AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1361
X X X X Extracts X X X X
X X X X Extracts X X X X
.....60 metric tons of the vessel though, according to the appellant, nothing, in excess of Rs. 10,61,460.90, paid on assessment of ten bills of entry for clearance of 732.60 metric tons between 1987 and 2005, was due. 2. To winnow the core of the tortuous history of this assessment from the recitals of Learned Counsel for appellant and of Learned Authorised Representative, including the appeal to the highest court of the land on more than one occasion, it would be worth recalling the brief facts, the legal framework, the postulates that guided the customs authorities and the peculiarities of the impugned import. Though MV Maratha Transhipper entered Indian waters as early as 11th October 1969, owing to dispute by the importer that vessel was exempted from duty, it took the course of a writ petition and appeal therefrom to secure compliance with section 46 of Customs Act, 1962 through judgement dated 19th February 1987 in civil appeal no. 179/1985. Though, again, the importer initially insisted on filing the required declarations in the format applicable at the time of first entry, the bill of entry was remedied on 23rd March 1987 and provisionally assessed to duty liability of Rs. 38....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... voyaging in territorial waters, vessels are beyond the pale of municipal laws. In such an existence, with much of the span expended in high seas, a vessel is very much a person, referred to in the feminine, and represented by a master wielding enormous powers that are vested in him by the written and unwritten law of marine conventions and customs. The tenuous link with the owner is only of commercial relevance. At the same time, that vessels are manufactured and are traded in a manner similar to goods is undeniable. The statutes governing the levy and collection of customs duties generally take note of this distinction. In the erstwhile Sea Customs Act, 1878, 'vessels', having been defined, could not be included for coverage of duty that was liable on 'goods' which remained undefined. Tax policy, with limited objectives, did not encompass import or export of vessels within it. The successor Customs Act, 1962 did not define 'vessels' but placed them within the inclusive confines of section 2(9) and section 2(22) defining 'conveyance' and 'goods' respectively implying that a vessel entering the customs territory as 'goods' could now be a subject of tax policy. The present controver....
X X X X Extracts X X X X
X X X X Extracts X X X X
....78 chose to notify the impugned exemption that employed this undefined expression and deployed a contingency for crystallising duty liability. In Union of India v. Jalyan Udyog [1994 SCC (1) 318], the Hon'ble Supreme Court noticed the substitution of the original 'Provided that any such vessel subsequently broken up shall be chargeable with duty which would be payable on her if she were imported to be broken up.' in notification no. 262/58 dated 11th October 1958 with 'Provided that the duty of Customs shall be levied on the vessel if it is broken up as if it were then imported to be broken up' by notification no. 162/65-Cus dated 16th October 1965 after the successor statute, with the overlap of vessels in 'conveyances' and 'goods', came into force. Even after the Customs Tariff Act, 1975 replaced the Indian Tariff Act, 1934, this exemption to 'ocean going vessels' continued to be in force until superseded by notification no. 133/87-Cus dated 19th March 1987 in exercise of powers conferred by section 25 of Customs Act, 1962. From the decision in Mustan Taherbhai v. Collector Customs [2006 ECR 561 Tri Mumbai], we learn that the Tribunal also noticed the exemption, under a new....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., should, by taking that temporary privilege to its logical conclusion, be assessed to duty as applicable to ships for breaking. Urging that the law permits only one of these two alternatives, reliance was placed on the decision of the Hon'ble High Court of Bombay in Khanbhai Essofbhai v. Union of India [1989 (41) ELT 239 (Bom)]. Continuing in that vein, it was submitted by Learned Authorized Representative that the exemption in the notification is effective only as long as the ship is a conveyance and that any other disposal would render it liable to duty that was foregone initially. 9. Though it is now common ground that, at the time of its first arrival in 1969, MV Maratha Transhipper, as a fully functional conveyance, was eligible for exemption from duties, it is still contended on behalf of Revenue, as the first of the postulates, that the intent of notification was deferment of chargeability to duty till, and if, such vessel is broken up. The other postulate in controversy, derived from the decision of the Hon'ble High Court of Bombay in re Khanbhai Essofbhai, is that a wrecked vessel must be assessed to duty as though imported for breaking up. 10. That MV Maratha Transhipp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of recovery', in defining 'wreck.' 12. Undoubtedly, wrecking and breaking up of a vessel have the same consequence of extinguishing a conveyance but the substantial difference between them is that former is often an accidental occurrence while the latter is deliberate with the usual risk and return implicit in a commercial transaction. It is not, as the adjudicating authority appears to believe, merely a transformation of an unseaworthy vessel that, arising from failure to comply with condition of exemption accorded to 'ocean going vessels', must burden the owner with duty liability otherwise foregone earlier. 13. The process of import of the functioning vessel was commenced after its demise as a vessel. Whether it be considered thereafter as import of ship for breaking or as a wreck, the assessment of the bill of entry filed in March, 1987 ceased prematurely and without finalisation upon issue of impugned show cause notice. The consequence of the impugned show cause notice must now be dealt with in the light of heading no. 8908 in the First Schedule to Customs Tariff Act, 1975 and the definition of 'wreck' supra. 14. The exemption notification operated, not for vessels that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xation, attributed to Christopher Bullock in The Cobbler of Preston (1716). 16. The intent of importing the impugned vessel for breaking up is not on record to evince. Intent is an inextricable element of heading no. 8908 of the First Schedule to Customs Tariff Act, 1975 and, absent such qualification, the sole alternative is heading no. 8901 of the First Schedule to Customs Tariff Act, 1975 which cannot apply to wrecks. The impugned order has erred by considering only these two alternatives. The admittance of bills of entry to which section 21 of Customs Act, 1962 applies suffices for consideration of the third option. The disposal of articles that were landed India on salvage from the vessel would need appropriate treatment under Customs Act, 1962. There is, obviously, no dispute that the salvaged parts of the wreck have not originated in India. Duty liability arises on presentation of goods for import; it is the parts of the vessel that were removed from wreck that were presented for import. Accordingly, the liability to duty would arise through section 21 of Customs Act, 1962 read with section 12 of Customs Act, 1962. As the vessel that was imported originally into India was e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Noticee bought a second hand used vessel, used it for about 16 years during the span of its economic viability and then left it to suffer at the vagaries of nature knowing fully well that the nature's fury was enough to sink the vessel. This can be construed as a ploy with an intent to evade payment of Customs duties to the Government as the transhippers normally conduct repairs during the off season as all port operations are closed. It is also likely that the vessel was fully insured and sufficient compensation claimed by the Noticee. Only on MPT's insistence and that too due to occurrence of a major casualty did the Noticee try to salvage the wreck. The salvaging operation was a mere eyewash as they salvaged only a meagre 10% inspite of the whole wreckage being secured by the salvagers as reported by MPT in their report dated 12.07.2000. The Noticee has intentionally not salvaged the whole wreck in order to avoid paying the duty even though the Hon'ble High Court had directed to salvage the wreckage and then claim the money lying with the Court. 29. The MPT furnished a certificate dated 20.08.2005, informing that the navigation path is clear, but nowhere has an....