Import duty on ship stores and time-barred reassessment under the Sea Customs Act were limited by statutory port-clearance rules.

Import duty under the Sea Customs Act, 1878 was chargeable only on goods brought for discharge, home consumption or warehousing, and mere entry of a coasting vessel into an Indian customs port did not by itself import all stores on board. Fuel oil bunkers remaining on board and not intended for discharge at the port were therefore outside the duty charge. The Act also provided only a limited statutory power to correct non-levy or short-levy, and that power had to be exercised within the prescribed period. A later reassessment or recovery after port clearance and expiry of that period was impermissible.

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Issues: (i) Whether fuel oil bunkers remaining on board coasting vessels after calling at a foreign port and entering an Indian customs port were liable to import customs duty under the Sea Customs Act, 1878; (ii) Whether the customs authorities could reassess and recover the duty after granting port clearance and after expiry of the statutory period for corrective action.

Issue (i): Whether fuel oil bunkers remaining on board coasting vessels after calling at a foreign port and entering an Indian customs port were liable to import customs duty under the Sea Customs Act, 1878.

Analysis: The charging and machinery provisions of the Act indicated that customs duty was attracted to goods imported for landing, home consumption, or warehousing, with assessment tied to the filing of a bill of entry and clearance of the goods. The special provisions governing vessels showed that coasting vessels were subject to a simplified procedure, but where a vessel had touched a foreign port and carried dutiable goods, the ordinary import formalities applied only to ensure duty on goods discharged at the port. Mere entry of the vessel into the customs port did not amount to importation of all goods on board, and the statutory scheme did not contemplate duty on ship stores that remained on board and were not intended for discharge at that port.

Conclusion: The bunkers remaining on board were not liable to import customs duty; this issue is decided in favour of the assessee.

Issue (ii): Whether the customs authorities could reassess and recover the duty after granting port clearance and after expiry of the statutory period for corrective action.

Analysis: Grant of port clearance necessarily involved a determination that the duties payable in respect of the goods on board had been satisfied or were nil. The Act did not confer an unrestricted power of review on the same authority, and the limited revisional power available under the Act was subject to a statutory time limit. Any demand based on inadvertent non-levy or short-levy had to be made within the period prescribed by the corrective provision governing such cases, and that period had long expired. The later demands were therefore beyond the statutory power available to the department.

Conclusion: The reassessment and recovery proceedings were barred by limitation and lacked statutory authority; this issue is decided in favour of the assessee.

Final Conclusion: The customs demands and the orders affirming them could not stand, and the assessee was entitled to relief quashing the demands and obtaining refund of the amount collected.

Ratio Decidendi: Under the Sea Customs Act, 1878, import duty is chargeable only on goods brought for discharge, home consumption, or warehousing at the port, and a limited statutory power to correct non-levy or short-levy must be exercised within the prescribed period; a later demand after port clearance is impermissible.

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