2024 (12) TMI 963 - AT - Customs

Salvage equipment imported for vessel incident not liable for customs duty under section 28

Anshu Sahay, JM Baxi & Co, Vijayan Chrysostom D’Souza Versus Commissioner of Customs (General) Air Cargo Complex, Mumbai – III

The CESTAT Mumbai held that salvage equipment imported for the MSC Chitra vessel incident was not liable for customs duty. The tribunal ruled that customs ... Duty liability on salvage equipment imported for the MSC Chitra incident - Stabilizing of the vessel and recovery of the containers - presumption of duty liability under Customs Act, 1962 - HELD THAT:- It is not conducive for proper administration of the machinery and procedural provisions of Customs Act, 1962 to be carried out to the exclusion of the laws governing transit of the seas and, more so, as the bulk of engagement of customs authorities with international trade and commerce is of sea cargo. Customs law has been, and continues to be, moulded within maritime laws which are of such hoary eminence as to predate ‘time immemorial’ even. Salvage and vessels in distress are a reality but it is only the rarity of occurrence that precluded inclusion in national legislation - Such legislation is outside the competence of customs authorities who are entrusted with assessment and levy of duties on goods cleared for home consumption or deemed, by specific provision in law, to have been. Procedural prescriptions do not empower levy of duty on goods that pass through the national territory. Notice for recovery of duty under section 28 of Customs Act, 1962 has been issued to M/s JM Baxi & Co, and by recourse to ingredients that are founded on alleged complicity on the part of importer. An importer, in circumstances of non-discharge, or short-payment, of duty liability is the ‘person chargeable to duty or interest’, the intended noticee under the empowerment of Customs Act, 1962 - In the absence of any fastening of obligations of levy or fiscal consequences on the principal, through empowerment under section 28 of Customs Act, 1962, it cannot be held that the noticee intended by law is the agent. In the absence of any evidence that the impugned goods have remained behind for domestic use, and without any reason to discard the transformation, by delivery and use thereof in salvage of ‘foreign going vessel’, of goods transshipped from aircrafts and vessels as ‘stores’ of MSC Chitra, as well as the authority under which the impugned goods traversed the national territory, the fastening of duty liability under section 28 of Customs Act, 1962 has no merit. There is, consequently, no cause for confiscation of the impugned goods under section 111(n) and section 111 (o) of Customs Act, 1962 in the light of all movements having been effected under the approval of customs authorities. With lack of empowerment to invoke section 28 of Customs Act, 1962, penalties under section 114A and section 114AA of Customs Act, 1962 are without authority of law. Appeals are allowed by setting aside the impugned orders. Issues Involved:1. Duty liability on salvage equipment imported for the MSC Chitra incident.2. Classification and treatment of the salvage equipment as 'ship stores'.3. Procedural compliance and transshipment regulations under the Customs Act, 1962.4. Authority and liability of agents under the Customs Act, 1962.5. Validity of penalties and confiscation orders under the Customs Act, 1962.Issue-wise Detailed Analysis:1. Duty Liability on Salvage Equipment:The primary issue was whether the salvage equipment imported for the MSC Chitra incident was liable for customs duty. The customs authorities argued that the equipment was neither exempt from duty nor exported, thus attracting duty liability. However, the tribunal found that the goods were transshipped with appropriate permissions and did not remain in India for domestic use. Consequently, the tribunal held that the duty liability under section 28 of the Customs Act, 1962, was not applicable.2. Classification and Treatment as 'Ship Stores':The tribunal examined whether the salvage equipment could be classified as 'ship stores' under the Customs Act, 1962. The customs authorities contended that the equipment did not qualify as 'ship stores' since it was not declared as such and was used on vessels other than the distressed MSC Chitra. The tribunal, however, concluded that the equipment was intended for use in refloating MSC Chitra and was effectively used as 'stores' by the salvage master. Therefore, the tribunal recognized the equipment as 'ship stores', which are zero-rated for duty under chapter XI of the Customs Act, 1962.3. Procedural Compliance and Transshipment Regulations:The tribunal addressed the procedural aspects of transshipment under section 54 of the Customs Act, 1962. It was noted that the goods were moved under customs authority sanction and were escorted to the accident site, qualifying as 'transshipment'. The tribunal acknowledged a technical neglect in failing to file a bill of transshipment but deemed it inconsequential as there was no evidence of the goods entering the domestic market. The tribunal emphasized that the procedural provisions should not hinder the overarching purpose of the statute, which is the levy and collection of customs duties.4. Authority and Liability of Agents:The tribunal examined the liability of M/s JM Baxi & Co, the agent involved in the transshipment process. The customs authorities had issued notices for recovery of duty and penalties against the agent. However, the tribunal found no evidence that M/s JM Baxi & Co was liable as an 'importer' or 'person chargeable to duty' under the Customs Act, 1962. The tribunal clarified that the agent's liability is limited to fulfilling obligations imposed on the person in charge of the conveyance and does not extend to fiscal liabilities of the principal.5. Validity of Penalties and Confiscation Orders:The tribunal scrutinized the penalties and confiscation orders imposed under sections 111(n), 111(o), 114A, and 114AA of the Customs Act, 1962. It concluded that, in the absence of duty liability and with all movements of goods conducted under customs authority approval, there was no basis for confiscation or penalties. The tribunal set aside the impugned orders, allowing the appeals and nullifying the penalties and confiscation directives.In conclusion, the tribunal allowed the appeals, setting aside the orders that imposed duty liability, confiscation, and penalties on the appellants, emphasizing the procedural compliance and lawful transshipment of the salvage equipment.