TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 270
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.... the provisions of Section 112 (a) and (b) of the Customs Act, 1962. Aggrieved of the same the appellant is before us. 3. This is the second round of litigation. In the first round of litigation, when the matter was heard by this Tribunal, this Tribunal vide order dated 22/10/2003 held that M/s. L&T are liable to pay duty only in respect of line pipes which are used in the designated areas and not for the length of the pipes which are used in the non-designated areas. This order of the Tribunal was challenged by the Revenue before the hon'ble Bombay High Court and the hon'ble Bombay High Court vide order dated 19/04/2012 set aside the order of the Tribunal and remanded the proceedings back for denovo consideration. 3.1 The facts relevant to the case, briefly, are as follow: M/s. L&T had imported 11 segments of pre-casted line pipes as per the requirement of ONGC's CRMP II Project. The said pipes were required to be installed for water injection to augment oil production. All the line pipes except one segment were for installation at designated platforms and were used for connecting two designated platforms and in the process the middle portion passed through non-desig....
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....bility in those areas. Accordingly, he held that the entire length of pipelines have been imported into India and is meant for home consumption inasmuch as the pipelines lying in the non-designated area cannot be cut to pieces since it would become unfit for use. Therefore, he held that the length of pipelines for transhipment was only notional and was contained in the same goods presented for clearance for home consumption and accordingly held that even if part of the goods remained outside India since use of the goods is in India, he held that the goods are liable to import duty on the entire length. Accordingly, demands were confirmed by the impugned order and it is this order that is the subject matter of appeal before us. 4. The learned counsel for the appellant made the following submissions: 4.1 The appellant never intended to clear the imported pipes for home consumption. Therefore, they had sought transhipment of the imported pipes by filing a transhipment of Bill of Lading in favour of the master vessel CSO Venturer at Bombay High. However, due to adverse weather conditions, they could not effect the transhipment and the goods had to be brought to the Port of Mumbai. On....
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....at part of space occupied by or belonging to a thing under consideration, a definite locality or location. It also means an open space or square in a city. Therefore, in international trade the ship beyond the territorial waters of a country would be a place outside the country." 4.3 It is the appellant's contention that taking the line pipes to high seas amounts to taking outside India since, in the present case, the line pipes were taken to Bombay High for installation and the same amounts to exports and, therefore, no duty is payable on 19739.50 meters taken to Bombay High for installation since they are directly taken from the Customs area to outside India without any home consumption. Even assuming that the length of pipes falling within 500 meters from the platform is subject to Customs duty, no duty can be demanded on that portion of line pipes which fall outside the designated area. 4.4 The contention of the Revenue that since the line pipes are continuous in nature and, therefore, the same cannot be apportioned in order to levy customs duty on only a portion of it, this argument is not tenable since the principle of apportionment is a well recognized principle and ne....
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....of apportionment, customs duty is required to be paid only on that portion of line pipes which falls within the 500 meters around the platforms. Accordingly, it is submitted that no customs duty is payable on 19739.50 meters of line pipes in non-designated areas. 4.6 It is further contended that no customs duty is payable even on the length of pipes falling within the 500 meters surrounding the platforms. Article 56 of the United Nations Convention on the Law of the Seas, 1982 (UNCLOS), confers jurisdiction on a State for the purpose of establishment and use of artificial island and installation of structures. As per Article 60, the costal State shall have exclusive jurisdiction over the artificial islands, installations and structures including jurisdiction with regard to customs, fiscal, health, safety and immigration laws and regulations. The said article further provides that States may, where necessary, establishes reasonable safety zones around such artificial islands, installations and structures in which it may take appropriate measures to ensure the safety of both of navigation and of the artificial islands, installation and structures. The breadth of the safety zones sha....
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....refore, if the appellant's contention is that they have exported the pipelines falling outside the designated area, the implication is that they had imported the same into India and therefore, customs duty would be leviable on such imports and the question of any transhipment would not arise at all. Similarly, in the case of State of Kerala vs. The Cochin Coal Company Ltd. AIR 1961 SC 408 the hon'ble apex Court held that the concept of 'export' in Article 286 postulates just as the import, the existence of two termini as those between which the good are intended to move or between which they are intended to be transported and not a mere movement of goods out of the country without any intention of their being landed in specie in some foreign port. Further 'export' as defined in Section 2(18) of the Customs Act, has two phrases, namely (i) taking out of India, and (ii) to a place outside India. Therefore, both the phrases need to be considered for harmonious interpretation. In the present case, since the pipelines are not taken to a place outside India it cannot be said that the appellant have exported the goods. 5.2 As per Section 45 of the Customs Act, 1962, the i....
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....oid customs duty liabilities. Even the documents have been manipulated and separate bills of lading has been prepared and the splitting of documents into goods meant for designated area or non-designated areas is an artificial arrangement to misrepresent to the Customs. Therefore, the penalty imposed on the importer is justified. 5.6 As regards the reliance placed on the judgment of the European Court of Justice, the same related to imposition of VAT which has nothing to do with the levy of Customs duty. Therefore, the decision in the said case is not relevant. Also being a foreign judgment, the decision has no applicability in India. Similarly, the reliance placed on the case of Sun Industries (supra) is also of no avail in view of the definition of 'export' which mandates that it should involve taking out of India to a place outside India. Similarly, the reliance placed on Lucas TVS 1987 (28) ELT 266 is also of no avail as the said decision pertained to an export transaction whereas in the present case, the issue involved is levy of customs duty on an import transaction. 5.7 As regards the plea that even for the portion of the line pipes falling within the 500 meters from t....
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....depend for its connotation on the context in which it is used. While coming to the said conclusion the apex Court also relied on the decision of the Madras High Court in the Lucas TVS case (supra) wherein also a similar view had been taken. We note that, in the present case, there was no transaction of taking the goods to a foreign country. The alleged pipes were taken to the designated areas in the Continental Shelf and Economic Zone of India and, therefore, the question of treating the transaction as an export transaction would not arise at all. 6.2 We further notice that there was no passing of title of the property in goods to another party. When the goods were taken out for laying in the designated as well as non-designated areas, the property of the goods vested with the importer, i.e., M/s. L&T and not on anybody else and, therefore, the concept of export transaction where the title of the property passed hands also does not exist. Thus, the facts involved in the Sun Industries case (supra) are different and distinguishable from those involved in the present appeal before us and, therefore, following the ratio of the decision of the hon'ble apex Court in the case of Al ....
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....t P. 311 (FB)]- "It is part of judicial prudence to decide an issue under a specific statute by confining the focus to that statutory compass as far as possible. Diffusion into wider juris-prudential areas is fraught with unwitting conflict or confusion." 6.5 The appellant has argued that the goods were brought for transhipment. This argument is also incorrect for the reason that transhipment takes place when goods are brought into one Port of India for transportation to another port situated outside India. In other words, as per the Transshipment Rules notified under Section 54 of the Customs Act, 1962, it is clearly only when the goods move from one port in India to another port situated outside India, it can be said that there is a transhipment of goods which are not subject to levy of customs duty. In the present case, there is no such transshipment where the goods are taken from one port of India to another port situated outside India. In the present case, the goods have moved from the Bombay port to a designated place in the Continental Shelf and Exclusive Economic Zone of India and, therefore, the goods have moved from one place in India to another place....
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....ivalent to the expression in the Maritime Zones Act, 1976. Territorial waters extends upto 12 nautical miles from the low water mark line of the coast (base line) which is consistent with the UNCLOS, 1982. Under sub- section (28) of Section 2, Indian customs water extends seaward up to the limit of the contiguous zone, namely, a jurisdictional zone adjoining the territorial sea and encompassing the stretch of sea waters upto a distance of 12 nautical miles beyond the territorial waters (which means 24 nautical miles from appropriate baseline). The coastal State has no sovereignty in territorial sense of dominium over the contiguous zone, but it exercises sovereign rights for the purpose of exploring the continental shelf and exploiting its natural resources. It has jurisdiction to enforce its fiscal, revenue and penal laws by intercepting vessels engaged in suspected smuggling or the other illegal activities attributable to a violation of the above laws or the existing laws. Undoubtedly, the waters which extends beyond the contiguous zone are traditionally the domain of the high seas or open sea which have, juristically speaking, the status of international waters where all States ....
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....the coastal State. The maritime limit of the coastal State would include territorial waters, continental shelf and exclusive economic zone, as recognized under the International Convention on the Law of the Sea including rights, exclusive jurisdiction and duties of the coastal State with regard to customs, fiscal safety, health, immigration laws and regulations [See Articles 56, 60, 77, 80 of the United Nations Convention on the Law of the Sea, 1982 (UNCLOS, 1982)]. 75. Pursuant to such recognition of the territorial limit in the Comity of Nations, the coastal State has the power to legislate or take such appropriate measures to exercise its sovereign power over that territorial limit. Maritime Zones Act, 1976 was enacted pursuant to such recognition, declaring designated area in the continental shelf/exclusive economic zone and extending the Customs Act to such areas. The notifications referred to in the foregoing paragraphs were issued pursuant to such recognition and the Customs Act and the Customs Tariff Act were extended to the designated area of the continental shelf, exclusive economic zone. There is no challenge to the Maritime Zones Act, 1976, the vario....
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....Any mineral oil produced in the exclusive economic zone or continental shelf will be chargeable to Central Excise Duty, as goods produced in India. Implication of notification no. S.O. 189 (E) dated 07.02.2002 and its consequences have been clarified in Circular No. 17/2002-Customs dated 13.03.2002 [2002 (141) ELT T10] in following terms: 3. The implication of the said notification is that mineral oils extracted or produced in the EEZ and Continental Shelf of India if brought to the mainland shall not be treated as import and therefore, no customs duty shall be leviable on such mineral oils. Likewise, the goods supplied from the mainland to a place in EEZ or Continental Shelf of India in connection with any activity related to mineral oil extraction or production shall not be treated as export under the Customs Act, 1962 and consequently, no export benefits can be availed of on such supplies . Another implication of the said notification is that bringing of any goods from any other country to any place in EEZ or Continental Shelf of India in connection with any activity related to extraction or production of mineral oils shall be treated as import under the Cust....
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.... Act, 1976 and the International Convention UNCLOS, 1982. 80. We do not find any ambiguity in this situation. The interpretation given by the High Court in Pride Foramer's case (supra) would not result in any absurd situation as contended by the Counsel for the Appellant. The Appellants wants the Court to read Section 2(21) of the Customs Act in isolation, which would not be the correct approach. The Customs Act has to be read along with the provisions of the Maritime Zones Act, 1976. 81. The contention of the Appellants that an attempt is being made to substitute the phrase appearing in the Customs Act contrary to its intent is without any basis. What the Appellants want is that, for the present adjudication or case, the Court should not look beyond Sections 2(21), 86 and 87 of the Customs Act and that it should not look into the other Acts. This may not be the right approach as it would result in undermining the power of the Parliament to enact laws as well as to render the provisions of Maritime Zones Act, 1976 nugatory and meaningless. 82. The fact that the stores are unloaded and consumed within the maritime bound....
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....ces rendered in India became liable to tax under the Income Tax Act. However, in the said case, on facts, it was held that the salary income earned by the assessee prior to 01.04.1983 could not be charged to tax under the provisions of the Income Tax Act, 1961 in the assessment year 1983-84 as the operation of the notification extending the provisions of Income Tax Act were not retrospective in nature. In substance, to the similar effect is the Judgment of the Bombay High Court in MCDERMOTT International Inc. v. Union of India & Others [1988 (173) ITR 155 (Bom.)]. 84. We agree with the views expressed by the Bombay High Court in Pride Foramer's case (supra) that in Amership Management case (supra), the High Court of Bombay was concerned with the limited question as to whether the oil rigs are vessels and if so a foreign going vessel in the light of the controversy raised in that Judgment. In Amership Management case (supra), the High Court after relying on the International Load Lines Convention, 1966 and Central Government Notifications and upon the load lines certificates, held for the purposes of the Customs Act, the expression vessel is of the widest amp....
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.... a part of the territory of India. In these circumstances, the definition of India as given in Section 2(27) of the Customs Act gets extended by these provisions to cover areas declared as designated areas beyond the territorial waters and located the continental shelf and the exclusive economic zone of India . If one reads the Customs Act without reading the Maritime Zones Act, 1976, then the oil rig located in the notified areas/designated areas constitute - place outside India. On the other hand, the very purpose of Sections 5, 6 and 7 of the Maritime Zones Act, 1976 is to declare an area of the contiguous zone/continental shelf/exclusive economic zone as a designated area so that exploration, exploitation and protection of resources belonging to India could be carried out. Under the said Act, the Central Government can create artificial island, offshore terminals, etc. By the said Act, customs and other fiscal enactments have been extended. Therefore, the object is very clear that the revenue generated from exploration and exploitation should accrue to the coastal State viz. India. As stated above, the area of exclusive economic zone/continental shelf, where the oil rigs are st....
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....poration also recognises the position that the rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with an Act of Parliament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid confrontation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield. 89. In Vishaka & others v. State of Rajasthan & others [(1997) 6 SCC 241], this Court considered the question as to what would be the position in law if there was no law for effective enforcement. It was held as under: - "The international conventions and norms are....
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....e pipelines passing through a non-designated area, it does not mean that they cannot be subject to levy of customs duty. Since the goods are not in transit to any other country but are in transit to the deemed territory of India, they are liable to customs duty in India and we hold accordingly. 6.9 In Burmah Shell Oil Storage and .... vs. The Commercial Tax Officer [AIR 1961 SC 315] a 5 member bench of the hon'ble Supreme Court examined the concept of export and held as follows: "36. ....It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported . It matters not that there is no valuable consideration from the receiver at the destination end........... The crucial fact is the sending of the goods to a foreign destination where they would be received as imports. The two notions of export and import, thus, go in pairs". The same view was reiterated by the hon'ble apex Court in State of Kerala vs. The Cochin Coal Company [1961 AIR 408]. If we apply this ratio to....