TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 271
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....les spread over an area of 105,000 km; out of which only 256 KM (0.25%) was within territorial waters of India. For this purpose, the Vessel had to move from various ports in India and also between ports outside India. During the movements it carried stores, spares, bunkers and crew and technical staff to and fro Indian Ports. During the period of dispute i.e. 11.07.2007 to 24.04.2012, the vessel had carried out 13 repair activities and 5 cable working exercises (CWEs) across the region; out of these only one recovery operation occurred 5-20 nautical miles of India, during the period 4.10.2007 to 6.10.2007. Revenue argued that out of 1750 days under consideration, the vessel was out for repairs only for 301 days and as such it cannot be considered as a 'Foreign Going Vessel' (FGV) and exemption availed for ship stores Bunkers etc is not available to the vessel. The vessel was seized on 17-02-2012 and was provisionally released on 27-02-2012. A show cause Notice dated 10-07-2012 along with a corrigendum dated 14-08-2012 was issued to the Appellant M/s Asean Cable Ship Pvt Ltd and Too Talk Leong, Master CS of the vessel. The Show Cause Notice was adjudicated by Commissioner of Custom....
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....el AE was put to any other use in the period of the contract. ASEAN Cable Ship was a Foreign Going Vessel 3. Coming to the definition of FGV, Shri Seth submits that in terms of Section 2(21)(ii) of Customs Act, 1962 ("Customs Act"), an FGV has inter alia been defined as "any vessel engaged in fishing or any other operations outside the territorial waters of India"; AE, though stationed at the Cochin port under the SEAICOMA, was entrusted with maintenance of cables in the Indian ocean, with the major portion of such cables (over 99.7%) being outside the Indian territorial waters; since first berthed at the Kochi port in the year 2003, AE has undertaken only a single repair activity within the Indian territorial waters. The definition is in two parts, which are independent, and if a case falls within the inclusive part of the definition above, it would still be considered as an FGV; the term "engaged in" covers not only a period when there is direct participation or activities, it also includes the period between such participation or activity and the time spent in preparation or readiness to undertake the activity. "Foreign going vessels" as per precedent, also cover situations wh....
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...., AE was at all times engaged in operations outside India, and thereby qualifies as an FGV in terms of Section 2(21)(ii) of the Customs Act. 5. Shri Seth further submits that in terms of judgments of the Supreme Court and various High Courts, AE qualifies to be an FGV. (i). The definition of FGV under Section 2(21) of the Customs Act is an inclusive definition, inasmuch as the words "includes" is used in the definition. In terms of the law declared by the Hon'ble Supreme Court in Bharat Cooperative Bank (Mumbai) Limited vs. Coop. Bank Employees Union [AIR 2007 SC 2320], when the word "includes" is used in the definition, the Legislature did not intend to restrict the definition to its natural meaning, but extends the definition to cover what is enumerated even if it is beyond the natural meaning of the word. (ii). Hon'ble Calcutta High Court, in the case of Scindia Steam Navigation vs. CCE [1988 (36) ELT 581, held that repairs of a vessel in dry docks to enable the vessel to proceed to foreign port with export cargo, cannot not take away the status of the vessel being an FGV. The Court held that "13... Steps taken in proceeding to foreign ports with export cargo could ....
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....as mandated under SEAICOMA, it ought to be considered as an FGV. 7. Shri Seth further submits that the Impugned Order is bad in law in as much it extends the words contained in main limb of Section 2(21) to the inclusive limb; it proceeds to deny the FGV status to AE by extending the words 'for the time being' to the inclusive part of the definition; it is noteworthy that the words 'engaged in' are set out only in context of the main clause of the definition of FGV, i.e. in respect of vessels engaged in the carriage of goods or passengers between any port in India and any port outside India; impugned Order has erred in extending the scope of the same to even the inclusive limb of Section 2(21), i.e. for vessels engaged for operations outside India. Reliance is this regard can be placed on the judgment of the Hon'ble Supreme Court in Commissioner Of Customs, Mumbai Vs Aban Lloyd Chiles Offshore Ltd (2017 (346) E.L.T. 513 (S.C.)], wherein it has been clearly set out that each of the limbs of the definition set out in Section 2(21) is independent of each other, and the words set out in the main limb of the definition of FGV cannot be extended to the inclusive limb....
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....ay; as an analogy, while a fighter jet is considered to be continuously engaged in the defence of the nation, it carries out sorties only on certain occasions when the need arises; therefore, for the period which it is not carrying out such sortie, it cannot be said that the said fighter jet is not engaged in the defence of the nation; it is evident that that merely because AE is not carrying out repair activities or cable-working exercises at a given moment in time, cannot take away its classification as an FGV. The issue is barred by Limitation 10. Shri Seth submits that invocation of extended period of limitation unsustainable in present facts; there has not been any suppression of facts by the Appellant in the present facts; Customs Department was always aware of the fact that AE has been stationed at Cochin port during its engagement under the SEAICOMA, which emerges from the various correspondences with the Customs Department; such information was not only provided to the Customs authorities, but also to the relevant police officials at the Cochin port, clearly setting out that AE has berthed and that it will be berthing at the Cochin port for a long period of time; sample ....
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....iod of limitation; it was held by Hon'ble Supreme Court, in Pahwa Chemicals Private Limited Vs Commissioner (2005 (189) ELT 257 (SC), that mere failure to declare does not amount to willful misdeclaration or suppression; there must be some positive act on the part of the party to establish either willful misdeclaration or suppression; where facts are known to both the parties, it cannot be said that there has been any willful misdeclaration or suppression. As all relevant facts regarding AE, including its stay at the Cochin port and its FGV status, were known to the Customs department, the invocation of extended period of limitation is not available and bald allegations of the Customs Department on this count cannot sustain. Obtaining of coastal Licences from DG Shipping will not change the character of the vessel: 12. Learned Counsel for the appellants submits that the Impugned Order (at paragraph 165) holds that the vessel AE, having procured licenses for coastal operations from the Director General of Shipping, was no longer entitled to a foreign run status. This approach is erroneous and legally untenable for the following reasons: (i) During the period in dispute, licen....
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....ng from any other sources. Therefore, in the present case, wherein AE qualifies as an FGV on account of being contractually mandated to undertake operations outside India, the pre-emptive obtaining of a licence under Section 407 of Merchant Shipping Act cannot impede its classification as an FGV. (iii). Hon'ble Bombay High Court in UOI Vs BPCL 1987 (30) ELT 383 (Bom), held that a status of a vessel as an FGV cannot cease merely because it had obtained a licence under Section 407 of the Merchant Shipping Act; on the contrary, the requirement to obtain such licence would by itself show that the vessel had retained the character of an FGV. The Impugned Order has sought to erroneously rely on the judgment in the case of Marco Shipping Services P. Ltd. vs. Commissioner of Customs, Ahmedabad 2008 (224) E.L.T. 93 (Tri- Ahmd) to arrive at the conclusion that procurement of a licence under Section 407 will alter the categorization of AE. However, the ratio in the case of Marco Shipping (supra) is inapplicable in the present case since the Tribunal did not considered the judgment of the Hon'ble Bombay High Court in BPCL case (supra). Further, in the said case, the assessee had not o....
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....h have been consumed onboard during such period when the repair activity was undertaken, viz. 04.10.2007 to 06.10.2007, in Indian territorial waters. Shri Roshan Seth concludes his argument by submitting that in view of his arguments, the OIO may be set aside giving consequential reliefs. 14. Shri Gopa Kumar, Joint Commissioner, AR, arguing on behalf of the department, submits that C.S ASEAN Explorer cannot be categorized as foreign going vessel; the vessel was operating within the territorial waters of India without reverting into a vessel on coastal run; the vessel was carrying out cable repair in the Indian waters; the same is evident from the following. (i). the master of the vessel stated, on 06.02.2012, that the vessel had discharged functions within the territorial waters of India, / that permission has been obtained only from the DG(Shipping) / Mumbai; no customs duty has been paid or exemption benefit availed on any of the consumables used by the vessel during its operation in Indian waters; (ii). Letter dated 10.02.2012, issued by the DoT, in response to an application filed by M/s. Tata Telecommunications Ltd (submitted by the master of the vessel) indicated that th....
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....r discharge of such services in India has been put to use in India and therefore, ought to have been converted into one on coastal run before applying the same to rendering of services in India; the vessel received, during its stay in India on board, spares and consumables essentially meant for submarine cable repair activity and fuel and ship spares as stores during the period from 11.07.2007 to 24. 04.2012. Despite the above clear facts, appellant has been arguing that the vessel qualified to be a foreign going vessel; in all their declarations before the Customs authorities, they had declared the vessel as foreign going vessel only; this amounts to suppression of facts and the demand for the extended period and the penalties imposed are justified. 15. Learned Authorised Representative further submits that no IGM indicating the vessel as cargo was filed and duty on the stores and bunkers was discharged. This basic requirement of compliance of CBEC circular 58/97 was not done by the ASEAN Cable Ship, which is a clear violation of the Customs Act. Therefore, the vessel was confiscated and the duties demanded on the stores and bunkers and penalties were rightly imposed. Learned A....
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....ritory of India. Even when this condition is satisfied, it would amount to home consumption." 31. "The Customs Act regulates and mandates compliance by the foreign going vessels when they enter the territorial waters. Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a 'good' meant for home consumption. Learned Authorised Representative further submits that the judgments support the department's view that when ASEAN Cable ship was brought into Indian territorial waters and put to use therein for operations- viz. Cable Repair work- the vessel should have been declared as Good by filing 1GM under Section 30 of the Customs Act. 'The Provisions of the Act are required to be met' and in the subject case as there was non- compliance of the provisions, the vessel was confiscated as per the provisions of the Act. 16. Heard both sides and perused the records of the case. We have also given careful consideration to the oral and written submissions of the rival parties. Though the senior counsel for the appellants and the authorised representative has given detailed and long d....
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....necessity to undertake repair activities in a time-bound manner as these cables are used for the purpose of telecommunication and data transmission and a fault somewhere can catastrophically affect global trade and commerce and security communications between Defence establishments. As such the cable ships are required to undertake repairs quickly and efficiently and therefore, the cable ships are required to be in operational preparedness all the times. 18. Learned Counsel for the appellants submits, drawing an analogy to a Fighter Plane that the Fighter Plane may not be engaged in a war all the times but it requires to be in readiness all the time. He submits that it is not proper for the Department to say that the vessel was mostly in Indian territorial waters; out of 18 instances of repair/cable-working during the disputed period (July 11, 2007 to April 26, 2012) and out of 36 instances of repair/cable-working during the life of Contract, only on a single occasion, the repair was carried out in the territorial waters of India. Even if, the vessel was berthing at Cochin Port for most of the time, it was required to be in readiness to go and carry out repairs. Therefore, the Con....
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....thority.......... The cost of such additional facilities provided directly in respect of a particular repair or maintenance operation shall be charged directly to that operation in accordance with Clause 19(g). Article 7(b) states that: (b) Under the Reduced Manning arrangement, each Cable ship Operator shall ensure that its Cable ship is operated in such a manner so as to be able to put to sea without undue delay and normally within 24 hours of receipt of written notification from the appropriate Maintenance Authority that the Cable ship's Services are required in accordance with Clause 11 unless Clause 15 and Clause 25 are applicable. Article 13(a) specifies that: (a) The Cable ships shall normally be located at the Base Ports as listed in Schedule A2 while on standby for repair and maintenance. Article 19(a) specifies that (a) The respective costs of each Cable ship (including its ROV) shall comprise Fixed Standing Charges and Running Costs. Running Costs incurred are calculated in accordance with Schedule D2. The Fixed Standing Charges from 1st July 2005 till 2012 are shown in Schedule D1. 20. Ongoing through the terms of the Contract, we do not have any doubt, whatso....
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....scribed factories as factories engaged in any industry, it did not intend that the said factories should be exclusively engaged in the industry specified in Schedule I. The construction for which the respondents contend requires that we should add the word "exclusively" in the clause and that clearly would not be permissible." 21. In view of the above, we are of the considered opinion that the vessel ASEAN Explorer was a foreign going vessel in terms of inclusive definition contained in Section 2(21)(ii) of the Customs Act, 1962. We find that as contended by the Learned Counsel for the appellants, no time period is prescribed in the definition. The engagement of the vessel in its entirety under the Agreement request to be considered and not for a specific voyage or time period; the vessel is on a continuous engagement and the status of the vessel being the tough a foreign going vessel cannot be decided on a piece meal basis as the contractual terms require a continuous and a long drawn engagement. Therefore, as contended by the appellants, the benefit of the provision should not be denied by reading extraneous conditions into the legal provisions as held in Tata Iron and Steel Co.....
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....at period on time is the material factor. It means or pre-supposes a vessel at the relevant time engaged in the carriage of goods or passenger between any port or airport in India and any port or airport outside India. The concept of movement according to the learned Counsel is implicit in the definition. In the instant case while the vessel was in the dry docks "for the time being" the vessel was not engaged in the carriage of goods. After repairs it might again be engaged in the carriage of goods both before and after the period when it was in the dry dock. 13. Mr. Dipankar Gupta, appearing on behalf of the petitioner, submitted that the vessel was a "foreign going vessel" even while it was being repaired in the dry docks because at that time it was making all reasonable and proper preparation for carrying the cargo to foreign ports. The delay occurred in repairing could not make the vessel a non-foreign going vessel. It appears that the vessel was carrying cargo between Indian ports and foreign ports. In one such voyage while the vessel came to Calcutta from foreign port, the vessel had to undergo repairs in the dry docks. But that was necessary for reasonable and proper prepa....
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....fact that for a major portion of time, the said vessel was berthed at Cochin Port and on a single occasion has undertaken the work within Indian territorial waters. 25. We find that Learned Commissioner placed reliance on Marco Shipping case (supra). However, we find that as submitted by Learned Counsel for the appellants that the facts of the case are different. In the above case, coastal permission was requested and granted; the vessel was held to be not engaged in the carriage of passengers and goods, whereas in the present case facts are different. We find that the case did not discuss the inclusive definition of a "foreign going vessel" as contained in (ii) of Section 2(21) of Customs Act, 1962 which is the case of the impugned vessel. However, the fact remains that during the course of coastal run, the vessel has consumed certain stores, spares and bunkers. Though the impugned vessel may not lose the status as an FGV for this incursion, a question arises as to whether the appellants are liable to pay duty on the same. The Learned Counsel for the appellants claimed that the duty comes to INR 1,63,479/-. However, before we decide whether duty is payable on such consumption, we....
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....Focus Energy, 2019 (11) TMI 22 (CESTAT BANG.) Therefore, we find that the appellants require to pay duty on the ship stores consumed by them while they were operating in the territorial waters of India. The appellants claim that such operations were only once during 4th October 2007 to 6th October 2007 and the applicable duty payable is Rs. 1, 63,479. However, this is a matter of fact and the same requires to be ascertained/verified from the records like vessel's log books, correspondence with their masters, telcom authorities, information submitted to Port and Customs etc. For this reason, the matter requires to go back to the adjudicating authority for computation of the duty liability. 27. We find that Learned Authorized Representative for the Department has reiterated the findings of the Learned Commissioner. However, as per our discussion above, the contentions of the Department have been countered and held to be not maintainable under law. We also find that the cases relied upon by the Authorized Representative cannot help the cause of the Department. We find that the decision in the case Aban Lyod Chiles Offshore Ltd., Pride Foramer (supra) concerned about the vessels which....
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....ther authorities; in all the applications seeking Port clearances specific declaration was made that the vessel was sailing under foreign run; the nature of the work was also disclosed. He submits that, moreover, Customs officers visited the vessel a number of times for boarding formalities as well as bonding the stores and therefore suppression of any kind cannot be alleged against the appellants. We find that the contentions of the appellants are acceptable. The vessel which was berthed in Cochin Port for more than five years could not have but escaped the attention of Customs and Port Officers. Understandably, it is not a small piece of item that one could have smuggled in or out in his pocket of baggage. Moreover, in the seven long years, Customs Officers have boarded the vessel and have questioned the captain and the crew about the vessel, voyage etc. as part of their routine formalities. The officers have also supervised the bond stores aboard the vessel. Therefore, we find that extended period is not invokable in the circumstances of the case. The demand is clearly hit by limitation. We hold that the impugned vessel is a foreign-going vessel and as such eligible to procure s....