Case Law Details
In Re Arya Tankers Private Ltd (CAAR Mumbai)
In the matter of Arya Tankers Private Ltd, the Customs Authority for Advance Rulings (CAAR) Mumbai addressed the tax implications for the vessel Kashi when it enters Indian waters for loading or unloading cargo. The ruling clarified that the vessel Kashi must file Bills of Entry and pay applicable Customs duties upon entering Indian waters. Furthermore, it was determined that the vessel is covered under entry no. 551, but not entry no. 557B, of Notification 50/2017-Customs dated 30 June 2017, necessitating the payment of Customs duties and IGST accordingly. Additionally, the applicable IGST rate for the import of Vessel Kashi is set at 5% as per Sr. No. 246 of Schedule-I of Notification No. 1/2017-Integrated Tax (Rate) dated 28 June 2017. The vessel’s entry into Indian waters for cargo operations qualifies as ‘supply’ under section 3(7) of the Customs Tariff Act, 1975, thereby subjecting it to IGST.
1) Whether Vessel Kashi when enters into Indian waters for loading/unloading of cargo shall be liable to file Bill of Entry and pay Customs Duty?
Vessel-Kashi when enters into Indian waters for loading/ unloading of cargo, the applicant is liable to file Bills of Entry and pay applicable Customs duties.
2) Whether vessel Kashi shall be covered by entry no. 551 and 557B of Notification 50/2017 – Customs dated 30 June 2017?
Vessel-Kashi shall be covered by entry no. 551, but not by entry no. 55713, of Notification 50/2017 — Customs dated 30 June 2017 (as amended) and the applicant is liable to pay Customs duties and IGST accordingly.
3) If answer to (1) 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?
The applicable IGST rate under sub-section (7) of Section 3 of the said Customs Tariff Act, 1975 read with Notifications issued on import of Vessel-Kashi is @5% as per Sr. No. 246 of Schedule-I of Notification No.1/2017-Integrated Tax(Rate) dated 28.06.2017 (as amended).
4) 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?
Vessel-Kashi when enters Indian waters for loading./ unloading of cargo, it shall qualify as ‘supply’ for payment of IGST under section 3(7) of the Customs Tariff Act, 1975.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s. Arya Tankers Private Limited (having IEC No. 0313043931 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 18.01.2024 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the following questions: –
a) Whether Vessel-Kashi when enters into Indian waters for loading/ unloading 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 ofthe 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 certificate for Vessel-Kashi. Copy of the invoice and the provisional registration certification is enclosed with the application. The applicant has executed the time charter agreement with M/s DCC Maritime Limited, Honk Kong for giving the Vessel-Kashi on Time Charter basis. As per the proposed agreement the right to use the Vessel-Kashi for transportation of cargo will be transferred to the Charterer. The Charterer will be free to load or unload the cargo at any port including India. Therefore, there is a possibility that Vessel-Kashi may come to India for loading / unloading of cargo and shall again go for voyage in International Waters. Copy of the agreement executed with the M/s DCC Maritime Limited, Honk Kong is enclosed with the application.
2.2 “Foreign going vessel” has been defined in Section 2(21) of the Customs Act, 1962 as vessel which is engaged in carriage of cargo between any port in India and any port outside India whether touching any intermediate port in India or not. The Vessel Kashi will also at the time of entering into Indian waters will be engaged in carriage of goods from any port outside India to any port in India or from any port in India to any port outside India. Thus, the functioning of Vessel-Kashi and foreign going vessel is identical.
2.3 The applicant further submits that 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 application to seek an advance ruling on applicability of customs duty on entry of Vessels Kashi into Indian territorial waters. Accordingly, the applicant seeks advance ruling on the applicability of customs duty on entry of Vessels Kashi entry & Customs/ IGST notification on the products proposed to be imported by the applicant.
3. The applicant further submitted the statement containing the applicant’s interpretation of law and/or facts, as follows:
3.1 Vessels provided on time-charter basis are covered by the exemption entry no. 557B of the Customs Notification 50/2017-Customs dated 30.06.2017. Applicant has submitted that they shall provide Vessel-Kashi on voyage/ time charter basis to the Foreign Charterers. 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 | 1 02 |
- 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;
(i) not to sell or part with the goods, without the prior permission of the Commissioner of Customs of the port of importation;
(ii) to re-export the goods within 3 months from the expiry of the period for which they were supplied under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 out of India;
(iii) to pay on demand an amount equal to the integrated tax payable on the said goods but for the exemption under this notification in the event of violation of any of the above conditions.
Provided that goods may, instead of being re-exported out of India in terms of condition at (iii) above, be given on lease under a transaction covered by item 1(b) or 5 (f) of Schedule II of the Central Goods and Service Tax Act, 2017, by lessor to another lessee in India, in which case, –
(a) the original lessee shall give an intimation to the commissioner of customs and get his bond discharged;
(b) the new lessee shall, by execution of bond, in such form and for such sum, as may be specified by the Commissioner of Customs, bind himself to comply with the conditions herein, as if he were the importer of the goods.
Provided further that in case of goods supplied by an SEZ unit to DTA under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017, where SEZ unit is liable to pay integrated tax on such transaction under the Integrated Goods and Services Tax Act, 2017, the lessee shall bind himself only with conditions (ii), (iii) and (iv) above.
Explanation. – In case of goods supplied by an SEZ unit (lessor) to DTA under a transaction covered by item 1(b) or 5(1) of Schedule II of the Central Goods and Services Act, 2017, –
(c) the “Commissioner of Customs” or the “Commissioner of Customs of the port of importation”, wherever they appear, shall mean “the Specified Officer” as defined in Special Economic Zone Rules, 2006;
(d) “Re-export” in item (iii) shall mean returning the goods to the lessor.
- Item 1(b) of Schedule-II of the Central Goods and Services Tax Act, 2017
(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services;
- Item 5(f) of Schedule-II of the Central Goods and Services Tax Act, 2017
(f) transfer of the right to use any goods for any purpose (whether or 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 clear terms come to the conclusion that what is relevant is the day on which the bill of entry in respect of goods is presented under Section 46 and in the case of goods which are warehoused the relevant date would be the date on which the goods are actually removed from the warehouse…..
The applicant submits that in the present case, ‘Vessel-Kashi’ shall not be cleared for home consumption and hence, it will not cross the customs barrier. Accordingly, the ratio laid down in the above decision squarely applies to the facts of the present application.
3.3 Further, the applicant also relies on the entry no 551A inserted vide the Finance Budget 2023 providing an exemption to Foreign Going Vessels converted for coastal runs provided it is re-converts to a foreign going vessels within 6 months from the date of such conversion. 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. |
| 551A | 8901 | Foreign Going Vessel converted for a coastal run:
Provided that such vessel re-converts to a foreign going vessel within six months from the date of such conversion. Explanation. – For the purpose of this entry, (i)”Foreign going vessel” shall have the same meaning as assigned to it under clause (21) of Section 2 of the Customs Act 1962. (ii) “Conversion to coastal Vessel” shall include the vessel granted necessary license under the Merchant Shipping Act,1958 |
N i 1 | 102 |
The meaning of term ‘foreign going vessel’ as per section 2(21) of the Customs Act, 1962 is provided as follows:
(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;
In view of the above, it can be inferred that customs duty is not payable on the foreign going vessel and the same is payable 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 extract of the decision is reproduced below:
9. In the present case, the goods are sent either for exhibition or on consignment basis. The goods which are re-imported are the once which are not sold in the Exhibition or are not approved by the buyer. The ownership of the goods does not transfer to the buyer/consignee to whom the goods i.e. appellant. In case of Exhibition, the appellant only takes the goods out of India and brings the same back after Exhibition. For supply of goods, there has to be supplier of goods and recipient of goods. However, in case of goods taken for exhibition both are same person. It is well settled principle that sale cannot be made to oneself only, similar concept is applicable in case of supply as well. Further, there is no consideration paid when the goods are re-imported by the appellant. Thus, at the time of re-import there is no ‘supply’ of goods as per Section 7 (1) (a) of the CGS7′ Act.
Similarly, in the present case, the Charterer shall bring Vessel-Kashi into India for loading/ unloading of cargo at Indian ports and Vessel-Kashi shall return for voyage in international waters after loading/ unloading of cargo, as the case may be. Further, the import shall be done by the Charterer and hence, as per the settled law, the supply cannot be made to oneself. Further, there is no consideration for import of vessels in India. Hence, applying the ratio in the above decision, there is no supply and hence, 1GST is not payable on bringing Vessel-Kashi into India for loading/ unloading of cargo.
3.5 The applicant further submitted that there is a specific entry no 551 to exempt BCD on import of goods falling under HSN 8901. The relevant extract of the exemption entry is reproduced below:
| S. No. |
Chapter or heading or sub-heading or tariff item |
Description of goods | Standard rate |
IGST | Condition No. |
| 551. | 8901 | All goods (excluding vessels and other floating structures as are imported for breaking-up) |
Nil | – | 84 |
It is an undisputed fact that the tanker proposed to be imported falls under 1-1SN 8901 and hence, it is covered by the above entry. The applicant submits that notwithstanding submission above, even in cases where customs duty is applicable, the same is exempt under the above entry.
4. The Jurisdictional Commissionerate of Customs, Jamnagar (hereinafter referred to as `the 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 | ||
|
557B
|
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 Customs Notification No. 50/2017-Customs dated 30.06.2017 as amended. The subject vessel has been purchased, not imported under lease by M/s Arya Tankers Pvt. Ltd. Therefore, the Entry No. 557B is not applicable in this case. In respect of Entry No. 551, it is to state that the M/s Arya Tankers Pvt. Ltd. has to pay Nil duty (BCD) as per Entry No.551 ofNotification No.50/2017-Customs dated 30.06.2017, Nil AIDC as per Sr. No.17 of Notification No.11/2021 dated 01.02.2021 and has to pay IGST @5% as per Sr. No. 246 of Schedule-I of Notification No.01/2017-Central Tax dated 28.06.2017.
4.3 The answer to (1) is not negative, however the IGST rate applicable on the import of vessel is 5%.
4.4 Kind attention is invited to Circular No.16/2012-Customs dated 13.06.2012 wherein, relevant paras are reproduced as under:
3.1 In this regard, it is stated that as the provisions of Section 29 of the Customs Act, 1962 read with Section 2 (22) and 2(25), the term ‘imported goods, inter alia, includes vessels entering India from any place outside the country (India). These vessels may fall into any of the following category (i) Foreign flag vessels i.e., vessels that have been registered outside India and which carry imported/ exported goods or passengers during its foreign run (voyage from a port outside India to an Indian port, whether touching any intermediate port in India or not); (ii) Vessel entering india for the first time on arrival in the country, for registration as Indian Flag vessels (iii) vessels which are intended for conversion from foreign run to coastal run/ trade (voyage between two or more Indian ports); and (iv) Vessels which are brought into India for breaking up.
3.3 Indian Flag Vessel: In terms of the provisions of Part-V of the Merchant Shipping Act, 1958, vessels entering into India for the first time, are required to be registered with specified authority of the Mercantile Marine Department as Indian ship, which can then display the national character of the ship as Indian Flag Vessel for the purpose of Customs and other purposes specified in the said Act. Such Indian ship or vessel may be used for foreign run or exclusively for coastal run/ trade. Further, any ship or vessel may be taken outside India or chartered for coastal trade in India, only after obtaining the requisite licence from 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 11GM. Bill of Entry is required to he 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) R.L.T. 513 (S.C.), wherein it is held that the customs duty is payable only on goods intended to be used for home consumption. Further, there cannot be a duty on the vessel imported as a conveyance. The relevant extract of the decision is reproduced below:
13. To appreciate the controversy, it is necessary to understand certain concepts as envisaged under the Act. ‘Goods’ for the purpose of the Act includes vessels, aircrafis and vehicles as defined in sub-section (22) to Section 2, yet the distinction has to be recognized between a vessel or an aircraft as a mere goods and when the vessel or an aircraft comes to India as a conveyance carrying imported goods. When a vessel or an aircraft is imported into India as a goods, customs duty is payable thereon. ITOwever, when a vessel is used as a conveyance of an imported goods, the position would be different…..
•••••
29. The adjudication order refers to and is predicated on the rig being brought to the port for repairs in February, 1996 for which permission was sought from the Commissioner of Customs vide letter dated 12th February, 1996 under the provisions of Notification No. 153/94-Cus. The rig subsequently moved out of the port after repairs. The rig was brought for the second time to the Mumbai port for repair on 9th November, 1996 and had remained there till 2nd December, 1996. The rig thereafter was taken out and removed from the territorial waters, of India as is evincible from the adjudication order. The rig was for the third time brought to the outer anchorage in Mumbai/Mumbai port on 9th December, 1998. and removed from the customs area. On this occasion, for the first time, the authorities felt that the rig had been imported into India when the rig was brought within the territorial waters for repairs. The adjudication order does not record that the rig was in operation within the territorial waters of India. On the other hand, the adjudication order does not spell out that the rig did not operate outside the territorial waters of India. The contention raised bythe owner in this regard was neither specifically rejected nor a different finding was recorded. The finding was that the rig when it is repaired in India, it is imported into India for home consumption. The adjudication order holds that the repairs undertaken would complete the act of import, for, the requirement of home consumption was satisfied. The said finding, in our opinion, 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 applies to the facts of the present application.
5.3 It is an accepted principle that customs duty is applicable only on goods crossing the customs frontier of India. The Applicant relies on the decision of the Hon’ ble Sup;’eme Court in the case of Commissioner of CGST & C. Ex., Mumbai East Versus Flemingo Travel Retail Ltd 2023 (73) G.S.T.L. 295 (S.C.) wherein the court has held that Duty Free Shops being outside the customs frontiers of India cannot be saddled with any indirect tax burden and any such levy would be unconstitutional. The relevant extract of the decision is reproduced below:
15. We have considered the above orders of the Tribunal, Central Government, High Courts and this court. Keeping in view the aforesaid judgments and Article 286 of the Constitution of India, we are also of the opinion that Duty Free Shops, whether in the arrival or departure terminals, being outside the customs frontiers of India, cannot be saddled with any indirect tax burden and any such levy would be unconstitutional. Therefore, if any tax is levied, the same cannot be retained and the Duty Free Shops would be entitled for refund of the same without raising any technical objection including that of limitation.
5.4 The reliance is placed on the decision of the Apex Court in the matter of ITDC Ltd. Hotel Ashoka v. Assistant Commissioner of Commercial Taxes and Anr. – 2012 (276) E.L.T. 433 (S.C.) and J.V. Gokal & Co. Pvt. Ltd. v. Assistant Collector of Sales Tax – 1999 (110) E.L.T. 106 (S.C.). In view of the above accepted principle that customs duty is applicable only on goods crossing the customs frontier of India, the Applicant submits that in the present case as well Vessel-Kashi shall not cross customs frontiers of India and hence, the levy of any indirect tax would be unconstitutional.
5.5 The Commissioner/department has not provided any comments on the submission of the Applicant that customs duty is payable on conversion of foreign going vessel into coastal run. The applicant submits that there shall be no customs duty payable on the entry of Vessel Kashi into India till it converts into a coastal run.
5.6 The Applicant has filed an application as the owner of the Vessel. The charter (M/s DCC Maritime Limited) and not the Applicant will be an importer for bringing Vessel-Kashi into India not the importer. The advance ruling provisions are 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 application to seek an advance ruling on applicability of customs duty on entry of Vessels Kashi into Indian territorial waters. Applicant has executed the time charter agreement with M/s DCC Maritime Limited, Honk Kong for giving the Vessel-Kashi on Time Charter basis. In view of above, the movement of Vessel-Kashi into India will be caused by the charter M/s DCC Maritime Limited. The term ‘importer’ as per section 2(26) of the Customs Act, 1962, includes any person holding himself out to be the importer. In the present case, as M/s DCC is a charter and will cause the movement of Vessel-Kashi into India, M/s DCC Maritime shall be considered as the importer of goods. Further. 1\4/s DCC Maritime being a charter is covered by the entry 557B of the Notification 50/2017-Cus and is eligible for exemption from payment of IGST. Hence, the observation of the Commissioner that Vessel-Kashi is not covered by the entry no 557B of the Notification No 50/2017-Cus is incorrect.
5.7 The applicant submitted that it can be observed from the Instruction F. No.- 450/79/2010-Cus.-IV dated 23.09.2010 that the instructions merely states that the vessel is also an ‘imported goods’ as defined in section 2(25) of the Customs Act and hence, the Bill of Entry shall also be filed for import of vessels. However, the instruction per se does not discuss about the occurring of a taxable event upon arrival of the vessel at the port. It is a judicially settled position that the taxable event for the purpose of payment of customs duty shall only arise upon filing of bills of entry for home consumption and mere arrival of the vessel at the port does not constitute occurrence of taxable event.
5.8 The Applicant has relied on the decision of the Hon’ble Supreme Court in the case of following:
a) Kiran Spinning Mills vs. Collector of Customs 1999 (113) ELT 753 (SC):
“6 … … This would bring into play the provisions of Section 15 of the Customs Act which, inter alia, provides that the rate of duty which will be payable would be on the day when the goods are removed from the bonded warehouse. That apart, this Court has held in Sea Customs Act – 1964 (3) SCR 787 at page 803 that in the case of duty of customs the taxable event is the import of goods within the customs barriers. In other words, the taxable event occurs when the customs barrier is crossed. In the case 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 other cargo intended for that port.
13. It is urged on behalf of the petitioners that the import of the goods mustbqdeemed to have taken place on 11 July, 1981, when the ship originally, arrived in bombay poral and registered itself The rate of customs duty prevailing on that date was 12.5 per cent, and that, learned counsel contends, should be the rate applicable to the edible oil consignment under Sec. 15 of the Act. The circumstance that the vessel was unable to secure a berth in the Port of Bombay compelled it to proceed to Karachi to discharge the cargo pertaining to that Port, and but for the non-availability of the berth she would not have undertaken that voyage but would have continued in Bombay and discharged the edible oil consignment there. The customs duty which could have been levied then would have been 12.5 per cent. It is pointed out that the vessel was unable to do so for no fault of the petitioners and a reasonable construction must be given to Sec. 15 taking into account the particular circumstances of the case, so that the vessel must be deemed to have made the “Entry Inwards” on 11 July, 1981. We do not find it possible to accept this submission. The provisions of Sec. 15 are clear in themselves. The date on which a Bill of Entry is presented under Section 46 is, in the case of goods entered for home consumption, the date relevant for determining the rate of duty and tariff valuation. Where the Bill of Entry is presented before the date of Entry Inwards of the vessel, the Bill of Entry is deemed to have been presented on the date of such Entry Inwards. “
c) Dhiraj Lal R Vohra vs U01 1993 (66) E.L.T. 551 (S.C.):
“2. Shri Salve, learned senior counsel for the petitioner contended that since the ship had entered into the Indian waters on February 20, 1989 and was ready to discharge the cargo, waiting clearance into the port and due to reasons beyond the control of the ship or the petitioner the goods could not be cleared until March 2, 1989 by which date the rate of levy was materially changed. As the cargo was ready for discharge from the ship from the Indian territorial waters from February 20, 1989 the duty prevailed as on that date shall be the proper duty. The petitioner presented the bill of entry for clearance of the goods for home consumption on February 27, 1989 which was received by the appraising 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.
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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 entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form and it may be presented under sub-section (3) thereof at any time after delivery of the import manifest. Section 31(1) provides that the Master of the vessel shall not permit the unloading of any imported goods until an order has been given by the proper officer “granting entry inwards” to such vessel and no order under sub- section (1) shall be given until an import manifest has been delivered or the proper officer is satisfied that there was sufficient cause for not delivering it. Granting entry inward on delivery of import manifest and the date of arrival of the vessel into port admittedly are on March 2, 1989 and the Master of the vessel made a declaration in this behalf that they would discharge the cargo on March 2, 1989. Therefore, the relevant date under Section 15(1)(a) is the date on which entry inwards after delivery of import manifest was granted to discharge the cargo for the purpose of the levy of the customs duty and rate of tariff. The contention, therefore that the ship entered Indian territorial waters on February 20, 1989 and was ready to discharge the cargo is not relevant for the purpose of Section 15(1) read with Sections 46 and 31 of the Act. The prior entries regarding presentation .of the bill of entry for clearance of the goods on February 27, 1989 and their receipt in the appraising section on February 28, 1989 also are irrelevant. The relevant date to fix the rate of customs duty, therefore, is March 2, 1989. The rate prevailed as on that date would be the duty to which the goods imported are liable to the impost and the goods would be cleared on its payment in accordance with the rate of levy of customs prevailing as on March 2, 1989.
d) UOI vs Apar Pvt Ltd 1999 (112) E.L.T. 3 (S.C.):
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3. The case of the respondents was that on the day when the goods entered the territorial waters, that is the point of time when the taxable event under Section 12 occurred; and as the duty was nil on that day, therefore the question of paying any duty with reference to a subsequent point of time, namely, when the goods were removed from the warehouse did not arise.
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6. Following the aforesaid two decisions of this Court, we are of the opinion that the judgment under appeal does not lay down the law correctly. 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.
a) 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 242-1984, “Bill of entry for warehousing” was filed on behalf of the petitioner. Accordingly, the imported goods were warehoused. The petitioner got the said goods cleared 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.
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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 an option to the importer either to file a bill of entry for home consumption straightaway (in which case he has to pay the duty determined with reference to that date) or to file a bill of entry for warehousing. In the latter case, the goods are merely warehoused. The import duty will be levied at the rate and on the basis of the valuation determined in accordance with the provisions prevailing on the date of clearance from the warehouse for which purpose the importer has to file a fresh bill of entry for home consumption. In other words, it is the date of filing the bill of entry for home consumption which determines the rate of duty in clauses (a) and (b) of Section 15. Inasmuch as the matter is left to the option of the importer and also because a uniform principle is adopted by the Act. As explain above, we see no room for any legitimate grievance of discrimination. There is also no presumption that rate of duty always goes up. It may also go down, in which case, the importer stands to gain.
5.9 The applicant submits that basis above, it is substantiated that the payment of customs duty arises on clearance of goods for home consumption by way of filing the Bill of Entry. In the present case, the vessel 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 of Bill of Entry or for payment of customs duty. Without prejudice to above, the applicant submits that the CBIC has noted the difficulties faced by the industry in filing of Bills of Entry for vessels meant for conveyance, issued a circular no. 16/2012-Cus dated 13.06.2012 clarifying that the Indian flag vessels used as conveyance are not required to file Bill of Entry. Similarly, in para 5 the CBIC has unambiguously clarified that the Indian flag vessels/Indian ship imported for subsequent use as foreign going vessel would not be required to file IGM and Bill of Entry for conveyance since the same are not imported goods to be cleared for home consumption. Therefore, the clarification provided in the circular 16/2012-Customs squarely applies in the case of the applicant and therefore the applicant is not required to file BOE on entry of vessel in India, as it will not be cleared for home consumption and there is no customs duty payable. Without prejudice to above, the applicant submits that the circulars 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 subniits 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 for which the requirement of filing BOE has been prescribed under the Circular. Hence, the purpose for which the BOE was to be filed is already achieved. Without prejudice to above, the mere filing of Bill of Entry from the perspective of the Merchant Shipping Act shall not create customs duty liability under the Customs Act and the same will arise on intention to clear the goods for home consumption by way of filing bills of entry. Therefore, any levy of customs duty on arrival of vessel Kashi for discharge of cargo shall defeat the intention of the legislator to levy customs duty only on conversion of foreign going vessel for coastal runs. Hence, there shall be no customs duty (including. IGST) levy on arrival of Vessel Kashi at Indian Port.
6. A personal hearing in the matter was conducted on 08.05.2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representatives of M/s. Arya Tankers Pvt. Ltd., Shri S. S. Gupta, Advocate and Shri Vaibhav Shah, Advocate both reiterated their earlier contentions made in the written application to CAAR. Mumbai. They also provided a compendium of case laws and submitted that the vessel/subject goods is coming to India for offloading of the goods and vessel itself is not meant for home consumption. In support of their contention, they also explained and relied upon various case laws, submitted during the personal hearing. Shri Chuna Ram, Addl. Commissioner, Jamnagar Customs attended personal hearing through video conferencing and reiterated the submissions filed on behalf of the Jamnagar Customs. The applicant contended that on import of the said vessel for offloading the goods, IGST is not applicable.
7. I have taken into consideration all the materials placed on record in respect of the subject application including the submissions made by the applicant during, the course of personal hearing. I have gone through the response received from the Commissionerate of Customs, Jamnagar and the rebuttal to that filed by the applicant. I therefore proceed to decide the present application in respect of the questions as to (a) Whether Vessel-Kashi when enters into Indian waters for loading/ unloading 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?, 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 in incurred on then 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 seems that the understanding of the applicant is narrow regarding defining scope of the term ‘home consumption’ inasmuch as the applicant has contended that the vessel is never going to be converted for coastal run, that is why, there is no `home consumption’ takes place.
It is very much clear from the submissions of the applicant that the vessel Kashi will enter the Territorial Waters of the applicant and further the activity of loading/unloading the cargo will also take place. In addition to the above facts, the applicant has very specifically submitted vide their submission dated 03.06.2024 that in the present case, the applicant has already obtained the final registration for the vessel under Merchant Shipping Act. The applicant has also attached the copy of the Certificate of Indian Registry issued in the name of the applicant by Mercantile Marine Department, Mumbai under Section 34 of the Merchant Shipping Act, 1958.
In view of above and para 2 of the Board’s instruction (reproduced infra), it can be safely concluded that the argument of the applicant that there is no home consumption involved is misleading and untenable.
9. I find that the Board’s Instruction dated 23.09.2010 issued vide F. No. 450/79/2010-Cus.IV and Circular No. 16/2012-Customs dated 13.06.2012 are very much clear on the aspect involved in the instant application. The department has also relied upon these instructions and circular. Relevant extract of the said instruction is reproduced with emphasis as under for ready reference:.
“..:…..instances have been brought to notice of the Board that certain ship-owners of Indian flag vessels have imported vessels, which are exempt from payment of duty, without filing Bill of Entry and Import General Manifest (IG1l/1).
2. In this connection, it is stated that at the time of their import into India the status of these vessels, which are meant for plying on Indian ports as coastal vessels or as Indian flag foreign going vessels etc. is the same as that of any other class of imported goods. Section 2 (25) defines “imported goods” as any goods brought into India from a place outside India but doeS not include goods which have been cleared for home consumption. Further, “goods” has been defined under section 2 (22) as to include, inter alia, vessels, aircrafis and vehicles. Hence, these. are subject 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 deiired, 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 with emphasis as under for ready reference:
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“3.2 Foreign flag vessels: These are the vessels that are registered abroad and its entry into the country is for carrying cargo or passengers, as a conveyance. Hence, there is no requirement for filing an IGM, Bill of Entry for foreign flag vessel which is being used as conveyance. However, the requirement for filing an import manifest in the prescribed manner for the goods or passengers which are being carried in the vessel, on its entry into an Indian port in’ terms of the provisions under Section 30 of the Customs Act needs to be complied with.
3.3 Indian Flag Vessel: In terms of the provisions of Part-V of the Merchant Shipping Act, 1958, vessels entering into India for the first time, are required to be registered with specified authority of the Mercantile Marine Department as Indian ship, which can then display the national character of the ship as Indian Flag Vessel for the purpose of Customs and other purposes specified in the said Act. Such Indian ship or vessel may he used for foreign run or exclusively for coastal run/ trade. Further, any ship or vessel may be taken outside India or chartered for coastal trade in India, only after obtaining the requisite licence from 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.
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4. In view of the above, it is clarified that in respect of foreign flag vessels, for Indian flag vessels, there is no requirement of filing of IGM and Bill’ of Entry, since its usage is as conveyance. In respect of Indian flag vessels and vessels for breaking WI as explained in para 3.3 and 3.5 above, the importer has to file IGM and Bill of Entry, under the provisions of the Customs Act,1962. As regards the vessel for conversion into costal run/ trade as detailed in para 3.4, since the changes in the duty structure for levy of CVD on vessels which are being converted for coastal trade lvas initially imposed from 1.3.2011, and subsequently retrospective exemption has been provided for the period 1.3.2011 to 16.3.2011 vide clause 129 of the Finance Act, 2012, the requirement for filing 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 entrj, 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 d 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 Flag vessel into India. It is important to note that the circular differentiate the procedure to be followed for the first time arrival of the vessel and subsequent use thereof. It is observed that the applicant has mis-understood the language of the para 3.3 of this circular. The applicant’s argument that the basis for filing bill of entry is to comply with the requirements of registration of vessel under the Merchant Shipping Act, is untenable inasmuch as the applicant seems to have ignored the following line of this circular ‘which can then display the national character of the ship as Indian Flag Vessel for the purpose of Customs’.
10.2 Para 3.3 also makes it clear that Indian ship or vessel which have entered first time in to India and has also has character of Indian Flag Vessel, may be used for foreign run or exclusively for coastal run/ trade. This para also throws light on the contention of the applicant that the vessel Kashi in the instant case is not going to be converted for coastal run and that is why, the liability of filing Bill of entry does not arise. Rather, from the said para 3.3, it is observed that the vessel Kashi in the instant case which has entered for the first time into India and has got the character of Indian flag vessel, may be used for foreign run or exclusively for coastal run/trade, however, the last line of the said para starts with the words ‘Hence in all such cases’ which makes it clear that once the vessel Kashi enters first time into India and got the character of Indian Flag vessel, in all such cases, the Customs declarations such as IGM, Bill of Entry is required to be filed with jurisdictional Customs authority.
10.3 Further, the applicant has also contended that the vessel Kashi in the instant case is a foreign going vessel, and therefore, liability of filing Bill of entry does not arise on this ground too. This argument is also non-maintainable in terms of the para 5 of this circular. While contending so, the applicant seems to have mis-understood the word ‘subsequent’ used in the said para. By mis-understanding the para 5, the applicant has argued that the vessel Kashi for subsequent use as foreign going vessel would not require tiling of IGM and Bill of Entry as conveyance, since the same is not imported goods to be cleared for home consumption. However, I am of the view that the word ‘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 of the vessel Kashi? Indian Territorial waters is an integral part of India and if in respect of vessel Kashi, activity of loading/unloading is going to be undertaken in the Indian Territorial waters, then thiS can be clearly covered within the scope of home consumption. That the vessel is not a kind of commodity to be consumed as such by the mass in terms of interpreting word as home consumption. The consumption of the vessel as such is its utility i.e. for transportation of goods either in Indian waters or in a foreign voyage. It is pertinent to mention here that in case of import of a vessei for breaking/scrapping, there is a specific mention in the statute. The instant case does not pertain to the importation of a vessel intended for breaking/scrapping.
12. The applicant has also contended that as per the agreement, it is the charterer namely, M/s. DCC Maritime Limited, who will cause the movement of the vessel Kashi into India and not the owner (i.e. the applicant) of the vessel Kashi and hence, as per the settled law, the supply cannot be made to oneself. Further, there is no consideration for import of vessels in India. Hence, applying the ratio in the above decision, there is no supply and hence, IGST is not payable on bringing Vessel-Kashi into India for loading/ unloading of cargo.
First and foremost, the applicant has again mis-understood the definition ofthe importer provided under section 2(26) of the Customs Act, 1962. “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer. The term “beneficial owner” means any person on whose behalf the goods are being imported or exported or who exercises effective control over the goods being imported or exported.
From the above, it is amply clear that as the applicant is the owner of the vessel, they are liable to file the Bill of entry in the instant case. Further, as the applicant being the owner of the vessel Kashi is covered with the scope of the term ‘importer’, the applicant cannot free itself of the liability of filing Bill of entry, by simply submitting that it is the charterer in the present case who will cause the movement of the vessel Kashi into India. Further, home consumption would definitely take place when the 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 brou2ht 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 tos11,14,anki-.eft-Athicb 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 time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on zoo* ds imported into, or exported from, India”. Section 2(23) of the Customs Act provides that “import”, with its grammatical variations and cognate expressions, means brinxiinj into India from a place outside India”.
In view of the above, the vessel Kashi in the instant case, is an imported and dutiable goods.
Section 2(4) of the IGST Act, 2017 provides that “customs frontiers of India” means the limits of a customs area as defined in section 2 of the Customs Act, 1962. Further, section 2(11) of the Customs Act provides that “customs area” means the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities. The applicant has argued that as the vessel Kashi will not cross the Customs frontiers of India, there is no home consumption and as such there is not liability of filing IGM and Bill of entry occurs.
However, this authority is of the view that as the vessel Kashi is an Indian Flag Vessel and has been proposed to enter Indian Territorial waters and further in respect ofthe said vessel, activity of loading/unloading will be undertaken in the territorial waters, therefore, home consumption has taken place and the applicant’s interpretation of Customs frontiers is narrow and confining the scope of the Customs frontiers to only land mass of India is fallacious. Territorial waters of India is an integral part of India and loading/unloading therein is definitely a home consumption of the vessel Kashi in the context of the Customs Act. Section 2(11) provides that CustOms area includes any area in which imported goods are ordinarily kept before clearance. Territorial waters of India an area in which vessel Kashi is proposed to. be entered and as it is the imported and dutiable goods, it will definitely reach the Customs frontiers. Further, as for the question of home consumption, loading/unloading is proposed to be undertaken in respect of the vessel Kashi, therefore, for this activity i.e. loading/unloading which is definitely a home consumption, Bill of entry is to be filed before that to get the vessel Kashi cleared for home consumption.
14. Further, Section 30 of the Customs Act inter-alia provides that “the person-in-charge of a vessel carrying imported goods or export good sor 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 automoted 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 tor warehousing. Further, as for the transit and transhipment, no such activity is involved in the instant case. The activity of loading/unloading is going to be undertaken in respect the vessel Kashi. Therefore,- the importer which is the applicant in instant application has to file Bill of entry.
16. Proviso to sub-section (1) of Section 5 of the IGST Act, 2017 is as follows: “Provided that the integrated tax on goods other than the goods as may be notified by the Government on the recommendations of the Council imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs TariffAct, 1975 on the value .as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.”
Section 7(2) of IGST Act, 2017 provides that “Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall he treated to be a supply of goods in the course of inter-State trade or commerce.”
In view of the above, the movement of vessel Kashi as proposed in the instant case is an import/supply of goods and as per the proviso discussed above in this para, JUST is leViable on the said import.
17. The applicant also contends that it is M/s. DCC Maritime (charterer) who shall be considered as the importer of goods, as it is the charterer who will cause the movement of vessel Kashi into India. Further, M/s. DCC Maritime (charterer) being a charterer is covered by the entry 557B of the Notification No. 50/2017-Cus. Dated 30.06.2017 and is eligible for exemption from payment of IGST.
It is observed that the department is right in its contention that Vessel Kashi shall not be covered under Entry No. 557B of Customs Notification No. 50/2017-Customs dated 30.06.2017 as amended. The subject vessel has been purchased, not imported under lease by M/s Arya Tankers Pvt. Ltd. Therefore, the Entry No. 557B is not applicable in this case. It is the applicant, who is the owner of the vessel Kashi and when it enters India, it cannot be considered a supply of goods (i.e. vessel) to itself (i.e. the applicant) on lease. Rather, the applicant has chartered the vessel Kashi to M/s. DCC Maritime (charterer) and when the vessel Kashi enters India, it is the applicant who shall be considered the importer (owner) of the said vessel (which will arrive first time) and as such no question of import on lease arises in the instant case.
18. The 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 Ahan Lo d 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 from these case laws, as in the instant case vessel is an Indian Flag vessel and further activities of loading/unloading are proposed to be undertaken in the Territorial waters of India. This results in incidence of home consumption which is not allowed without filing IGM and Bill of entry. Further, the case laws Commissioner of CGST & C. Ex., Mumbai East Versus Flemingo Travel Retail Ltd 2023 (73) G.S.T.L. 295 (S.C.); ITDC Ltd. – Hotel Ashoka v. Assistant Commissioner of Commercial Taxes and Anr. – 2012 (276) E.L.T. 433 (S.C.) and J.V. Gokal & Co. Pvt. Ltd. v. Assistant Collector of Sales Tax – 1999 (110) E.L.T. 106 (S.C.), cited by the applicant are in respect of duty free shops. There are provisions available for duty free shops in Customs Act. Section 58A of the Customs Act deals with licensing of special warehouses. As per section 58A of the Customs Act, “the Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, licence a special warehouse wherein dutiable goods may be deposited and such warehouse shall be caused to be locked by the proper officer and no person shall enter the warehouse or remove any goods therefrom without the permission of the proper officer. ” The case law of of M/S. Heeralal Chhaganlal “lank vs. Commissioner of Customs, Jaipur 2023 (11) TMI 22 — (cEsTAT New Delhi) is in respect of re-import of goods exported for exhibition or on consignment basis. The case at hand is not related to re-import of the vessel Kashi. It is clarified in the Circular No.16/2012-Customs dated 13.06.2012 as discussed above that the Indian flag vessels/Indian ship imported for subsequent use as foreign going vessel would not be required to file IGM and Bill of Entry for conveyance since the same are not imported goods to be cleared for home consumption. First time arrival of the vessel Kashi cannot be considered re-import of the same.
19. On the basis of foregoing discussions and findings, my answers in respect of all the four questions asked in the present application, are as follows:
Answer in respect of question (a): Vessel-Kashi when enters into Indian waters for loading/ unloading of cargo, the applicant is liable to file Bills of Entry and pay applicable Customs duties.
Answer in respect of question (b): Vessel-Kashi shall be covered by entry no. 551, but not by entry no. 55713, of Notification 50/2017 — Customs dated 30 June 2017 (as amended) and the applicant is liable to pay Customs duties and IGST accordingly.
Answer in respect of question (c): The applicable IGST rate under sub-section (7) of Section 3 of the said Customs Tariff Act, 1975 read with Notifications issued on import of Vessel-Kashi is @5% as per Sr. No. 246 of Schedule-I of Notification No.1/2017-Integrated Tax(Rate) dated 28.06.2017 (as amended).
Answer in respect of question (d):Vessel-Kashi when enters Indian waters for loading./ unloading of cargo, it shall qualify as ‘supply’ for payment of IGST under section 3(7) of the Customs Tariff Act, 1975.
20. I rule accordingly.
