2025 (3) TMI 860 - HC - Customs

Import of Fibre-optic Cables in EEZ and International Waters Exempt from Customs Duty per 2002 Notification.

The HC held that the import of Fibre-optic Cables for installation in the EEZ and International Waters is not liable to customs duty under the Customs ... Liability of Customs Duty - import of Fibre-optic Cables to be laid not only within the territorial waters of India but also in the Exclusive Economic Zone - HELD THAT:- The Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (for short the “Territorial Waters Act”) gives power to the Central Government to extend the enactments of India to the Continental Shelf, EEZ and other Maritime Zones by issuing Notifications in that regard as more particularly set out in Section 6 and Section 7 of the said Act. It is exercising powers under this Act that two Notifications have been issued by the Central Government. The first Notification is dated 14th January 1987 issued under Clause (a) of sub-Section (6) of Section 6 and Clause (a) of sub Section (7) of Section 7 [of the Territorial Waters Act] extending the Customs Act, 1962 and the Customs Tariff Act, 1975 to the designated areas in the Continental Shelf and the EEZ of India, with effect from 15th January 1987. Since there is no dispute in the present case that the Fibre-optic Cables imported by the Petitioner are not for the purposes as mentioned in the Notification dated 7th February 2002, we find that a strong prima facie case is made by the Petitioner and which really goes to the root of the matter, namely, whether the Customs Act, 1962 and the Customs Tariff Act, 1975, at all apply to the Continental Shelf and to the EEZ with reference to the goods imported by the Petitioner. Since the 3rd Respondent has issued a show cause notice to the Petitioner demanding an additional amount of duty on the goods imported and since the issue considered whether the Customs Act, 1962 and the Customs Tariff Act, 1975, at all apply to the goods imported by the Petitioner, as and by way of interim relief, it is directed that pending the final decision in the above Writ Petition, the adjudication of the SCN dated 2nd December 2024 shall remain stayed. Conclusion - A strong prima facie case is made by the Petitioner and which really goes to the root of the matter, namely, whether the Customs Act, 1962 and the Customs Tariff Act, 1975, at all apply to the Continental Shelf and to the EEZ with reference to the goods imported by the Petitioner. Petition disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the import of Fibre-optic Cables intended for installation in the Exclusive Economic Zone (EEZ) and International Waters is liable to customs duty under the Customs Act, 1962 and the Customs Tariff Act, 1975. Specifically, the issue revolves around the applicability of these Acts to goods imported for purposes other than those specified in a particular Notification issued by the Ministry of External Affairs on 7th February 2002.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The Customs Act, 1962, defines 'India' to include the territorial waters of India. The Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, empowers the Central Government to extend Indian enactments to the Continental Shelf, EEZ, and other Maritime Zones through Notifications. Two significant Notifications are relevant here: one dated 14th January 1987, and another dated 7th February 2002. The 1987 Notification extends the Customs Act, 1962, and the Customs Tariff Act, 1975, to designated areas in the Continental Shelf and EEZ, making goods brought into these areas from outside India subject to customs duty. The 2002 Notification extends these Acts to the Continental Shelf and EEZ only for specific purposes, such as the extraction of mineral oils or the supply of goods related to such activities.Court's interpretation and reasoning:The Court finds that the 2002 Notification limits the applicability of the Customs Act, 1962, and the Customs Tariff Act, 1975, to the EEZ and Continental Shelf for specific purposes only. The Court notes that the Fibre-optic Cables imported by the Petitioner are not intended for any of the purposes outlined in the 2002 Notification, such as mineral oil extraction. Therefore, the Court concludes that a strong prima facie case exists for the Petitioner, questioning whether these Acts apply to the goods imported by the Petitioner.Key evidence and findings:The primary evidence considered is the Notification dated 7th February 2002, which specifies the limited purposes for which the Customs Act, 1962, and the Customs Tariff Act, 1975, are extended to the EEZ and Continental Shelf. The Court finds no dispute that the Fibre-optic Cables are not imported for these specified purposes.Application of law to facts:Applying the law to the facts, the Court determines that the import of Fibre-optic Cables for installation in the EEZ and International Waters does not fall within the scope of the 2002 Notification. Consequently, the imposition of customs duty on these imports is questionable under the current legal framework.Treatment of competing arguments:The Court acknowledges the arguments presented by both the Petitioner and the customs department. While the customs department seeks to levy a higher customs duty based on a show cause notice, the Court finds the Petitioner's argument compelling that the imports do not fall under the specified purposes of the 2002 Notification, thus challenging the applicability of the customs duty.Conclusions:The Court concludes that the Petitioner's case raises arguable questions regarding the applicability of the Customs Act, 1962, and the Customs Tariff Act, 1975, to the imports in question. The Court issues a Rule and stays the adjudication of the show cause notice demanding additional duty pending the final decision on the Writ Petition.SIGNIFICANT HOLDINGSThe Court holds that the Notifications under the Territorial Waters Act, particularly the one dated 7th February 2002, limit the application of the Customs Act, 1962, and the Customs Tariff Act, 1975, to the EEZ and Continental Shelf for specific purposes. The Court finds that the import of Fibre-optic Cables for installation in these areas does not fall within these specified purposes, thus questioning the imposition of customs duty.Verbatim quotes of crucial legal reasoning:'Since there is no dispute in the present case that the Fibre-optic Cables imported by the Petitioner are not for the purposes as mentioned in the Notification dated 7th February 2002, we find that a strong prima facie case is made by the Petitioner and which really goes to the root of the matter, namely, whether the Customs Act, 1962 and the Customs Tariff Act, 1975, at all apply to the Continental Shelf and to the EEZ with reference to the goods imported by the Petitioner.'Core principles established:The judgment establishes the principle that the applicability of customs duty under the Customs Act, 1962, and the Customs Tariff Act, 1975, to goods imported into the EEZ and Continental Shelf is contingent upon the purposes specified in the relevant Notifications. Goods imported for purposes not specified in these Notifications may not be subject to customs duty.Final determinations on each issue:The Court determines that the Petitioner's case presents a strong argument against the imposition of customs duty on the Fibre-optic Cables imported for installation in the EEZ and International Waters. The Court stays the adjudication of the show cause notice and schedules the Writ Petition for final hearing and disposal.