption for the purposes of customs levy and procedural filings.

Conclusion: Vessel-Kashi when entering Indian waters for loading/unloading is required to file arrival/import manifest and bill of entry and is liable to pay applicable customs duties.

Issue (ii): Whether Vessel-Kashi is covered by entries no. 551 and 557B of Notification No.50/2017-Customs dated 30.06.2017 and liable to pay customs duty.

Analysis: Entry 551 provides exemption from basic customs duty for goods under HSN 8901 subject to conditions; entry 557B provides exemption for goods (including vessels) imported under lease/transactions covered by specified Schedule II items (supply as lease/transfer of right to use). The factual matrix indicates the vessel was purchased by the applicant and is arriving first time as an Indian-flag vessel; it is not being imported under lease by the importer.

Conclusion: Vessel-Kashi is covered by entry no. 551 but not by entry no. 557B; the importer remains liable to pay IGST and other duties as applicable under the notification framework.

Issue (iii): If entry 557B is not applicable, what IGST rate applies under section 3(7) of the Customs Tariff Act, 1975 read with notifications?

Analysis: The IGST levy on imported goods is governed by the IGST Act and specified rate notifications. Notifications specify IGST rates for imports; the notified rate applicable to vessels of the relevant classification is referenced in Notification No.1/2017-Integrated Tax(Rate) as amended.

Conclusion: The applicable IGST rate on import of Vessel-Kashi is 5% as per Sr. No. 246 of Schedule-I of Notification No.1/2017-Integrated Tax(Rate) dated 28.06.2017 (as amended).

Issue (iv): Whether Vessel-Kashi's entry into Indian waters for loading/unloading qualifies as a 'supply' attracting IGST under section 3(7) of the Customs Tariff Act, 1975.

Analysis: Under the IGST Act and related provisions, goods imported into the territory of India until they cross the customs frontier are treated as inter-state supply; where the vessel enters territorial waters and loading/unloading constitutes home consumption, the import event is a taxable supply for IGST purposes at the point duties of customs are leviable.

Conclusion: Vessel-Kashi's entry into Indian waters for loading/unloading qualifies as a 'supply' for payment of IGST under section 3(7) of the Customs Tariff Act, 1975.

Final Conclusion: The questions referred are answered against the applicant: the vessel's first-time entry for loading/unloading attracts mandatory filing of import manifest and bill of entry, is dutiable, is not covered by entry 557B but is covered by entry 551 for BCD exemption (subject to conditions), IGST at 5% is payable under the notified rate, and the event qualifies as a supply for IGST purposes.

Ratio Decidendi: For a first-time arrival Indian-flag vessel entering territorial waters and undertaking loading/unloading, the entry constitutes import/home consumption for customs purposes requiring filing of import manifest and bill of entry and attracting customs and IGST liability as per applicable notifications; exemptions for import under lease do not apply where the vessel is purchased by the importer.

---