Centre for Marine Living Resources & Ecology Vs Commissioner of Customs (CESTAT Bangalore)
Introduction: The CESTAT Bangalore has delivered a verdict in favor of the Centre for Marine Living Resources and Ecology (CMLRE), allowing customs duty exemption on the import of spares and other specific items for vessel repair. The case involved the Master of the vessel Fishery Oceanographic Research Vessel (FORV) Sagar Sampada, owned by CMLRE, who imported ship spares without paying customs duty, leading to a show-cause notice.
Analysis: The Commissioner of Customs demanded customs duty based on Section 12 of the Customs Act, 1962, which makes all imported goods liable for duty, with exemptions granted by the Central Government. The Commissioner interpreted the vessel’s foreign-going status to permit duty-free supply of diesel oil and lubricating oil but excluded spares. CMLRE argued that the CBEC letter did not explicitly mention spares in the exclusion list.
Additionally, CMLRE claimed eligibility for exemption under Notification No.21/2002, meant for Ocean Going Vessels, which was applicable either way – as a foreign-going vessel or an ocean-going vessel.
The CESTAT Bangalore upheld CMLRE’s claims, citing the CBEC letter declaring FORV Sagar Sampada as a foreign-going vessel without explicitly excluding spares. Furthermore, they recognized the vessel as an ocean-going vessel under the exemption Notification No.21/2002, covering spares for repairs of ocean-going vessels.
Conclusion: The CESTAT Bangalore’s ruling grants customs duty exemption to CMLRE on the import of spares and other specific items for vessel repair. The decision clarifies the eligibility of ocean-going vessels like FORV Sagar Sampada for duty exemptions, benefiting research and scientific vessels engaged in essential marine activities.
FULL TEXT OF THE CESTAT BANGALORE ORDER
1. The Centre for Marine Living Resources and Ecology (CMLRE), the appellant herein, is an organisation established by Government of India under Ministry of Earth Sciences for organising, coordinating and promoting development activities. Appellant was issued with the show-cause notice dated 14.01.2009 demanding customs duty amounting to Rs.91,05,880/-. The Master of the vessel Fishery Oceanographic Research Vessel (FORV) Sagar Sampada owned by the appellant had imported ship spares in large quantity onboard the vessel after filing reshipment application instead of Bill of Entry and without paying any customs duty, hence, the show-cause notice.
2. It was noticed that during 18.1.2008 to 29.12.2008, 56 reshipment applications were filed on behalf of FORV Sagar Sampada and ship spares valued at Rs.2,87,22,089/- were cleared to onboard the vessel without payment of any customs duty. The Commissioner of Customs held that Section 12 of the Customs Act, 1962 renders all imported goods liable for payment of duty and the power to grant exemption from payment of duty was vested with Central Government under Section 25 of the Customs Act, 1962. In the instant case, the CBEC vide letter D.O.F No.445/3/98-Cus. IV dated 30.05.1988 stated that the Government had agreed to consider the vessel as a ‘foreign going vessel’ within the meaning of Section 2(21)(ii) of the Customs Act, 1962, for purpose of permitting duty-free supply of diesel oil and lubricating oil, subject to the condition that other items of store in the nature of liquor, cigarettes and food stuffs will not be permitted free of duty. The Commissioner taking into account the definition of ‘Stores’ as defined under Section 2(38) of the Customs Act, 1962 held that goods for use in a vessel includes fuel and spare parts and other articles of equipment. The vessel had been granted foreign going status only for the duty-free supply of fuel and lubricants, therefore, the goods other than fuel and lubricants attract duties of customs. Accordingly, duty on the spares was demanded and duty amount of Rs.91,05,880/- was confirmed along with interest and penalty imposed under Section 114A of the Customs Act, 1962 on the Master of the vessel.
3. Learned counsel appearing on behalf of the appellant referring to the impugned order stated that it is an admitted fact that FORV Sagar Sampada was a research vessel owned by Ministry of Earth Science and he also stated that the letter issued by CBEC declared them as a foreign going vessel and permitted duty-free supply of diesel oil and lubricating oil subject to the condition that other items of stores in the nature of liquor, cigarettes and food stuffs will not be permitted free of duty. In the permission given by CBEC, nowhere the words ‘spares’ has been categorically mentioned, hence, it was not for the Commissioner to interpret ‘Stores’ as per Section 2(38) to include the item ‘spares’ which had been permitted by CBEC.
3.1 The alternative argument taken by the learned counsel for the appellant is that even if the above benefit for the foreign going vessel was to be rejected, they were eligible for the exemption vide Notification No.21/2002 which is meant for Ocean Going Vessels.
