TaxTMI 
TaxTMI 
2017 (2) TMI 294
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....ling and related activities on contract basis, inter alia, for the Oil and Natural Gas Corporation Limited (ONGC) had obtained the approval of the Government of India on 25.03.1987 for the import of a Rig for such oil field services. It was granted a Special Import Licence bearing number P/CG/2103211 dated 24.04.1987 for the import of the said Rig along with certain drilling equipments. A confirmed irrevocable Letter of Credit amounting to US $ 1,521,000/- for the shipment of Capital goods covered under L/C No. ICICI/RF/87/2 dated 08.05.1987 was given by ICICI Bombay against the said Import Licence. As per the special instructions annexed to the said Letter of Credit, the transport documents were required to fulfil six conditions including the one, that is, the shipping document should indicate the place of final destination and should not be different from the port of discharge. As the factual matrix has been uncurtained, the assessee purchased in July 1987 a rig, Griffin Alexander III, from Griffin Alexander Drilling Co. for a price of US $ 5.39 million. The rig was towed directly to the drilling site at Bombay High in October 1987. In February 1996, the importer wrote to the Com....
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....) and (j) of Section 111. The Commissioner also held that the rig was imported for home consumption and hence, the assesses were liable to pay duty on the value of Rs. 44,40,28,320/-, determined after depreciating the value by 70% from the built cost of the rig. Being of this view, the said authority confirmed the demand for duty amounting to Rs. 27.91 crores, confiscation of the rig and had given the option of redeeming it by payment of fine of Rs. 2.0 crores. The authority exonerated P.A. Abraham, Managing Director of the Company, imposed penalties of Rs. 50,000/- each on P. Venkateswaran, Vice President and A.P.S. Sandhu, General Manager, ordered confiscation of three towing vessels but permitted them to be redeemed on payment of fine of Rs. 1.0 lakh each and imposed penalties on ONGC, and Benny Ltd., the importer's agent. 4. Aggrieved by the said order, assessee preferred appeal before the tribunal. On the foundation of the judgments, namely, mership Management Pvt. Ltd. v. UOI1996 (86) ELT 15rendered by the High Court of Bombay, Scindia Steamship Co. Ltd. v. CC 1988 (36) ELT 581 delivered by the High Court of Calcutta and an earlier judgment of the tribunal in Sedco Forex Int....
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.... Pride Foramer(supra) wherein the Bombay High Court taking note of the judgment in Amership Management Pvt. Ltd. (supra) had opined that the imported stores supplied to a rig located in an area designated under the Act 80 of 1976 would not fall within Section 86 of the Act. The tribunal appreciated the fact that in the said decision reliance was placed on the judgment of the Division Bench of that Court in Salgaonkar Engineering v. OJF Games 1984 (86) Bom LR 127to hold that it is only that vessel which is actually carrying at a given point of time the goods or passengers between a port in India and a port outside India is a foreign going vessel. Analysing the provisions of the Act and the authorities in the field, the tribunal held that a ship that is engaged in carriage of cargo or passengers between Mumbai and Abu Dhabi is a foreign going vessel covered by the first part of the definition and would be as such a foreign going vessel throughout the length of its voyage, if, during its voyage between these two ports, it touches other Indian Ports. It further opined that a rig had been held in Amership Management Pvt Ltd. (supra) as a foreign going vessel because it was engaged in th....
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.... home consumption and a bill of entry was required to be filed with regard to it. It was held that there was no justification for holding the vessels were not goods for the purposes of Section 46(1) of the Act and, therefore, addressed the question as to whether the vessels which were to be used in Indian territorial waters for topping of bulk carriers could be said to be vessels for home consumption merely on that account. It said that for the purposes of levy of customs duty, it is necessary to determine whether imported goods are "goods for home consumption". The Court in that case after analysing the statutory provisions held thus:- "15. In our view, for the purpose of the levy of customs duty, in order to determine whether any imported goods are "goods for home consumption", we have to find out the primary intended use of the goods when the goods are brought into Indian Territorial Waters. If the goods are intended to be primarily used in India, they are goods for home consumption notwithstanding that they may also be used for the same or other purposes outside India. We guard ourselves against saying that the converse may be true. The question whether goods not intended to b....
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....exploration or exploitation but only had entered the territorial waters for purposes of repair. The tribunal also observed that the rig was not in the process of transit through Indian waters for the purpose of going from one point to another for drilling and this being the case, it cannot be said that the rig was goods imported for home consumption and covered under Section 46(1) of the Act. It further held that the principles laid down by this Court that while the act of import commences when the goods enter the territorial waters, it continues and is completed only when it merged with the mass of the goods in the country, will apply to the facts before it and hence, it is deducible that import had not been completed. On the aforesaid basis, it concluded that in the circumstances payment of duty on the rig did not arise and even if the rig was liable to duty. 11. After so holding the tribunal addressed to the contravention of the provisions of clauses (f), (g) and (j) of Section 111 of the Act. Analysing various aspects, it opined that the provisions of Section 111 would be attracted and, therefore, contravention of clause (f) had been established. It was also held that clause (....
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....b-section (42) to Section 2 means conveyance of any type used on land. As a logical corollary, it would not include a ship or vessel. Sub-section (2) to Section 43 states that the Central Government may by notification in the Official Gazette exempt the different classes of conveyances from all or any other provisions of the Act. However, we do find some difficulty as taxation or taxability of the 'foreign going vessels' when they enter Indian territorial waters is not directly addressed in the fasciculus of the Sections from 29 to 43 of the Act. These provisions do make a distinction between goods imported to be unloaded at the port for India and those which are not to be unloaded and in transit. The said aspect shall be elucidated at a subsequent stage. 15. At this stage, we would like to first adumbrate on the definition of the term "foreign going vessel or aircraft" as defined in sub-section (21) of Section 2 which reads as under:- "(21) "foreign-going vessel or aircraft" means any vessel or aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and any port or airport outside India, whether touching any intermediate po....
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....shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." 18. The expression "import" is a wide expression, which would include cognate expressions and means bringing into India from a place outside India. The word "India" for the purpose of the Act includes the land mass as well as territorial waters. The term "dutiable goods" are goods which are chargeable to duty and on which duty has not been paid. Once duty has been paid, the goods cease to be dutiable goods. Section 12 of the Act begins with the words "Except as otherwise provided in this Act or any other law for the time being in force". Thus, it gives primacy to any other law being in force, and records that the said provision would apply when otherwise not provided in the said Act. Therefore, when any other provision of the Act or other law for the time being provides differently, that would not attract customs duty under Section 12. Duty of custom, subject to the above, is levied at the rates specified under the Customs Tariff Act, 1975 or any other law for the time being in force on the goods imported into or exported from India. 19. In Chowgule and Co. ....
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.... in that vessel or aircraft, at any place other than a customs port or a customs airport, as the case may be. Section 30 imposes a duty on a person in charge of the conveyance carrying imported goods to deliver to the proper officer, within twenty-four hours after arrival, an import manifest in the case of a vessel or aircraft or an import report, in the case of a vehicle, in the prescribed form. Section 31 prohibits the master of a vessel from permitting the unloading of any imported goods until an order has been given by the proper officer granting "entry inwards" to such vessel. An "entry inwards" order is not to be given until an import manifest has been delivered or unless the proper officer is satisfied that there was sufficient cause for not delivering it. Section 39 prohibits the master of a vessel from permitting the loading of any export goods other than the baggage and mail bags, until an order has been given by the proper officer granting "entry outwards" to such vessel. Section 41 prescribes that an export manifest in the case of a vessel or an aircraft and an export report in the case of a vehicle should be filed by the person in charge of a conveyance before the depa....
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....onsider the question whether a vessel is goods so as to attract Section 46(1) of the Customs Act. By definition a vessel, aircraft or vehicle is included among goods, vide Section 2(22). But, according to Shri Setalvad, notwithstanding the definition, the scheme of Chapters VI and VII of the Customs Act and the context in which the expression "goods" is used in Section 46 of the Act requires the expression to be interpreted for the purpose of Section 46(1) as excluding a vessel, aircraft or vehicle. In answer to a direct question by us, Shri Setalvad confessed that if a vessel, aircraft and vehicle are required to be excluded from the meaning of the expression "goods" in Section 46(1) of the Act, he was unable to suggest what other purpose was to be served by the inclusive definition of the expression which expressly brought within its shadow "vessel, aircraft and vehicle". He frankly stated that he was unable to point out any provision in the Act into which the inclusive definition could be read. We cannot attribute redundance to the legislature particularly in the case of a definition in a taxing statute. We must proceed on the basis that such a definition is designed to achieve ....
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....ill capable of being used as oceangoing vessels and are in fact so used during the off-season when it is not practicable to do topping-up operations and, for that matter, even during the fair season when they have necessarily to go into the open sea to go alongside the bulk carriers in open anchorages. In both the cases before us there can be no doubt that the vessels are not only capable of being used but are used as cargo ships to carry cargo from one Indian port to another or sometimes to foreign ports, necessarily going out on the high seas. They are structurally and technically competent to go on the high seas and they have been certified to be so competent by appropriate maritime authorities. Instead of remaining idle and getting rusty, during off-season, that is when because of inclement monsoon weather topping-up operations cannot be done in MormugaoHarbour, the vessels do go out into the open sea sometimes from one Indian port to another and at other times to foreign ports. Of course, even in the course of topping-up operations during the fair season, it is necessary for the trans-shippers to go into the open sea to reach the bulk carriers. But, in our view these operation....
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....io in Chowgule and Co. Pvt Ltd (supra). While deciding the said issue, it has been held as under:- "25. There is no dispute for the department that by design and equipment, transhippers are intended to be used mostly to carry the cargo from harbours to the high seas and vice versa. That such transhippers often move into the open sea is also not disputed by the department. Thus considering the question from all the different angles, it is reasonable to take the view that merely because transhippers are used for carrying cargo for loading into the bulk carriers (those being unable to touch the port) they cannot be excluded from the category of ocean-going vessels. At any rate it has been demonstrated by the Government that it was not very much interested in segregating transhippers from the category of ocean-going vessels as the Government brought out a new notification enveloping all vessels including transhippers within the ambit of ocean-going vessels, almost immediately after pronouncement of the decision in Chowgule& Co. (P) Ltd. That subsequent development on account of its close proximity to time cannot be overlooked as of no impact. 26. In the result we accept the contention....
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....irs. The rig was brought for the second time to the Mumbai port for repair on 9th November, 1996 and had remained there till 2nd December, 1996. The rig thereafter was taken out and removed from the territorial waters of India as is evincible from the adjudication order. The rig was for the third time brought to the outer anchorage in Mumbai/Mumbai port on 9th December, 1998 and removed from the customs area. On this occasion, for the first time, the authorities felt that the rig had been imported into India when the rig was brought within the territorial waters for repairs. The adjudication order does not record that the rig was in operation within the territorial waters of India. On the other hand, the adjudication order does not spell out that the rig did not operate outside the territorial waters of India. The contention raised by the owner in this regard was neither specifically rejected not a different finding was recorded. The finding was that the rig when it is repaired in India, it is imported into India for home consumption. The adjudication order holds that the repairs undertaken would complete the act of import, for the requirement of home consumption was satisfied. The....