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2025 (6) TMI 1026
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....s of cables in the Indian Ocean was not a foreign going vessel for the purposes of claiming exemption under Section 87 of the Customs Act, 1961 in relation to spares and consumables contained in its store. 2. The brief facts necessary for the disposal of this appeal are as follows: The vessel Asean Explorer is a Singapore vessel that was engaged to carry out repairs of cables located in Indian Ocean, and was berthed at Kochi for operating the zones connecting India, different Asian and West Asian Countries and Australia. The repair activities were in relation to cables spread over an area of 1.05 lakh kms of which 256 kms was within the territorial waters of India. As per the time charter under which the vessel was engaged, it was expected to move across various Ports inside India and also beyond the Indian waters and during these excursions, the vessel would carry spares, bunkers, crew and technical staff on board. It appears to have been the bone fide belief of the respondent that the vessel in question was a Foreign Going vessel and that therefore, the spares and consumables in the store of the vessel would not attract the levy of customs duty under the Customs Act. ....
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....ssel can be categorized as a foreign going vessel only if it is engaged for the time being in carriage of goods or passengers between any port in India and abroad. Although the inclusive part of the definition also takes in any vessel engaged in fishing or any other operations outside the territorial waters of India, the vessel in question had to be actually engaged in other operations outside the territorial waters of India for qualifying as a foreign going vessel and being entitled for the exemption envisaged under Section 87 of the Customs Act. It is his contention that a vessel that was stationed and therefore idling within Indian waters without actually being engaged in the cable repairing activities outside territorial waters for about 1450 days out of 1750 days, cannot be seen as a foreign going vessel for the purposes of the Customs Act. ● Referring to the communication issued by the Cochin Port Trust to the vessel in question which suggests that the respondent had committed to berthing the vessel in Cochin Port for 265 days in a year with a view to obtaining concessional rates of berthing charges, it is pointed out that the intention of the respondent was al....
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....uth East Asia and Indian Ocean Cable Maintenance Agreement [SEAIOCM Agreement] clearly revealed that the vessel in question was engaged on a time charter for carrying out various activities in terms of the agreement. The repair activities in respect of the underwater cable had to be carried out in a time bound manner as and when required at the instance of VSNL. The scope of the work under the agreement required the vessel to be exclusively dedicated to undertake repair activities over an area of 1,05,000 kms of cable extending from Djibouti in the West; Perth in the South; Guam in the East and Taiwan in the North. During the contract period, the vessel had undertaken 29 instances of cable repair and 7 instances of cable-working exercises and only one cable recovery was within the territorial waters of India. Since the vessel was obliged to carry out the work and be prepared to do so during the entire period of the time chart, it could not be said that it was not engaged during the relevant period for carrying out the repair activities in respect of the cables. Accordingly, the contention that the vessel was not a foreign going vessel could not be legally countenanced. 	....
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....nate contention, the learned counsel also submits that the show cause notice covering a larger period of limitation was therefore not legally sustainable. 9. We have considered the submissions advanced by either side and gone through the impugned order of the Appellate Tribunal. The only issue that arises for consideration is whether in the backdrop of the terms of engagement of the vessel under the SEAIOCM Agreement, the vessel can be categorized as a foreign going vessel for the purposes of claiming exemption under Section 87 of the Customs Act. The Tribunal, on an elaborate consideration of the facts, found that it would. The reasoning of the Tribunal is contained in paragraphs 19 to 21 of the impugned order which reads as under: "19. In order to appreciate, the engagement of the impugned vessel, it will be beneficial to look into the terms of the Contract under which the said vessel is engaged. The South-East Asia and Indian Ocean Cable Maintenance Agreement (SEAIOCMA) dated 15th December, 2005 reads as follows: "(b) The Maintenance Authorities wish to have made available cable ships, remote operated vehicles and depots for the repair and maintenance and st....
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....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 1 July 2005 till 2012 are shown in Schedule D1. 20. Ongoing through the terms of the Contract, we do not have any doubt, whatsoever, in our minds that the impugned vessel is engaged for cable repair and cable-laying work in the areas specified therein; the ship requires to be in readiness to leave for repairs should an exigency arise and the vessel is paid both fixed charges as well as operational charges. Therefore, we find that the appellants have a strong case in their favour inasmuch as the (ii) inclusive definition is concerned. It is squarely covered by the terms "any vessel engaged in fishing or any other operations outside the territorial waters of India". We find that the term "engaged in" has not been defined in the Customs Act. Therefore, it is required to fall upon the interpretation given by the higher Courts with reference to the words. We find that the Hon'ble High Court of Gujarat has extensively discussed the term "engaged" in the case of Natwarlal Thribhovandas (supra). ....
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....gement 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. Ltd. (supra), Naffar Chandra Jute Mills Ltd. (supra) and Indian Organic Chemicals Ltd. (Supra)." 10. Elaborating on the entitlement for exemption under Section 87 of the Customs Act, the Tribunal reasoned as follows at paragraphs 26 and 27 of the impugned order: "26. On a plain reading of the Section 87 as above, it is evidently clear that as long as the vessel or the aircraft holds the status as a foreign-going vessel, exemptions contained in Section 87 applies without any doubt. Going by the ratio of the judgment of the Hon'ble Supreme Court in the case of Aban Lyod Chiles Offshore Ltd, 2008 (4) TMI 19 (SC) held that: "79. It may not be correct to contend that the oil rigs installed by the appellants answer the description "foreign going vessel". A vessel may be a foreign going vessel ....
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....so 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 were rigs engaged in oil exploration in the designated areas of continental shelf and exclusive economic zone, which were declared by a Notification to be a part of India for a limited purpose. However, we find that the cases are relevant only to the extent they decide the applicability of duty-free stores during the period the vessels were in Indian territorial waters. Moreover, the submissions of the learned AR are based on stray correspondence and no investigation to that extent appears to have been done in this regard. The crux of the argument of the department was that the Vessel was berthed in Cochin for most of the time during the disputed period and thus It ceases to be foreign going vessel. Moreover, we find that the vessel was anchored in Cochin Port and was under the watchful eyes of Customs and Port authorities. Many times, Customs authorities have boarded the Vessel as demonstrated by the counsel for the appellants. Customs officers were ....
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....eement entered into between the respondent and the Cochin Port Trust, committing to berth the vessel in Cochin Port for a specified number of days in a calendar year so as to obtain a concessional rate of berthing charges, and in fact remaining within territorial waters for a good part of the calendar year, the vessel will lose its status as a 'foreign going vessel'. The definition of 'foreign going vessel' under Section 2 (21) of the Customs Act reads as follows: "2. Definitions xxxxxxxxxxxxxxxxx (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 port or airport in India or not, and includes- (i) any naval vessel of a foreign Government taking part in any naval exercises; (ii) any vessel engaged in fishing or any other operations outside the territorial waters of India; (iii) any vessel or aircraft proceeding to a place outside India for any purpose whatsoever;" 12. The phrase 'engaged in' has to be read in the....