Prospective customs exemption prevents countervailing duty on previously imported vessels later converted to coastal run.

Imported vessels attracted customs duty only at the time of their first import, when they were goods; once imported, they operated as conveyances. The Madras HC held that Notification No. 12/2012-Cus operated prospectively and could not retrospectively create countervailing duty liability merely because the vessels were later converted from foreign run to coastal run. Communications demanding payment were unsustainable because they quantified duty and required payment within a fixed time, rather than serving as advisory letters. The ruling also distinguished duty on ship stores from duty on the vessels themselves. Accordingly, CVD could not be levied on these vessels on the basis of the later conversion.

---

---

Issues: Whether countervailing duty could be demanded on vessels imported before Notification No. 12/2012-Cus dated 17-03-2012, merely because they were later converted from foreign run to coastal run, and whether the impugned communications demanding such duty were sustainable.

Analysis: The vessels had been imported into India in 2005 and 2011, before the exemption notification came into force. The governing principle applied was that customs duty on a vessel as goods is attracted at the time of its first import, and thereafter the vessel functions as a conveyance. The exemption notification was held to operate prospectively only, and the later conversion to coastal run could not create a fresh liability where none existed on the date of import. The communications were not treated as mere advisory letters, since they quantified the demand and called for payment within a fixed time. The reasoning also distinguished duty on ship stores from duty on the vessels themselves.

Conclusion: CVD could not be levied on the vessels on the basis of their later conversion to coastal run, and the demand communications were unsustainable.

Ratio Decidendi: Customs duty on an imported vessel is determined by the law in force on the date of its first import, and a subsequent exemption notification cannot retrospectively impose duty on a vessel already imported and exempt at that time.

---