AI Drafter 
TaxTMI 
TaxTMI 
2013 (7) TMI 881
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....i & Co. C/1293/2012 Mr. Vijayan C. D'Souza C/1294/2012 2. 58/2012/CAC/CC(I)/AB/Gr. VB, dated 5-10-2012 Posh Giant-I J.M. Baxi & Co. C/1035/2012 Mr. Vijayan C. D'Souza C/1295/2012 3. 59/2012/CAC/CC(I)/AB/Gr. VB, dated 9-10-2012 Salvaree J.M. Baxi & Co. C/1036/2012 Mr. Vijayan C. D'Souza C/1296/2012 4. 50/2012/CAC/CC(I)/AB/Gr. VB, dated 1-9-2012 Smit Lynx J.M. Baxi & Co. C/1302/2012 Mr. Vijayan C. D'Souza C/1303/2012 5. 55/2012/CAC/CC(I)/AB/Gr. VB, dated 28-9-2012 Union Boxer J.M. Baxi & Co. C/1334/2012 Mr. Vijayan C. D'Souza C/1335/2012 6. 60/2012/CAC/CC(I)/AB/Gr. VB, dated 5-10-2012 Giant-2 J.M. Baxi & Co. C/1341/2012 Mr. Vijayan C. D'Souza C/1336/2012 7. 61/2012/CAC/CC(I)/AB/Gr. VB, dated 10-10-2012 Smit Borne J.M. Baxi & Co. C/1342/2012 Mr. Vijayan C. D'Souza C/1337/2012 8. 81/2012/CAC/CC(I)/AB/Gr. VB, dated 21-12-2012 Seacor Valor J.M. Baxi & Co. C/86212/2013 Mr. Vijayan C. D'Souza C/86215/2013 9. 84/2012/CAC/CC(I)/AB/Gr. VB, dated 20-12-2012 Smit Cyclone J.M. Baxi & Co. C/86214/2013....
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....CAC/CC(I)/AB/Gr. VB, dated 20-12-2012 Smit Cyclone 24-6-2010 31-7-2010 28-3-2012 Section 125(2) 10. 85/2012/CAC/CC(I)/AB/Gr. VB, dated 21-12-2012 Mastas Star 29-8-2008 3-10-2008 24-12-2012 Section 125(2) 3.1 From the above table it may be seen that, barring three vessels, namely, Sumit Lumba, Posh Giant - I and Salvaree which were seized by the Customs authorities, the demand for duty in respect of remaining seven vessels has been confirmed under Section 125(2) of the Customs Act, 1962. These seven vessels were never seized by the Customs and consequently no confiscation has been ordered by the Commissioner in the adjudication orders passed by him in respect of these vessels. However, duty demand has been confirmed invoking the provisions of Section 125(2) of the Customs Act, 1962. 3.2 As regards the three vessels, which were seized by the Customs authorities, the duty demands have been confirmed under Section 28(8) of the Customs Act, 1962. Of the three vessels, Posh Giant - I and Salvaree were seized by the Customs when they returned to India after completion of the first salvage job for which they had earlier come and....
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....pacity, description of equipments on board, etc. and (x) obtaining inward clearance certificate from the import department of the Custom House. 3.4 After completing the above formalities and procedures, the vessels were used in Indian waters for conducting salvage operations in 9 cases and in the case of Sumit Lumba the vessel was used a stand-bye for undertaking emergency towing operations in case of accident or mishap in accordance with the Disaster Management plan of the Ministry of Shipping. After completion of the assignments, the following formalities were completed, while sending the vessels back out of India. (a) filing of applications for re-conversion of the vessels from coastal-run to foreign-run; (b) obtaining permission from the Superintendent of Customs (Preventive) granting re-conversion from coastal-run to foreign-run; and (c) obtaining port clearance certificate under Section 42 of the Customs Act, 1962 from the Assistant/Deputy Commissioner of Customs confirming the compliance of all required procedures. 3.5 The above procedures were in confo....
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....sion from foreign-run to coastal-run was to be applied only w.e.f. 17-3-2012. It was further clarified by the Board that in respect of foreign flag vessels, there was no requirement of filing any Bill of Entry for the vessels and consequently paying duty thereon. The said circular also clarified that the requirement of filing of Bill of Entry by treating the vessels as 'goods' also apply to vessels which were brought in India for the first time for registration as Indian flag ships and vessels which were brought into India for breaking up. In respect of vessels for conversion into coastal-run, it clarified that the requirement of filing Bill of Entry and paying duty on such vessels was made effective only from 17-3-2012. 4.2 The appellant further contends that in the present case all the 10 vessels were foreign flag vessels and had been converted from foreign-run to coastal-run by the Customs Officers prior to 17-3-2012 and, therefore, the entire matter is covered and resolved by the Board's Circular, dated 13-6-2012 (supra). In spite of the same, the learned Commissioner passed orders not only confirming the demands of duty but also imposing penalties and in three cases, o....
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....nfirmation of customs duty in three cases under Section 28, limitation provided under the said Section would apply. Inasmuch as there has been no wilful misstatement or suppression of facts on the part of the appellant, extended period of limitation cannot be invoked. In the balance 7 cases, where there has been no confiscation at all, duty demand under Section 125(2) cannot be sustained because without there being any seizure there cannot be any confiscation of the goods and if there cannot be any confiscation, the question of payment of redemption fine would not arise and consequently there cannot be any duty demand under Section 125(2) as the said provision envisages payment of fine consequent upon confiscation, along with payment of customs duty. Thus, only in the case of Smit Lumba, where the import has been made by the Shipping Corporation of India, the demand is within the normal period of limitation and the appellant was permitted to file a post-Bill of Entry wherein Shipping Corporation of India claimed benefit of Notification No. 27/2002-Cus., dated 1-3-2002. The same was not extended to the appellant. Therefore, at the time of re-export, Shipping Corporation of India fil....
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....id, the same should remain with the exchequer. He relies on the decision of the Hon'ble Apex Court in the case of Supreme Woollen Mills Ltd. v. Commissioner of Customs, Nhava Sheva [2004 (167) E.L.T. 439] and also on the decision of the Tribunal in the case of India Cement Ltd. v. Commissioner of Central Excise, Madras [1984 (18) E.L.T. 499]. 5.2 It is contended that in the case of Smit Lumba, the Shipping Corporation of India amended the IGM and filed a Bill of Entry No. 4468239, dated 26-8-2011 and paid the requisite Customs duty. The show cause notice dated 8-12-2011 issued to Shipping Corporation of India is well within the time limit from the relevant date i.e., from the date of filing of the Bill of Entry. In the remaining cases the relevant date would be the date of payment of the duty as prescribed under clause (d), Explanation (1) to sub-section (ii) to Section 28 and if the date of show cause notice is reckoned from the date of payment, it may be seen that the show cause notices have been issued well within the limitation of time. 5.3 As regards the benefit of exemption under Notification No. 27/2002-Cus., dated 1-3-2002 and the claim of drawback, the lear....
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....ble for confiscation. However, demands of duty on these vessels have been confirmed under the provisions of Section 125(2) of the Customs Act, 1962. The said Section provides for recovery of duty only in a case where the goods are confiscated and a fine in lieu of confiscation is imposed under Section 125(1). In such a situation, the owner of such goods or the person from whom the goods have been seized would, in addition to the fine, be liable to any duty and charges payable on such goods. In other words, provisions of Section 125(2) are attracted only when goods are confiscated and an option to redeem the goods on payment of fine in lieu of confiscation is given. In the case before us, in respect of the seven vessels mentioned above, there is no confiscation of the goods and consequently, there is also no order imposing any fine in lieu of confiscation. In view of the legal position as discussed above, the demand of duty on these seven vessels is clearly unsustainable in law. In all these cases, it is seen that the duty demands were made in the show cause notices under Section 28(4). However, since the show cause notices were issued beyond the normal period of limitation and duty....
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....home consumption and duty liability would be attracted. 6.3 We have carefully examined the rival contentions. It would be useful to see the definitions of 'conveyance' and 'goods' for the purposes of Customs Act. Section 2(9) defines - "conveyance" includes a vessel, an aircraft and a vehicle. As per Section 2(22) "goods" includes - (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of moveable property. It can thus be seen that the term "goods" is far wider in scope and coverage than "conveyance" and goods includes conveyance. While all conveyances are goods, the reverse is not true. Though the Customs Act does not define conveyance specifically, the ordinary dictionary meaning of the term "conveyance" as per Oxford English Dictionary is - "the action or process of transporting or carrying someone or something from one place to another : a means of transport; a vehicle". As per the cargo declaration form filed at the time of the arrival of these vessels, cargo was declared as 'Nil'. There was also no passenger manifest filed for carriage of persons. Thus the said vessels "Smit Lumba, Posh Giant-I an....
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....rdingly, they are liable to pay the applicable customs duty on import. 6.5 In the Chowgule & Co. Pvt. Ltd. case cited (supra), the Supreme Court had occasion to consider when a vessel can be considered as goods and the Court held as follows :- "Thus, the test laid down for deciding whether a vessel is for the purposes of the Customs Act an ocean-going vessel or "goods for home consumption" is the primary use of the vessel; if the predominant or the primary use of the vessel is to transverse the open seas, the vessel, will be an ocean-going vessel, but if it is brought into India primarily for use in India, then such vessel will be "goods for home consumption", notwithstanding that occasionally or incidentally they are used outside India." The same view was taken in the V.M. Salgaonkar & Bros. (P) Ltd. case cited supra. 6.6 There are customs duty exemptions available on vessels imported for temporary use. For example, barges or pontoons imported along with ships for more speedy unloading of imported goods and loading of export goods are exempt from import duty if they are re-exported by the same ship which brought them or by any other ship under the same shippi....
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....nd B/E in respect of foreign flag vessels. Relevant extracts from the said Circular is reproduced below : "Subject : Procedure followed for import of Indian vessels and filing of Import General Manifest, Bill of Entry - regarding. I am directed to invite your attention to the Board's instruction issued vide F. No. 450/79/2010-Cus. IV, dated 23-9-2010 which state that the requirement for filing Import General Manifest (IGM) and Bill of Entry should be complied with even in cases, where goods are exempt from payment of any duty. The jurisdictional Commissioners were also instructed to review the situation, and take appropriate action for past cases, including adjudication, if warranted, in case of non-fulfillment of aforesaid filing of documents. 2. In this regard, certain difficulties have been brought to the notice of the Board by the trade and Indian Ship Owners' Association stating that the Customs field formations are insisting on filing of IGM and Bill of Entry even in respect of those vessels that were imported in the past and which were exempt from payment of import duty. 3.1 In this regard, it is stated that as the provisions of Section 29 of the Custom....
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....re is a need to file a Bill of Entry for payment of applicable duty as CVD. 3.5 ............................. 4. In view of the above, it is clarified that in respect of foreign flag vessels, for Indian flag vessels, there is no requirement of filing of IGM and Bill of Entry, since its usage is as conveyance. In respect of Indian flag vessels and vessels for breaking up as explained in para 3.3 and 3.5 above, the importer has to file IGM and Bill of Entry, under the provisions of the Customs Act, 1962. As regards the vessel for conversion into costal run/trade as detailed in para 3.4, since the changes in the duty structure for levy of CVD on vessels which are being converted for coastal trade was initially imposed from 1-3-2011, and subsequently retrospective exemption has been provided for the period 1-3-2011 to 16-3-2011 vide clause 129 of the Finance Act, 2012, the requirement for filing IGM and Bill of Entry may be insisted in all such cases w.e.f. 17-3-2012, that is the date from which levy of CVD has come into force. 5. It is also clarified that all vessels including foreign going vessels for its entry into/exit from the country during its journey as ....
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....anding duty under Section 28(4) and the duty demands were confirmed under Section 28(8). However, since the goods have been confiscated and option to redeem the goods have been given on payment of fine in lieu of confiscation under Section 125(2) of the Customs Act, the appellants are liable to pay duty when the option for redemption is exercised. From the records of the case it is seen that the appellants have discharged the duty liability at the time of provisional release of the goods. There is no time limit for demand of duty under Section 125(2). Therefore, even though the duty demand has been made and confirmed under a wrong or incorrect provision of law, the demand is sustainable in law. A three judges Bench of the Hon'ble Apex Court, in the case of J. K. Steel Limited (supra), while considering Central Excise duty demand under a wrong provision of the Central Excise Rules, held as follows :- "If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled position of law. In this connection reference may be ma....
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....arily for execution of a contract; the said goods are re-exported within six months of the date of importation or within such extended period not exceeding one year from the date of importation, as the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be, may allow. The concessional rate of duty prescribed is fifteen per cent. of the aggregate of the duties of customs, which would be leviable, in the case of goods which are re-exported within six months of the date of importation. In the case of goods which are re-exported after six months, but within one year of the date of importation, the rate of duty chargeable would be thirty per cent. of the aggregate of the duties of customs. To be eligible for the concession, the goods should be either machinery, equipment or tools. Tugs and barges can, by no stretch of imagination, be considered as falling in this category. They fall under Chapter 89 as "Ships, boats and floating structures". Therefore, in our view, the appellant would not be eligible for any duty concession under the said Notification and the claim in this regard is not sustainable. 6.13 The appellants have alternatively argued t....
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....ity for action under section 111 read with section 112 of the Act. In other words, the language of both the sections above referred to does not warrant the actual confiscation, but merely speaks of the liability of the goods being confiscated. This is the plain and most unambiguous meaning of the phraseology "liable to confiscation" spoken in these two sections." 6.15 The next issue for consideration is whether the vessels are liable to confiscation under the Customs Act or not. The vessels, Smit Lumba, Posh Giant-I and Salvaree have been confiscated under the provisions of Sections 111(f), 111(g) and 111(h) of the Customs Act. In respect of the other 7 vessels, they have also been held liable to confiscation under the same provisions. Section 111(g) is attracted when any dutiable goods or prohibited goods are unloaded from a conveyance in contravention of the provisions of Section 32. Since the case of the Customs is that the impugned vessels are not "conveyances", there cannot be any violation of Section 111(g) as no unloading has taken place from a 'conveyance'. Similarly, violation of 111(h) can also not be alleged for the reason that the said section is attracted when ....
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.... Rs. 5 crore and Rs. 2 crore in respect of the 3 seized vessels. While imposing fine, the consideration that is relevant is the profit margin on the goods. Since the imported vessels are not meant for sale, it may not be possible to make any estimate of the profit margin. Therefore, what is relevant is the duty amount sought to be saved by the appellant in respect of the transaction. Since all the three vessels have been re-exported within a period of 3 months from the date of importation, the appellant would have been eligible to claim drawback of the import duties paid. For re-exportation within a period of 3 months, eligible drawback amount is 95% of the duty paid. Thus, the appellant has sought to save only 5% of the duly involved. Therefore, this is the amount that could be considered for imposition of fine. On this basis, the reasonable fine amount would work out to Rs. 50 lakhs each on Smit Lumba and Posh Giant-I and Rs. 15 lakhs on Salvaree. Accordingly we reduce the redemption fine to Rs. 50 lakhs each on Smit Lumba and Posh Giant-I and Rs. 15 lakhs on Salvaree. The same logic would apply in the case of imposition of penalty also. Accordingly we impose a penalty of Rs. 50 ....