2026 (1) TMI 669 - HC - Customs

Conversion of imported vessels to coastal run-customs/CVD liability fixed at original import date; post-conversion recovery demands quashed

Dominant issue: whether customs/CVD liability arises on conversion of imported conveyances from foreign to coastal run when the original import pre-dated ... Conversion of imprt of Conveyance from foreign to coastal run - Prospective application of exemption notification No.12/2012 - non-payment of countervailing duty (CVD) on conversion from foreign to coastal run - Validity of demand communication vs show-cause notice - HELD THAT:- Jug Rahul’ has been imported in 2005. No Bill of Entry has been filed as the law did not mandate the filing of Bill of Entry at that relevant point in time. As far as ‘Jug Rishi’ is concerned, Bill of Entry has been filed on 28.03.2011. Both imports are prior to date of Notification dated 12/2012. The admitted position in the present case is that, post date of Notification there has been conversion from foreign run to coastal run. However, one of the question that has been taken note of by the Orissa High Court referring to Commissioner of Customs, Mumbai v Aban Loyd Chiles Offshore Ltd. [2017 (2) TMI 294 - SUPREME COURT] is that customs duty would be leviable only on the import of conveyances at the first instance (i.e., at the time of first entry). This event was in 2005 and 2011 in the case of the two vessels we are concerned with. Post the aforesaid event, they ceased to be goods and were only conveyances. Hence the critical event in order to attract liability under Notification No.12/2012 would be the date of import alone and not their subsequent run as a conveyance. In the present case, these critical dates are in 2005 and 2011, even prior to date of Notification. We are hence of the considered view that the impugned demands under communications dated 11.07.2012 are liable to be quashed. The very fact that there is a computation / working sheet annexed with the impugned communication quantifying the demand and calling for the remittance of the same within 14 days from date of receipt of the letter, would make the impugned communication nothing short of a demand and, they are quashed. In light of the above discussion, W.P. are allowed. As a sequitur, W.P., seeking a writ of prohibition in demanding customs duty on the import of ‘Jag Rahul’ and ‘Jug Rishi’ is also allowed. Issues: (i) Whether Notification No.12/2012-Cus dated 17-03-2012 (Entry 462/Condition 82) applies to vessels imported prior to 17-03-2012. (ii) Whether the communications dated 11-07-2012 that quantify and call for payment of CVD on conversion to coastal run constitute valid demands liable to be sustained.Issue (i): Whether the exemption notification applies retrospectively to vessels imported before 17-03-2012, attracting CVD on subsequent conversion to coastal run.Analysis: The legal inquiry centres on the relevant date for levy of customs duty and the scope of the exemption notification. The analysis applies the principle that levy of customs duty on vessels hinges on the import event (first entry) and recognizes the statutory distinction between a vessel as imported 'goods' and a vessel operating as a 'conveyance'. The notification's conditions and Circular No.16/2012 are examined to determine whether they were intended to operate retrospectively or prospectively.Conclusion: The exemption notification is prospective in effect and Entry 462 read with Condition 82 does not apply to vessels imported prior to 17-03-2012; consequently CVD cannot be imposed on such prior imports upon later conversion to coastal run.Issue (ii): Whether the communications dated 11-07-2012, which include a computation and demand for payment within 14 days, amount to valid demands for CVD enforceable against vessels imported before 17-03-2012.Analysis: The communications are evaluated in light of their content and effect. A communication that annexes a computation/working sheet quantifying a demand and calls for remittance within a short period is assessed as a demand rather than a mere advisory notice; the applicability of the underlying levy is determined by the import-date principle established under relevant precedent and statutory interpretation.Conclusion: The communications dated 11-07-2012 are quashed as demands for CVD insofar as they seek to levy duty on vessels imported before 17-03-2012.Final Conclusion: The impugned demands for countervailing duty arising from the communications dated 11-07-2012 are set aside for vessels imported prior to 17-03-2012; the writ petitions are allowed and the deposits made are to be released as directed by the Court.Ratio Decidendi: An exemption notification that came into force on a specific date operates prospectively and customs duty on a vessel is determined by the date of its importation (first entry); a subsequent condition in an exemption notification cannot retroactively create a levy on imports made prior to the notification.