TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1755
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....oading of cargo shall be liable to file Bills of Entry and pay customs duty? b) Whether Vessel-Kashi shall be covered by entry no. 551 and 557B of Notification 50/2017 - Customs dated 30 June 2017 and liable to pay customs duty? c) If answer to (b) above is negative, what is the IGST rate under sub-section (7) of Section 3 of the said Customs Tariff Act read with Notifications issued on import of Vessel-Kashi? d) Whether Vessel-Kashi when enters into Indian waters for loading/ unloading of cargo shall qualify as 'supply' for payment of IGST under section 3(7) of the Customs Tariff Act, 1975? 2. Applicant has stated as follows in their statement of relevant facts having a bearing on the questions raised enclosed with the CAAR-1 application: 2.1 The applicant is, inter-alia, engaged in the business of leasing tankers to local & foreign customers. The applicant has purchased a Tanker named Kashi (hereinafter referred as 'Vessel-Kashi') falling under HSN 8901 2000 of the Customs Tariff Act, 1975 from the foreign entity. Vessel-Kashi is currently ported at Al Fujairah - Dubai. Further, the applicant has received a provisional registration....
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....Vessel-Kashi shall enter into Indian waters for loading/ unloading of cargo and shall again go for voyage in international water within the period of three months. Vessel Kashi shall not be converted for a coastal run. In view of above, the Applicant shall be entitled to the exemption under entry no 557B of the Customs Notification 50/2017. The relevant entry is reproduced below: S. No. Chapter or heading or sub- heading or tariff item Description of goods Standard rate IGST Condition No. 557B Any Chapter All goods, vessels, ships other than motor vehicles imported under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 - Nil 102 * Condition No 102: The importer, by the execution of bond, in such form and for such sum as may be specified by the Commissioner of Customs, binds himself,- (i) to pay Integrated tax leviable under section 5(1) of the IGST Act, 2017 on supply of services covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017; (ii) not to sell or part with the goods, without the prior permission of the Commissi....
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....not for a specified period) for cash, deferred payment or other valuable consideration. The applicant submits that as per the agreement all rights for the use of Vessel-Kashi will be transferred to foreign charterers. Hence, the transaction will be covered by item 5(f) of Schedule-II of the Central Goods and Services Tax Act, 2017. In view of above, the Applicant shall be entitled to claim the exemption under entry no 557B of the Customs Notification 50/2017 subject to compliance with the condition no 102 of the Notification including execution of the Bond. 3.2 The Applicant submitted that they shall provide Vessel-Kashi on voyage/ time charter basis to the Foreign Charters. The Vessel shall enter into India for loading/ unloading of cargo and shall again go for voyage in international water within the period of three months. Vessel- Kashi shall not be cleared for home consumption and hence, there shall be no customs duty applicable on the same. The Applicant relies on the decision of Supreme Court in the case of Apar P Limited 1999 (112) ELT 3 (Supreme Court). The relevant extract of the decision is reproduced below: 5. .... Dealing with the same, this Court has in ....
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....ble on conversion of vessels into coastal run. In the present case, Vessel-Kashi is engaged in the carriage of goods between a port in India and any port outside India. Therefore, it qualifies as a foreign going vessel. Further, as per the agreement, Vessel-Kashi shall not be converted for coastal run. The relevant portion of the agreement is reproduced below: A: Main Terms: ----- ----- Trade in Indian Coastal Voyage not allowed In view of the above, Vessel-Kashi qualifies as a foreign going vessel. Hence, the applicant submits that there shall be no customs duty payable on the entry of Vessel Kashi into India. 3.4 The applicant submitted that there is no supply in case of voyage of Vessel-Kashi into India for loading/ unloading of goods. In this regard, the Applicant refers to the decision of the CESTAT in the case of M/S. Heeralal Chhaganlal Tank vs. Commissioner of Customs, Jaipur 2023 (11) TMI 22 - (CESTAT New Delhi) wherein the question involved was with respect to import of goods sent for Exhibitions. In this regard, the CESTAT observed that there is no supply and hence, IGST is not payable on import of goods in India. The relevant ex....
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.... department' also) submitted comments vide letter dated 24.04.2024 to the subject application as follows: - 4.1 As the vessel is arriving to Indian Port for the first time after purchase by an Indian Owner with provisional registry of Indian Flag, the vessel Kashi has to file the Bill of Entry and requires to pay Customs Duty as applicable. 4.2 The relevant part of Notification No.50/2017-Customs dated 30.06.2017 is inserted as under: S. No. Chapter or Heading or sub- heading or tariff item. Description of goods Standard rate Integrated Goods and Services Tax Condition No. Remarks 551 8901 All goods (excluding vessels and other floating structures as are imported for breaking up) Nil - 84 557 B Any Chapter All goods, vessels, ships [other than motor vehicles] imported under lease, by the importer for use after import under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 - Nil 102 (1) New Entry Inserted by 85/17 dt. 14/11/17 (2) Description substituted By 34/2019 Dt. 30- 09- 19 Vessel Kashi shall not be covered under Entry No. 557B of Cus....
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....om the Director General of Shipping, under the provisions of Section 406 or 407, respectively, of the said Merchant Shipping Act. Hence, in all such cases the Customs declarations such as IGM, Bill of Entry is required to be filed with jurisdictional Customs authority. 4.5 From the subject application of the M/ s Arya Tankers Pvt. Ltd., it is observed that they have purchased the vessel and the said vessel is entering into Indian Waters for the first time. As per Para 3.3 of the Circular No.16/2012-Customs dated 13.06.2012, the Customs declarations such as IGM, Bill of Entry is required to be filed with jurisdictional Customs authority. 5. The applicant submitted their response/rebuttal to the comments of the Jurisdictional Commissionerate as below: 5.1 The Commissioner has not provided any comments on the submission of the Applicant that Vessel-Kashi shall not be cleared for home consumption and hence, there shall be no customs duty applicable on the same. The Applicant relies on the decision of the Supreme Court in the case of Commissioner of Customs, Mumbai v. Aban Loyd Chiles Offshore Ltd. 2017 (346) E.L.T. 513 (S.C.), wherein it is held that the customs duty is payabl....
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....n, is unacceptable and faulty. Mere repair of a vessel is not putting the vessel to use in India and would not result in home consumption as the vessel was not utilized within the territory of India. Repairs are carried on the vessel and not to utilize the vessel. It would not amount to utilization or operation of the vessel/rig in India. Thus, it cannot be said that the vessel, i.e., the rig, was imported into India when it had anchored twice in 1996 and once in 1998 for the purpose of repair, for the element of home consumption is missing even when the vessel, i.e., the rig, had entered the territorial waters. Thus, it would be incorrect to hold that mere repair of the vessel in 1996 or in 1998 would constitute taxable import. 5.2 The applicant further submits that in the present case, the Vessel shall enter into India for loading/ unloading of cargo and shall again go for voyage in international water within the period of three months. Vessel-Kashi is not intended for use in India and it shall not be cleared for home consumption and hence, it will not cross the customs frontier of India. Accordingly, the ratio laid down in the above decisions cited by the applicant squarely a....
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.... covered in chapter VB of the Customs Act, 1962. The definition of term 'advance ruling' and 'applicant' have been provided in section 28E(b) of the said Act. The said definition is reproduced below: "(b) "advance ruling" means a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation; (c) "applicant" means any person, - (i) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992); or (ii) exporting any goods to India; or (iii) with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under section 28H;] As per the above reproduced definition, advance ruling means decision provided in respect of any goods prior to its importation or exportation. Therefore, application can be filed in relation to proposed import of vessels by the applicant or the charterer. Further, the applicant holding IEC owns the 'Vessel-Kashi' and hence it has a justifiable cause to file an ....
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....e of goods which are in the warehouse the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country. The taxable therefore, being the day of crossing of customs barrier, and not on the date when the goods had landed in India or had entered the territorial waters. We find that on the date of the taxable event the additional duty of excise was leviable under the said Ordinance and, therefore, additional duty under Section 3 of the Tariff Act was rightly demanded from the appellants." b) Bharat Surfactants (Pvt) Ltd vs. UOI 1989 (43) E.L.T. 189 (S.C.): "2. The petitioners entered into a contract with foreign sellers for the supply of edible oils. The consignment of edible oils was sent by the ocean going vessel M.V. Kotta Ratu. The vessel approached Bombay and made its "prior entry" on 4 July, 1981, It actually arrived and registered in the Port of Bombay on 11 July, 1981. The petitioners say that the Port authorities at Bombay were unable to allot a berth to the vessel, and as she was under heavy pressure from the parties whose goods she was carrying she left Bombay for Karachi for unloading....
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.... section on February 28, 1989, that would be at least the proper date for determination of the rate of levy. We find no force in the contention. Section 15 of the Customs Act, 1962 for short 'the Act' prescribes the rate of duty and tariff valuation on imported goods thus. ................... 3. It is clear from bare reading of these relevant provisions that the due date to calculate the rate of duty applicable to any imported goods shall be the rate and valuation in force, in the case of the goods entered for home consumption under Section 46, is the date on which the bill of entry in respect of such goods is presented under that section and in the case of goods cleared from a warehouse under Section 68, the date on which the goods are actually removed from the warehouse. By operation of the proviso if a bill of entry has been presented before the date of entry inwards the bill of entry shall be deemed to have been presented "on the date of such entry inwards" but would be subject to the operation of Sections 46 and 31(1) of the Act. Section 46(1) provides that the importer of any goods, other than goods intended for transit or transhipment, shall make en....
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....orrectly. Duty has to be paid with reference to the relevant date as per Section 15 of the Customs Act. We, accordingly, allow these appeals and set aside the judgment of the Bombay High Court, the result of which would be that the writ petitions filed by the respondents in the Bombay High Court would stand dismissed. e) D.C.M Versus Union of India 1999 (109) ELT 12 (Supreme Court): 2. The petitioner imported certain goods by sea. The ship arrived on 23-2- 1982. On 24- 2-1984, "Bill of entry for warehousing" was filed on behalf of the petitioner. Accordingly, the imported goods were warehoused. The petitioner got the said goods clearance from the warehouse between 3-3-1982 and 15-4-1982. Applying Section 15(1)(b), the custom duty in force on the respective dates of clearance from-the warehouse was levied. It is the said circumstance that has occasioned the attack upon the constitutional validity of the said provision. ............ 7. .... It is Section 15 that prescribes the date with reference to which the rate of duty and tariff valuation of imported goods shall be determined. A reading of Sections 15, 46 and 68 makes it clear that they provide....
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....culars are issued to clarify the provisions enacted by the parliament and it cannot create a taxability other than provided in the statutory provisions. Section 12 read with section 46 of the customs Act, 1962 requires filing of bill of entry for clearance of goods for home consumption. The taxable event to pay customs duty arises on filing of Bill of Entry. The same has been held in the plethora of decisions as discussed above. Without prejudice to their submissions that the circular 16/2012 clarifies that the Indian flag vessels are not required to file bill of entry, the applicant further submits that the para 3 of the circular has made reference to section 406 and 407 of the Indian Merchant Shipping Act. It can be observed from para 3.3 of the circular that the basis for filing of bill of entry is to comply with the requirements of registration of vessel under the Merchant Shipping Act. In the present case, the Applicant has already obtained the final registration for the vessel under the Merchant Shipping Act. The copy of the registration obtained is attached as Annexure 1 with the present CAAR application. Accordingly, the Applicant has already complied with the conditions fo....
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....017 and liable to pay customs duty? (c) If answer to (b) above is negative, what is the IGST rate under sub-section (7) of Section 3 of the said Customs Tariff Act read with Notifications issued on import of Vessel-Kashi? (d) Whether Vessel-Kashi when enters into Indian waters for loading/ unloading of cargo shall qualify as 'supply' for payment of IGST under section 3(7) of the Customs Tariff Act, 1975?, on the basis of the information on record as well as the existing legal framework having bearing on the questions asked in the present application. 8. In the backdrop of the situation involved in the instant case, the Ld. Advocate present for the applicant has vehemently argued, that when the vessel Kashi enters Indian Territorial Waters, lability of filing Bill of Entry does not arise. After going through the submissions of the applicant and plethora of case laws cited in the present application, it can be seen that the contention of the applicant that there is no liability to file Bill of Entry incurred on them In the present case mainly revolves around the argument that there is not home consumption of the goods in question i.e. the vessel. It se....
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.... to the same procedure i.e., filing of IGM, Bill of Entry, payment of duty, if any etc., as is applicable in case of other imported goods. 3. Accordingly, it is instructed that the requirement for filing of these documents should be complied with even in cases, where goods are exempt from payment of any duty. Therefore, the jurisdictional Commissioners should review the situation, and take appropriate action for past cases, including adjudication, if warranted. Further, Chief Commissioners may make a reference to the Board for appointment of a common adjudication authority, if so desired, for these cases." Para 2 of the said instruction makes it abundantly clear that the status of the imported vessels is the same as that of any other class of imported goods, whether these are meant for plying on Indian ports as coastal vessels or as Indian flag foreign going vessels etc. Further, it is very specifically communicated in the said instruction that filing of IGM, Bill of Entry, payment of duty, if any, is also applicable as it is applicable in case of other imported goods. 10. Further, relevant extract of the Circular No. 16/2012-Customs dated 13.06.2012 is reproduced wi....
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....g IGM and Bill of Entry may be insisted in all such cases w.e.f. 17.03.2012, 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 foreign going vessel and the Indian flag vessel/Indian Ship for subsequent use as foreign going vessel would not require filing of IGM and Bill of Entry as conveyance, since the same are not imported goods to be cleared for home consumption. 6. Accordingly, the field formations may adjudicate the cases involving any violation where the IGM or Bill of Entry in respect of import of vessel were not filed at the time of import, on its first arrival in India or on its conversion into coastal trade and appropriate penal action be taken against the offenders." 10.1 In the above circular, the aspect of 'first time arrival' of a vessel is covered. Board has clarified the aspect of 'first time arrival' of a vessel vide this circular in para 3.3 and para 6. From para 3.3 and para 6, it is amply clear that filing IGM and Bill of Entry is mandatory on the first-time arrival of an Indian Fl....
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....ord 'subsequent' is used here to emphases that when an Indian Flag vessel enters India for the first-time, filing of IGM and Bill of entry is mandatory for the same, and only subsequent to that, the same vessel is free of liabilities of filing IGM and Bill of entry as conveyance when it is used as a foreign going vessel subsequently. 11. The Ld. Advocate for the applicant has vehemently argued that the payment of Customs duty arises on clearance of goods for home consumption by way of filing the Bill of entry and as in the present case, the vessel Kashi shall not be cleared for home consumption, and shall go back for voyage in international waters, therefore, there is no taxable event triggered for filing Bill of entry or for payment of Customs duty. I am of the view that the by arguing so, the applicant wants to narrow down the scope of the home consumption only to conversion of the vessel Kashi for coastal run or breaking up. However, a very important question arises here, that if the entering of Indian Flag Vessel into Indian Territorial Waters and further undertaking loading/unloading of cargo is not home consumption, then what actually home consumption would be o....
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....vessel Kashi enters India and gets the character of Indian Flag Vessel, therefore, argument of the applicant regarding supply as mentioned above, is fallacious, as it is the applicant who has paid consideration in the form of foreign currency and supply is not taking place between the charterer to charterer, rather, supply is taking place between the applicant and the seller of the vessel Kashi. Therefore, supply is taking place in the instant case and hence, IGST is leviable on bringing Vessel-Kashi into India for loading/ unloading of cargo as per the section 5 of the IGST act, 2017. 13. Section 2(25) of the Customs Act provides that "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. By virtue of this definition, the vessel Kashi which enters the Territorial waters of India, is an 'imported goods' Further, Section 2(14) of the Customs Act provides that "dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid. Further, Section 12 of the Customs Act provides that "Except as otherwise provided in this Act, or any other law for the t....
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....30 of the Customs Act inter-alia provides that: "the person-in-charge of a vessel carrying imported goods or export goods or any other person as may be specified by the Central Government, by notification in the Official Gazette, in this behalf shall, in the case of a vessel or an aircraft, deliver to the proper officer an arrival manifest or import manifest by presenting electronically prior to the arrival of the vessel ......" From the foregoing discussions, it is amply clear that the vessel Kashi is an imported and dutiable goods, therefore, the as per the provisions of the Customs Act, filing of IGM is mandatory. 15. Further, Section 46 of the Customs Act inter-alia provides that: "the importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting electronically on the customs automated system to the proper officer a bill of entry for home consumption or warehousing in such form and manner as may be prescribed ......". It is nobody's contention that the vessel Kashi will be brought for warehousing. Further, as for the transit and transhipment, no such activity is involved in the instant case. T....
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....e applicant has submitted plethora of case laws to put forth the argument that as there is not home consumption taking place in the instant case, there is no need to file Bill of entry. The case law of Aban Loyd Chiles Offshore Ltd. vs. Commissioner of Customs, Mumbai, cited by the applicant is not applicable in the instant case as the rig in the said case was brought into India for repair, whereas, the vessel Kashi is not proposed to enter India for repair, rather, for loading/unloading. The case law of Apar P Limited is also far-fetched as the home consumption is taking place in the instant case and the applicant has to file Bill of entry prior to that. The case laws of Apar P Limited, Kiran Spinning Mills vs. Collector of Customs 1999 (113) ELT 753 (SC) and Bharat Surfactants (Pvt) Ltd vs. UOI 1989 (43) E.L.T. 189 (S.C.) are regarding the quantum of duty in reference of section 12 and 15 of the Customs Act. In said cases it is concluded taxable event occurs when the Customs barrier is crossed and not on the date when goods had landed in India or had entered the territorial waters of India. However, this authority is of the view that the case at hand of vessel Kashi is different ....