Case Law Details
Samudra Dredgers (UK) Ltd. Vs Commissioner of Customs (CESTAT Bangalore)
Learned Counsel further submits that Commissioner of Cochin does not have jurisdiction to demand duty in the present case, just because the vessel was seized at Cochin; the vessel entered India in May 2011 through Nagapattinam wherein it was idling as a foreign going vessel; it was duly converted from foreign run to coastal run in Paradeep Port; if at all its opined that the dredger was imported into India for home consumption, it was in Paradeep; customs department in Cochin has no jurisdiction to demand duty on imports made at Pardeep Port; Tribunal held in favour of appellants in Samson Maritime Ltd. v. Commissioner of Customs (Import), Mumbai: 2016 (333) ELT 148 (Tri.-Mum) (Para 7); territorial jurisdiction of the Commissioner Cochin has not been extended to Paradeep, either by the Customs Act or by the Central Board of Excise and Customs; section 15(1)(c) or Section 28 also does not confer jurisdiction on customs department at Cochin to demand duty from the Appellants for the import made at Paradeep Port; this is more so when the department is stating that the bill of entry ought to have been filed when the vessel was converted into coastal run from Paradeep Port; it was held in Devilog Systems India v. Collector of Customs, Bangalore: 1995 (76) ELT 520 (Kar) and NCR Corporation of India Ltd Vs CC (Prev.), Mumbai, 2002 (143) E.L.T. 349 (Tri. -Mumbai) that a Commissioner does not have the power to adjudicate over a matter where his territorial jurisdiction does not extend.
Coming to the issue of Jurisdiction, hotly contested by rival parties, we find that the impugned dredger MV Darya Manthan has been making trips in and out of Indian Ports right from 2007 onwards. Though the vessel touched the Indian port of Nagapattinam on 12.5.2011, it did not engage in any activity in that port. It reached Paradeep Port on 11.6.2011. At Paradeep Port, a Bill of Entry was filed for the ship stores and bunkers and permission for converting from foreign run to coastal run was obtained from Paradeep Customs to work at Dhamra Port. Later on it moved to Cochin Port. Cochin customs vide Order No. SAV/56/2012 dated 24.8.2012 put the vessel on restraint and the same was provisionally released on 30.8.2012. The argument of the Revenue is that the vessel though imported on 11.6.2011 at Paradeep, no Bill of Entry was filed; Bill of Entry was required to be filed and duty needed to be discharged in terms of Notification No.19/2012-Customs dated 17.3.2012. Learned Commissioner finds in the impugned order that the import duty was payable at the time of import, however, the importer volunteered to complete the act of import and pay duty in 2012 in terms of the above cited Notification. Learned Commissioner takes note of the applications dated 15.5.2013 and 22.5.2013 filed by the appellants for amending the respective Bill of Entries including the vessel, as goods. Learned Commissioner relies on the fact that the deposit towards the duty irrespective of the fact that the same is final or provisional was made with the Customs Cochin; the formality of import has been completed at Cochin and therefore, the jurisdiction of Cochin has been invoked by the appellant themselves; as such, the relevant date to issue a demand Notice would also be the date of payment of such duty. We find that the vessel under dispute did not arrive at Cochin Port from a foreign port. In fact it was already under a coastal run at Dhamra Port duly permitted by Paradeep Customs. No act of import Vis a Vis the impugned vessel has taken place at the port of Cochin. We find that there is no legal backing to come to a conclusion that the act of import has occurred/completed at Cochin. The only change in circumstances with regard to the vessel at Cochin is that either the disponent and/or the lessee has changed, vis a vis its position in Dhamra Port, where the vessel was already in coastal run as permitted by Paradeep Customs. Per contra, the appellants submit that it is accepted by the department that in May 2011 when it was converted into coastal run; it is evident that the dredger was imported into India for home consumption in Paradeep first by its conversion to coastal run; therefore, Cochin Customs has no jurisdiction to demand duty on imports made at Paradeep Port.
We find that while demanding and confirming duty, learned Commissioner observed that separate proceedings for confiscation as regards the vessel will be initiated by Commissioner of Customs at Paradeep. We find that such an argument is incorrect. In case, Paradeep Customs can only take action in respect of the violation committed if any, by the appellants in respect of the import of the impugned vessel, we do not find what logic would support the action of Cochin Customs in demanding duty on the same without invoking the provisions laid for confiscation and penalty. As submitted by the learned counsel for the appellant, the jurisdiction of Cochin Customs has not been extended till Paradeep; Cochin Customs have also not been empowered by a specific order to exercise the powers of Paradeep Customs. We find that Section 28 has been invoked by the Customs Cochin to demand duty. The word “Proper Officer‟ needs to be understood in the context of the scheme of recovery provided under Section 28. Section 28 provides for duties not levied or not paid or short levied or short paid or erroneously refunded. Each of the words mentioned therein refer to the “Proper Officer‟, which necessarily has to be read as the officer in whose jurisdiction such non-levy, non-payment, etc, have taken place. Levy of Customs duty is on the completion of act of import. There is no dispute in the instant case that the act of import was complete in Paradeep Port where permission for conversion to coastal run was accorded by the Proper Officer after examining all the facts and circumstances of the case and after accepting the bill of entry filed for ship stores and consumables on board. Paradeep Customs were well within their rights to issue demand for customs duty non-levied and / or not paid for whatsoever reason. Simply because the Customs Paradeep have not advised the appellants to file a Bill of Entry showing the “vessel‟ as “goods‟; have accepted Bill of Entry for ship stores and consumables and have accorded permission for coastal run, it is not free for Cochin Customs to takeover the powers of Paradeep Customs. Learned Commissioner, in the impugned order, has taken the argument that since the duty, whether provisional or final, was paid in the jurisdiction of Cochin Customs, it can be assumed that the importers have declared their intention to complete the act of import within Customs Cochin jurisdiction. We find that this argument is not supported by Law. It is very clear that the appellants have deposited an amount to obtain provisional release in terms of Section 110A of Customs Act, 1962 when the subject vessel was restrained by Cochin Customs. Hereto, we find that the duty was not paid but was deposited along with a bond and a bank guarantee. Moreover, the duty was not paid in full as demanded. Therefore, by no stretch of imagination, the same can be deemed to be payment of duty. Such amounts deposited do not take the character of duty. In the instant case, the payment was “not of any duty but was a deposit, that too not in full‟, made to secure provisional release of the vessel and the appropriation has been appealed against. Therefore, it is not free for Cochin Customs to reckon date of making of deposit as the relevant date in terms of Section 15 of the Customs Act, 1962. Section 15 is relevant only for the purposes of fixing the rate of duty, and not be reckoned for issuance of a demand notice.
Further, the impugned vessel was operating in the jurisdiction of Cochin Customs. As per Cochin Customs, applicable duty has not been paid on the vessel. Cochin Customs were free to consider the impugned vessel to be “smuggled goods‟, in terms of Section 2(39) of Customs Act, 1962 and seize the vessel under Section 110 of the Customs Act, 1962 and consequent action under Section 124, 125, etc, would have followed, while intimating customs Paradeep to take action with reference to the collection of duty on the impugned vessel. We find that Section 124 does not specify any “Proper Officer‟, as in the case of Section 28. This being the legal position, the findings in the impugned order that action vis-a-vis confiscation, penalty, etc., will be taken by Paradeep Customs defies reason or logic. Moreover, we find that the impugned order confirmed duty for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013. Learned Commissioner, while holding that separate proceedings would be initiated by Paradeep Customs in respect of confiscation and penalty was silent on the duty recoverable for the period between 11-5-2011 and 28-1-2012. We fail to understand the logic of collecting duty on each change of lease, though not ordained in law, after the vessel got converted to coastal run, was not applicable for the period when the impugned vessel was in coastal run at Dhamra Port. The impugned order is silent on duty payable during the period 11-5-2011 and 27-1-2012. We find that it’s not open for Customs to demand and confirm duty for a particular period without any logic.
Whether the dredger is covered as a foreign flag vessel and liable for payment of custom duty?
CESTAT states that, the show-cause notice was made answerable jointly and severally to the owners of the dredger – M/s. Manthan Dredging Ltd., their disponent owners M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd. and their agents M/s. Chellaram Shipping (UK) Ltd., M/s. Chellaram Shipping (Hong Kong) Ltd. and the agents in Cochin M/s. Parekh Marine Agencies Pvt. Ltd. and the Indian charterers M/s. Dharthi Dredging and Infrastructure Ltd., Hyderabad and M/s. AFCONS Infrastructure Ltd., Mumbai. Learned Commissioner while passing the impugned order confirmed the duty of Rs.3,28,42,609/- jointly on the owner of the dredger “MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. He also confirmed duty of Rs.46,73,440/- jointly on the owner of the dredger “MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. CESTAT find that such a joint confirmation has no sanctity of law, inasmuch as the exact amount payable by the individual noticees is not given. The order is not enforceable also for the said reason. On this count also, the impugned order is liable to be set aside.
The appellants have also submitted without prejudice to the other submissions that the duty demanded at the rate of 6% CVD is not correct. CVD at the rate of 1% is applicable in terms of Notification No.1/2011. They also submit that the value of the dredger is inflated, relying on a news report about the controversy on Sethusamudram Project, even though the appellants have placed on record the purchase cost of the dredger. CESTAT find that this issue does not require consideration, as they hold that the impugned order is not maintainable on the count of jurisdiction, limitation and for the reason that the same is not legally enforceable being jointly confirmed without specifying the due amount payable by individual noticees.
FULL TEXT OF THE CESTAT JUDGEMENT
Brief facts of the case are that M/s Manthan Dredging Ltd., Hong Kong, are owners of “MV Darya Manthan‟; the “Disponent owners‟ of the vessel over a period of time were M/s Chell Chart Ltd, UK ( 25-12-2007 to 15-1-2012); Samudra Dredgers Ltd, UK (20-1-2012 to 10-10-2012 and Universal Dredgers Ltd, UK ( 16-10-2012 onwards). Investigation conducted by SIIB of Cochin, Customs reveals that the dredgers was having a foreign flag; arrived in India in May 2011; reached Paradeep Port on 11.06.2011; it was chartered on lease by M/s Dhamra Port Co. Ltd. for dredging at Dhamra Port, Channel for the period 06.06.2011 to 15.01.2012; was converted into coastal run on 12.06.2011 and arrived in Cochin Port on 28.01.2012 on being chartered by M/s. Dharti Dredging and Infrastructure Ltd. for dredging operations at Cochin. A NIL cargo IGM No. 290/2011 dated 08.06.2011 was filed; however, it was not indicated that the dredger was imported and no duty was paid in terms of Notification No. 21/2002 or 19/2012. Statements of various persons involved were recorded and investigations were concluded. It appeared to investigation that the dredger was not covered as a foreign flag vessel in terms of Section 2(21) of Customs Act, 1962 and CBEC Circular No. 16/2012 dated 13.06.2012; no bill of entry was filed. A SCN dated 30.01.2013 was issued to the owner of the dredger i.e. M/s Manthan Dredging Ltd. and the disponent owners M/s Samudra Dredgers Ltd, U.K; M/s Universal Dredgers and their agents seeking demand of Customs duty of Rs.3,28,42,609/- during the period 28.01.2012 to 10.10.2012 and 16.10.2012 to 08.01.2013. Another SCN dated 07.05.2013 to the owner of the dredger i.e. M/s Manthan Dredging Ltd and the disponent owners M/s Universal Dredgers and their agents seeking demand of Customs duty of Rs.46, 73,440/- covering the period 09.01.2013 to 28.02.2013. Both SCNs proposed penalty under Section 114A of Customs Act, 1962. Both the SCN were adjudicated by impugned OIO dated 25.02.2014, confirming the duty demanded jointly on the owner of the dredger “Darya Manthan” and the despodent owners along with interest and equal penalty under Section 114A. Hence, these appeals.
2. Shri T. Viswanathan and Shri Rohan Karia appeared on behalf of the appellants. Shri T. Viswanathan submits that Non-filing of bill of entry at the time of initial import does not make the vessel liable to duty on the date of seizure or subsequently; non-filing of bill of entry is not deliberate; It has been the practice adopted by the trade and the customs department ( as reflected in the Circular No. Circular 450/79/2010-Cus IV dated 23.09.2010 and Circular No.16/2012-Cus dated 13.06.2012 issued by the CBEC), that no bill of entry is to be filed or insisted for the vessels brought to India, when such a vessel is exempt from duties during the period in question; the vessel in question was imported into India for undertaking work on 20.12.2007, 20.11.2009 and 12.06.2011; the vessel was a foreign flag vessel, exempt, and came to India for the purposes of dredging and not for clearance for home consumption; filing of bill of entry was insisted only for the stores and consumables on board of the vessel, when the vessels were being converted from a foreign run to coastal run; numerous scenarios were high-lighted by the Board in 2012, and also stipulated filing of bill of entry for certain situations mentioned therein; Even the said circular did not make it clear the position with regard to foreign flag vessel; therefore, the Appellants cannot be faulted with for not filing a bill of entry; department also never insisted on the same.
2.1. Learned Counsel submits that though the Customs Act, 1962, a perfect enactment, clearly covers goods in their traditional sense; however, there is confusion when the vessels, aircrafts etc, which qualify as also take the form of goods; therefore, the assessee‟s as well as the customs department never insisted on the filing of bill of entry, as far as vessels are concerned. He relies upon the following cases in his support. He submits that
(i). This Tribunal, in the case of Samson Maritime Ltd Vs Commissioner of Customs (Import), Mumbai 2016 (333) ELT 148 (Mum), held that where customs never insisted on filing of bill of entry, customs duty cannot be demanded subsequently (Para 6.3 to 6.6).
(ii). Tribunal in the case of Hede Ferrominas Pvt Ltd Vs Commissioner of Customs (Import, Mumbai) 2016 (334) ELT 540, held that as regard non-filing of Bill of Entry, we find that once goods is exempted by customs exemption notification, non-filing of Bill of Entry at the time of import is merely a procedural lapse, as there is no mala fide intention of the appellant as no benefit accrues to the appellant by non-filing of Bill of Entry (Para 6.4).
(iii). Tribunal in Devshi Bhanji Khona vs. CC, Cochin 2019 TIOL 3369 also held as above (Para 16.5).
(iv). Tribunal in the case of Noble Asset Co. Ltd – 2006 (205) ELT 901 held that No customs duty is payable on the vessel, when it is re-imported into India.
Learned Counsel submits that in the present proceedings, customs duty is not demanded for the initial imports made in 2007 and 2009 as vessel was exempt from duty; duty is demand only for the entry made in 2011, as the exemption given to dredger was withdrawn during the period in question; if the case of the department is correct, duty ought to have been demanded for the initial imports too; it is not done so in the present case itself shows that the demand of duty is arising only on account of the change in the practice, adopted by the customs department.
2.2. Learned Counsel submits that Section 15(1)(c) cannot be the basis to demand duty; and in any case duty payable will only be in terms of Notification No. 94/96-Cus; section 15 (1) (c) is not applicable as the date of import and the place of import are known; there is no clandestine import to avoid or evade taxes; on the date of the first import, i.e. on 20.12.2007, BCD was exempt as per Sl. No. 353A of Notification No.21/2002-Cus; Tariff rate for Dredgers was NIL under Central Excise tariff till March 2011; hence, CVD was also exempt; SAD was also exempt as per Sl. No.1 of the Notification No.20/2006-Cus till February 2011; hence, it had unconditional exemption on the date of import, i.e., in 2007; the import of the dredger was complete on 20.12.2007.
2.3. Learned Counsel submits that in 2007, the dredger was first imported, it was exempted from BCD vide Notification No. 21/2002- (Sl. No. 353A), effective from March 2007. Upon re-import on 11.06.2011, duty would be payable only on the cost incurred for repairs abroad as per Sl. No.2 of Notification No. 94/96-Cus. Hence, duty payable would be only on Rs.82,95,600/-, which is the cost incurred by the Appellant on repairs when it went for dry-docking in 2011 and was re-imported back. the Appellants are entitled to the benefit of exemption under Notification No. 94/96-Cus at the time of every subsequent re-import; the benefit of exemption Notification can be claimed even after clearance of the goods, as held by Hon‟ble Supreme Court in Share Medical Care v. UOI- 2007 (209) ELT 321 (SC); as per this Sl. No. 2, of the Notification, duty is payable with reference to the cost of repairs and to and fro freight. The information about the cost of repairs and the freight was made available to the department during the investigation / adjudication; the Commissioner has primarily rejected this contention solely on the ground that the costs could not be verified; this is a flimsy ground to deny the exemption; the other ground to deny the exemption is that there is change in the ownership, which is factually incorrect; Manthan Dredging Ltd. continue to be the owners of the dredger and have not transferred the ownership to any other persons; other disponent owners, decide and control only the commercial operations of the ship/vessel.
2.4. Learned Counsel submits that the dredger in question is a foreign going vessel and hence not liable to duty; vessel in question is a foreign going vessel at all times; as per Section 2(21) of the Customs Act, definition of foreign-going vessel or aircraft” has therefore two parts; the first part is a means definition and the other part is an inclusive definition; the means definition applies to a vessel or aircraft for the time being engaged in carrying goods or passengers between any port or airport in India and any port or airport outside India; the inclusive definition covers vessels which are undertaking activities entirely unconnected with carriage of goods or of passengers; each of the three clauses of the inclusive definition applies to various specific situations mentioned therein; a vessel may be termed a foreign going vessel either because it falls within the first part of the definition or within any of the three clauses of the latter part; in the present case the vessel in question falls under clause (ii) contained in Section 2(21); Clause (ii) of Section 2(21) treats any vessel engaged in fishing or any other operation outside the territorial waters in India as foreign going vessels; there is no definition of territorial water in the Customs Act; further Section 2(27) defines India to include the territorial waters of India; Section (3) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, states that the sovereignty of India extends and has always extended to the territorial waters of India (hereinafter referred to as the territorial waters) and to the seabed and subsoil underlying, and the air space over such waters; the limit of the territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline; As per sub-section (2), the Central Government may, whenever it considers necessary so to do having regard to International Law and State practice, alter, by notification in the Official Gazette, the limit of the territorial waters; thus, according to Section 3(2) of the above Act, anything beyond the distance of twelve nautical miles from the nearest point of the appropriate baseline, is beyond the territorial waters; but sub-section (3) gives the power to the Central Government to alter the limit of the territorial waters by way of notification; nautical mile has been defined as an international unit equal to 1.852 km. (see The Penguin English Dictionary). Thus, twelve nautical miles is approximately equal to 22.20 km; thus, if a vessel goes outside the territorial water of India i.e. beyond twelve nautical miles for any operations, then the said vessel will be treated as a foreign going vessel under clause (ii) of Section 2(21); the impugned vessel has undertaken dredging operations before 12 nautical miles also; the vessel in question is to be treated as foreign going vessels by virtue of clause (iii) of Section 2(21) also. Learned counsel relies upon the decision of Calcutta High Court in Turner Morrison & Co. Ltd Vs Assistant Collector of Customs for Exports-II 1999 (110) ELT 484 (Cal) and followed by the Tribunal in CC Vs Emirates Trading Agency – 2005 (184) ELT 98 (Tri) wherein the vessel operating within the harbour for unloading the cargo from bigger vessel is treated as foreign going vessel.
2.5. Learned Counsel further submits that duty demanded by applying rate of duty of 6% as CVD is not correct. CVD ought to have been computed by applying rate of duty of 1% in terms of Notification No.1/2011-C.E; valuation adopted by the department is also not correct and not substantiated; Notification No.1/2011-C.E. (Sl.No.113) prescribes an effective rate of 1% CVD on all goods classifiable under the Heading 89.05. He relies on the decision of the Supreme Court in the case of SRF Ltd vs. Commissioner of Customs, Chennai: 2015 (318) ELT 607 (SC) (paras 6-8), wherein appellants were entitled to exemption from payment of CVD in terms of Notification No. 6/2002; the appellants had placed on record the purchase cost of the dredger. However, the department has relied upon a news report about the controversy on Sethusamudram project and proceeded on the basis of the value indicated therein, which value is not authentic and only hearsay; in light of the same, to this extent, the differential amount of duty is to be re-calculated.
2.6. Learned Counsel submits that extended period of limitation is not invokable in terms of Section 28(4) of the Customs Act; invocation of extended period of limitation is not tenable as there is no fraud, collusion etc. Customs formalities have been complied with at the time of every entry into India; dredger was duly converted from foreign run to coastal run and vice versa; further, IGM as well as EGM were filed for the dredger; department had knowledge of the import; bills of entry had been filed for the consumables; the details of the documents which have been submitted at various points of time before the customs authorities to show that the department was aware of the import of the vessel into India, have been mentioned in the list of dates and events in the table; moreover, circular dated 13.06.2012 was issued by the CBEC clarifying that the importer needs to file bill of entry for imported vessels; hence, when there existed ambiguity and uncertainty in practice resorted to by the Customs Authorities till 2012, mis-statement or suppression by the Appellant cannot be alleged; non-filing of bill of entry does not mean that the appellants have sought to evade duty; The dredger was exempt from duty when they were imported initially; on the third occasion, the duty if any was payable not on full value of the vessel, but only on the repair costs; as the appellants did not gain any benefit, omission, if any, can at best be a technical lapse but not willful; this does not warrant invocation of extended period of limitation; he relies on the decision of Aban Lloyd Chiles Offshore Ltd. v. Commissioner of Customs, Maharashtra, 2006 (200) ELT 370 (SC), wherein it was held that demand invoking the extended period of limitation will not be sustainable when the facts were within the knowledge of the department; Penalty under 114 A is not imposable as the duty has not been paid by the Appellant due to suppression or misrepresentation of facts etc; appellants have filed applications under Section 149 of the Customs Act, for amendment of the bills of entry for consumables dated 14.12.2007 and 19.11.2009 to include the dredger in question as an item of import; if the applications are allowed, the allegation that Dredger was not re-imported in 2009 would not survive; hence, upon re-import, duty would be restricted only to the cost of repair abroad as per Sl. No.2 of Notification No.94/1996-Cus.
2.7. Learned Counsel further submits that Commissioner of Cochin does not have jurisdiction to demand duty in the present case, just because the vessel was seized at Cochin; the vessel entered India in May 2011 through Nagapattinam wherein it was idling as a foreign going vessel; it was duly converted from foreign run to coastal run in Paradeep Port; if at all its opined that the dredger was imported into India for home consumption, it was in Paradeep; customs department in Cochin has no jurisdiction to demand duty on imports made at Pardeep Port; Tribunal held in favour of appellants in Samson Maritime Ltd. v. Commissioner of Customs (Import), Mumbai: 2016 (333) ELT 148 (Tri.-Mum) (Para 7); territorial jurisdiction of the Commissioner Cochin has not been extended to Paradeep, either by the Customs Act or by the Central Board of Excise and Customs; section 15(1)(c) or Section 28 also does not confer jurisdiction on customs department at Cochin to demand duty from the Appellants for the import made at Paradeep Port; this is more so when the department is stating that the bill of entry ought to have been filed when the vessel was converted into coastal run from Paradeep Port; it was held in Devilog Systems India v. Collector of Customs, Bangalore: 1995 (76) ELT 520 (Kar) and NCR Corporation of India Ltd Vs CC (Prev.), Mumbai, 2002 (143) E.L.T. 349 (Tri. -Mumbai) that a Commissioner does not have the power to adjudicate over a matter where his territorial jurisdiction does not extend.
2.8. Learned Counsel further submits that the impugned order has confirmed only proposal for demanding duty and imposing penalty; as far as confiscation proceeding is concerned, it has been observed by the Commissioner of Customs in the impugned order that separate proceeding for the same will be initiated by the Commissioner of Customs at Pradeep etc; Proceedings for demand of duty under Section 28 and proceedings under Section 124 for confiscation and penalty cannot be bifurcated or truncated as held in Bakeman’s Home Products Pvt. Ltd Vs CC, Bombay: 1997 (95) ELT 278 (Tri.).
3. Shri Gopakumar Joint Commissioner, Learned Authorized Representative, appearing for the department reiterated the findings of OIO and submitted a written brief dated 25-02-2020 and submitted that two Show Cause Notices dated 30.01.2013, covering the period 28.01.2012 to 08.01.2013 and SCN dated 07.05.2013, covering the period 01.2013 to 28.02.2013; Dredgers on lease are leviable to Customs duty as per Customs Notification19/2012Cus dated 17/03/2012 and penalty is imposable under Sec 114 A of the Customs Act for not following the procedures (Declaration in the IGM, Filing of B/E ) and non-payment of applicable duty.
3.1 Learned Authorised Representative submits that the vessel M V Darya Manthan arrived in Indian waters on May 2011 which amounted to import; the vessel reached Paradeep port on 11.06.2011; it was converted to coastal run thereafter; however, no Bill of Entry for import of the dredger was filed by the importers; the vessel was seized when it was plying near Cochin port on operations; Cochin Customs examined the issue and issued the SCNs for the violations; as on 11.06.2011, the dredger attracted import duties @ BCD- Nil; CVD-5%; Education Cess & Higher Education Cess- 3% and SAD 4% (aggregate duty-9.517%); subsequently, the CBEC issued Notification 19/2012-Cus Dt.17/03/2012 prescribing lower rates of effective import duty for dredgers which are on lease.
3.2 Learned Authorised Representative submits that M/s Manthan Dredging have contended that No duty is payable on vessel re-imported into India, as the vessel ceases to be goods, when re-imported into India: the vessel was first imported in 2007 as “”goods””, and thereafter, on re-import, it assumed the character as “‟conveyance‟‟, and hence no duty would be leviable. He submits that this issue was examined elaborately in the case of M/s. SEAMEC Ltd.: 2017(12) TMI 1281- CESTAT Mumbai, this Tribunal held as follows.
“62. When the vessels remained as “goods” all along i.e. from point of first entry to India and during the re-import from time to time that was classifiable under CTH 89059090, for the reasons stated hereinbefore taking the criteria of classification prescribed by the said CTH. All the vessels did not possess the character of the goods covered by CTH 89019090 not being used for carriage of cargo or passenger according to the mandate of the said CTH. Accordingly, stand of Revenue that the vessels on re-import shall be classifiable under CTH 89059090 as “goods” only is correct and that is upheld”.
3.3 Learned Authorised Representative further submits that the appellant has pleaded that they had filed the declaration on stores and also obtained the conversion certificates duly; however, this does not exonerate the importers from the act of non-filing of Bill of Entry for import; in the absence of filing the IGM showing the „dredger‟ included as goods and the non-filing of the Bill of Entry, the import duty needs to be collected and penalty is imposable. He relies on the decision in the cases of M/s. SEAMEC Ltd (Supra) at Para 59 & 65; Devshi Bhanji Khona and others: 2019(11) TMI 22-Cestat Bangalore Para 16.3 and 16.5. He further, submits that in the case of Noble Asset Co Ltd vs. Commissioner of Customs (Prev) 2006(205) ELT 901, it was held that the subsequent imports will be conveyance; in the instant case, there was no such import in the first place; no IGM was filed including the vessel as cargo and no Bill of Entry was filed for the import of the vessel.
3.4 Learned Authorised Representative submits that the appellant‟s contention, to categorise the import of the vessel in 2011 as re-import, thus eligible for concession under Notification 94/96, is refuted with detailed reasoning in Para 46 (i) and (ii) of OIO; Notification No. 94/96 is a conditional notification, where proper export and import documents are filed and identity of the goods established; conditions of the notification have to be strictly satisfied with at the time of export and subsequent import to avail the benefit under the notification; Tribunal in the case of M/s. SEAMEC (supra) finds that such reimports are to be accompanied by the prescribed procedures (Paras 57 and 58).
3.5 Learned Authorised Representative submits that the stand of the revenue on the applicability of Section 15(1) (c), is elaborated in the order. Section 15(1) (c) stipulates the date for determination of rate of duty; instant case does not fall under clauses (a) and (b) and only falls under clause (c), i.e. the date of payment of duty. Learned Authorised Representative submits that he reiterates the findings of OIO, On the other issues like invocation of extended period, valuation, jurisdiction and demand of duty on the owners and disponent owners, etc.
4. Shri Rohan Karia, counsel submitted as follows-
(i). copy of application and bond dated 10.06.2011 (made before the Assistant Commission of Customs, Paradeep, requesting for conversion of the vessel to coastal run.
(ii). copy of permission dated 8.06.2011 granted to M.V. Darya Manthan by the DG Shipping.
Learned Counsel submits that it is evident from the documents that it was clearly disclosed to the customs officers that the dredger will be taken to Dhamra Port for carrying out the dredging operations; the dredger was converted from foreign run to coastal run in Pardeep port on 12.06.2011; import deemed, if any, has taken place on 12.6.2011 at Pradeep Port and thus, the Commissioner of Customs, Cochin lacks the jurisdiction to initiate action by issuance of show cause notice; CBEC has clarified vide their Circular No.16/2012-Cus dated 13.06.2012, that where foreign flag vessels are to be converted from foreign run to coastal run, bill of entry for home consumption is to be filed at that point of time and applicable duties of customs is to be paid.
4.1 Learned Counsel submits that In the instant case, it is clearly evident that the dredger was imported into India for home consumption in Paradeep port first, as evidenced by its conversion into coastal run; therefore, the customs department in Cochin has no jurisdiction to demand duty on imports made at Paradip Port; neither Commissioner Customs‟ was given jurisdiction; Section 15(1)(c) or Section 28 also does not confer jurisdiction on customs department at Cochin to demand duty from the Appellants for the import made at Paradip Port. This is more so when the department is stating that the bill of entry ought to have been filed when the vessel was converted into coastal run from Paradip Port. He submits that the proceedings have been initiated in the instant case by the Cochin Customs without any jurisdiction; on this ground alone, the impugned order is liable to be set aside. He relies on-
(i). Samson Maritime Ltd Vs CC (Import), Mumbai 2016 (333) ELT 148 (Tri-Mum)
(ii). Shipping Corporation of India Ltd Vs Commissioner, 2015 (317) ELT 74 (Tribunal).
(iii). N.C.R. Corporation of India Ltd Vs CC(Prev) Mumbai, 2002 (143) ELT 349 (Tri – Mumbai).
(iv). Devilog Systems India Vs CC, Bangalore1995 (76) ELT 520 (Kar).
(v). Sunil Bajaj Vs CC, New Delhi, 2017-TIOL-4206-CESTAT-Del.
4.2 Learned Counsel submits that the dredging operations in Cochin has been undertaken after the vessel was imported into India; therefore, demanding duty in terms of the Notification No.19/2012-Cus for operations is incorrect and not sustainable; CVD is being demanded in terms of Notification No.19/2012-Cus on the dredging operations, whereas it is leviable on dredgers at the time of its importation into India; dredger was imported into India at Paradip port and was converted from foreign run to coastal run; import was complete in Paradip. Learned Counsel further submits that the demand of duty is barred by limitation. Extended period of limitation is not invokable in terms of Section 28(4) of the Customs Act; Even though the SCN dated 30.01.2013 covers the period of lease 28.01.2012 to 28.02.2013, still the relevant date for the purpose of Section 28 will be 12.6.2011; duty has not been demanded under Section 125 of the Customs Act, 1962; in terms of the Circular No.16/2012-Cus dated 13.06.2012 issued by the CBIC, bill of entry for home consumption is to be filed and duty discharged on conversion from foreign run to coastal run; appellants were directed to only file bill of entry for the stores and consumables on board the dredger; there has been confusion about the exact procedure to be followed in the case of import of vessels, has been acknowledged by a number of decisions of the Tribunal; invocation of extended period of limitation is not tenable as there is no fraud, collusion etc, as all facts were disclosed before the customs department at Paradip and the vessel was also boarded by the customs officers at Dhamra Port; Department‟s reliance on SEAMEC Limited Vs CC (Imports), Mumbai, 2017 (12) TMI 1281 – CESTAT Mumbai is misplaced as this decision has been since recalled 2018 (364) ELT 611 (Tri.-Mum).
5. Heard both sides and perused the records of the case. The rival contentions in the case revolve around the following issues:
(i) Whether the impugned vessel MV Darya Manthan is foreign going vessel in terms of Section 2(21) of Customs Act, 1962;
(ii) Whether the appellants are entitled to the benefit of Notification No.94/96;
(iii) Whether Commissioner of Customs, Cochin has jurisdiction over the import which initially occurred at the port of Paradeep on 11.6.2011;
(iv) Whether the vessel MV Darya Manthan is liable to pay duty on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013;
(v) Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV Darya Manthan can be initiated; and
(vi) Whether Commissioner of Customs was correct in confirming the duty liability jointly on different parties.
6. Learned counsel for the appellants makes a spirited plea to the effect that the vessel is a foreign going vessel and as such, is not hit by the clarification contained in Circular No.16/2012 dated 13.6.2012. He contends that the definition of foreign going vessel under Section 2(21) of the Customs Act, 1962, is a definition having “means‟ and “inclusive‟ parts. He claims that as per Clause (ii) of the definition any vessel engaged in fishing or any other operations outside the territorial waters of India is deemed to be a foreign going vessel or aircraft. He takes pains to explain that, Customs Act does not define territorial waters of India and such definitions is found only in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone Act, 1976. However, we find that the appellants have obtained permission for coastal run in Dhamra Port till 15.1.2012 and from 28.1.2012 for dredging operations near Cochin Coast in connection with the LNG Terminal near Cochin Port. Understandably, the work undertaken by the vessel is in the port premises and even going by the definition of the Territorial Waters as provided by the counsel himself, the work undertaken is within Territorial Waters. Appellants have not been able to provide any definitive proof to show that during the period in dispute the vessel did proceed to a place beyond Indian territorial waters for any purpose. Therefore, we are of the considered opinion that the appellants cannot take recourse to the definition contained in Section 2(21) (ii) of Customs Act, 1962, to claim that the impugned vessel is a foreign going vessel. Therefore, we hold that the impugned vessel cannot be treated as a foreign going vessel during the impugned period.
7. The appellants have also vehemently argued, even if the vessel is treated as goods and not a conveyance, it has been going in and out from different Indian Ports. The first import has taken place in 2007 when there was no duty leviable on such dredgers. Thereafter, the subsequent visits to the Indian Ports by the impugned vessel should be treated as “reimport‟ and benefit of Notification No.94/1996-Cus should be made available and duty should be charged to the extent of repair or maintenance charges incurred. We find that this argument is not tenable. We find that the import and export activities as claimed by the appellant are not recorded. The appellants themselves agree that no Bills of Entry and Shipping Bills have been filed. In the absence of clear record to correlate the import and export of the vessel and the extent of repairs claimed to have been undertaken, we find that the appellant‟s claim cannot be entertained. We find that learned Commissioner has correctly observed that:
“44. The vessel, thus, having illegally entered into India and not imported through a due process during any of its prior sorties, clearly falls outside the definition of a re-imported cargo as well. In any case, it is no longer res integra that re-imports do not carry a blanket exemption from customs duty. The findings of the Hon’ble Supreme Court in the matter of Super Cassettes Industries Ltd. (reported in 2008 (225) ELT 401 (SC) that on re-importation of goods assessee would be liable to pay same duty as had been paid when goods were imported for first time applies to the instant case.”
We find that the appellants cannot claim the benefit of a notification retrospectively, that too having not established the fulfilment of conditions envisaged in the notification. In view of the above the argument of the appellants is not acceptable.
8. Coming to the issue of Jurisdiction, hotly contested by rival parties, we find that the impugned dredger MV Darya Manthan has been making trips in and out of Indian Ports right from 2007 onwards. Though the vessel touched the Indian port of Nagapattinam on 12.5.2011, it did not engage in any activity in that port. It reached Paradeep Port on 11.6.2011. At Paradeep Port, a Bill of Entry was filed for the ship stores and bunkers and permission for converting from foreign run to coastal run was obtained from Paradeep Customs to work at Dhamra Port. Later on it moved to Cochin Port. Cochin customs vide Order No. SAV/56/2012 dated 24.8.2012 put the vessel on restraint and the same was provisionally released on 30.8.2012. The argument of the Revenue is that the vessel though imported on 11.6.2011 at Paradeep, no Bill of Entry was filed; Bill of Entry was required to be filed and duty needed to be discharged in terms of Notification No.19/2012-Customs dated 17.3.2012. Learned Commissioner finds in the impugned order that the import duty was payable at the time of import, however, the importer volunteered to complete the act of import and pay duty in 2012 in terms of the above cited Notification. Learned Commissioner takes note of the applications dated 15.5.2013 and 22.5.2013 filed by the appellants for amending the respective Bill of Entries including the vessel, as goods. Learned Commissioner relies on the fact that the deposit towards the duty irrespective of the fact that the same is final or provisional was made with the Customs Cochin; the formality of import has been completed at Cochin and therefore, the jurisdiction of Cochin has been invoked by the appellant themselves; as such, the relevant date to issue a demand Notice would also be the date of payment of such duty. We find that the vessel under dispute did not arrive at Cochin Port from a foreign port. In fact it was already under a coastal run at Dhamra Port duly permitted by Paradeep Customs. No act of import Vis a Vis the impugned vessel has taken place at the port of Cochin. We find that there is no legal backing to come to a conclusion that the act of import has occurred/completed at Cochin. The only change in circumstances with regard to the vessel at Cochin is that either the disponent and/or the lessee has changed, vis a vis its position in Dhamra Port, where the vessel was already in coastal run as permitted by Paradeep Customs. Per contra, the appellants submit that it is accepted by the department that in May 2011 when it was converted into coastal run; it is evident that the dredger was imported into India for home consumption in Paradeep first by its conversion to coastal run; therefore, Cochin Customs has no jurisdiction to demand duty on imports made at Paradeep Port. Learned counsel for the appellants relies upon Samsung Maritime Ltd. (supra) wherein Tribunal has held as follows:
“7. Although we have opined above on merits, we would discuss a preliminary objection by the ld. Advocate that the Commissioner at Mumbai had no jurisdiction to seize and adjudicate upon a case of goods which were imported at Chennai. The case of Revenue is that the appellant did not file the IGM/Bill of Entry at the time of import at Chennai. We find that the Commissioner of Customs at Mumbai does not have jurisdiction over Chennai port. Therefore, neither could he have issued a show cause notice proposing confiscation and penalty for a contravention committed in Chennai jurisdiction. Nor could he have adjudicated the case without authority under the Act. On this ground too, we set aside the impugned order as beyond jurisdiction and illegal.”
9. We find that while demanding and confirming duty, learned Commissioner observed that separate proceedings for confiscation as regards the vessel will be initiated by Commissioner of Customs at Paradeep. We find that such an argument is incorrect. In case, Paradeep Customs can only take action in respect of the violation committed if any, by the appellants in respect of the import of the impugned vessel, we do not find what logic would support the action of Cochin Customs in demanding duty on the same without invoking the provisions laid for confiscation and penalty. As submitted by the learned counsel for the appellant, the jurisdiction of Cochin Customs has not been extended till Paradeep; Cochin Customs have also not been empowered by a specific order to exercise the powers of Paradeep Customs. We find that Section 28 has been invoked by the Customs Cochin to demand duty. The word “Proper Officer‟ needs to be understood in the context of the scheme of recovery provided under Section 28. Section 28 provides for duties not levied or not paid or short levied or short paid or erroneously refunded. Each of the words mentioned therein refer to the “Proper Officer‟, which necessarily has to be read as the officer in whose jurisdiction such non-levy, non-payment, etc, have taken place. Levy of Customs duty is on the completion of act of import. There is no dispute in the instant case that the act of import was complete in Paradeep Port where permission for conversion to coastal run was accorded by the Proper Officer after examining all the facts and circumstances of the case and after accepting the bill of entry filed for ship stores and consumables on board. Paradeep Customs were well within their rights to issue demand for customs duty non-levied and / or not paid for whatsoever reason. Simply because the Customs Paradeep have not advised the appellants to file a Bill of Entry showing the “vessel‟ as “goods‟; have accepted Bill of Entry for ship stores and consumables and have accorded permission for coastal run, it is not free for Cochin Customs to takeover the powers of Paradeep Customs. Learned Commissioner, in the impugned order, has taken the argument that since the duty, whether provisional or final, was paid in the jurisdiction of Cochin Customs, it can be assumed that the importers have declared their intention to complete the act of import within Customs Cochin jurisdiction. We find that this argument is not supported by Law. It is very clear that the appellants have deposited an amount to obtain provisional release in terms of Section 110A of Customs Act, 1962 when the subject vessel was restrained by Cochin Customs. Hereto, we find that the duty was not paid but was deposited along with a bond and a bank guarantee. Moreover, the duty was not paid in full as demanded. Therefore, by no stretch of imagination, the same can be deemed to be payment of duty. Such amounts deposited do not take the character of duty. In the instant case, the payment was “not of any duty but was a deposit, that too not in full‟, made to secure provisional release of the vessel and the appropriation has been appealed against. Therefore, it is not free for Cochin Customs to reckon date of making of deposit as the relevant date in terms of Section 15 of the Customs Act, 1962. Section 15 is relevant only for the purposes of fixing the rate of duty, and not be reckoned for issuance of a demand notice.
10. Further, the impugned vessel was operating in the jurisdiction of Cochin Customs. As per Cochin Customs, applicable duty has not been paid on the vessel. Cochin Customs were free to consider the impugned vessel to be “smuggled goods‟, in terms of Section 2(39) of Customs Act, 1962 and seize the vessel under Section 110 of the Customs Act, 1962 and consequent action under Section 124, 125, etc, would have followed, while intimating customs Paradeep to take action with reference to the collection of duty on the impugned vessel. We find that Section 124 does not specify any “Proper Officer‟, as in the case of Section 28. This being the legal position, the findings in the impugned order that action vis-a-vis confiscation, penalty, etc., will be taken by Paradeep Customs defies reason or logic. Moreover, we find that the impugned order confirmed duty for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013. Learned Commissioner, while holding that separate proceedings would be initiated by Paradeep Customs in respect of confiscation and penalty was silent on the duty recoverable for the period between 11-5-2011 and 28-1-2012. We fail to understand the logic of collecting duty on each change of lease, though not ordained in law, after the vessel got converted to coastal run, was not applicable for the period when the impugned vessel was in coastal run at Dhamra Port. The impugned order is silent on duty payable during the period 11-5-2011 and 27-1-2012. We find that it’s not open for Customs to demand and confirm duty for a particular period without any logic.
11. Moreover, the impugned order confirms duty on the vessel imported in 2011, in terms of a Notification issued in 2012. The said Notification is not retrospective, as it effects the substantial rights of an importer. Moreover, we find that duty has been demanded for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013 depending on the disponent owners and the companies who took the vessel on lease. We fail to understand as to how duty could be demanded and confirmed for three different periods, when there is no change in the status of the impugned vessel i.e., the vessel continued to be in the coastal run throughout the period. We find that the Notification No.19/2012 dated 17.3.2012, did not envisage any such collection of duty from different lessees during the period. Moreover, customs duty is charged when the act of importation is done. Understandably, the act of import is not evident during the three periods. At the most it would be in the first period itself. It is not understood as to how Customs duty could be charged on subsequent lessees after the vessel is imported and is under coastal run, that too ignoring the period when the vessel was under coastal run at Dhamra Port. We find that a stand, taken even due to mistaken appreciation of law, cannot be selective. However, we find that learned counsel for the appellants has not raised this issue. Therefore, we refrain from giving any opinion on this issue.
12. We find that learned counsel has correctly replied upon decision of Tribunal in the cases of C.R. Corporation of India Ltd. vs. CC (Preventive) Mumbai (supra) and Devilog Systems India (supra). We also find that as held by Tribunal in Bakeman’s Home Products Pvt. Ltd. vs. CC, Bombay: 1997 (95) ELT 278 (Tri.), demand and confiscation proceedings cannot be initiated in a truncated manner. In view of our discussion above, we further conclude that Cochin Customs had no jurisdiction to demand duty on the impugned vessel and we find that the show-cause notice and adjudication order have been issued without proper authority of law. Moreover, in the instant case, the vessel has been traveling between foreign ports and Indian ports. During the current Journey, the vessel arrived at Paradeep Port on 11-5-2011. If duty was chargeable on vessels as per change in law if any, and if a Bill of entry was needed to be filed in view of the circular issued by CBEC, it was incumbent upon Paradeep Customs to advise the appellants. Paradeep Customs have not only permitted costal run for the vessel but also have accepted bills of entry for ship stores, bunkers etc. Proper officers have boarded the vessel and inspected the documents at various places. Every movement and intention of the vessel was known to the department. Therefore, extended period cannot be invoked in this case. Moreover, as submitted by the appellants, we find that various circulars have been issued on the subject of necessity of filing Bills of entry by the vessels, which could be treated as goods as well, under similar circumstances. We find that action cannot be taken on a vessel imported in 2011 on the basis of a clarification issued vide circular in 2012. If the department can view the issue differently at different periods of time, the appellants also can understandably, entertain a bona fide belief on the taxability of the impugned vessel and the procedures to be adopted thereof. In any case, suppression of fact, etc cannot be alleged, and extended period cannot be invoked.
13. We find that the show-cause notice was made answerable jointly and severally to the owners of the dredger – M/s. Manthan Dredging Ltd., their disponent owners M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd. and their agents M/s. Chellaram Shipping (UK) Ltd., M/s. Chellaram Shipping (Hong Kong) Ltd. and the agents in Cochin M/s. Parekh Marine Agencies Pvt. Ltd. and the Indian charterers M/s. Dharthi Dredging and Infrastructure Ltd., Hyderabad and M/s. AFCONS Infrastructure Ltd., Mumbai. Learned Commissioner while passing the impugned order confirmed the duty of Rs.3,28,42,609/- jointly on the owner of the dredger “MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. He also confirmed duty of Rs.46,73,440/- jointly on the owner of the dredger “MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. We find that such a joint confirmation has no sanctity of law, inasmuch as the exact amount payable by the individual noticees is not given. The order is not enforceable also for the said reason. On this count also, the impugned order is liable to be set aside.
14. The appellants have also submitted without prejudice to the other submissions that the duty demanded at the rate of 6% CVD is not correct. CVD at the rate of 1% is applicable in terms of Notification No.1/2011. They also submit that the value of the dredger is inflated, relying on a news report about the controversy on Sethusamudram Project, even though the appellants have placed on record the purchase cost of the dredger. We find that this issue does not require consideration, as we hold that the impugned order is not maintainable on the count of jurisdiction, limitation and for the reason that the same is not legally enforceable being jointly confirmed without specifying the due amount payable by individual noticees.
15. In the result, impugned order is set aside and all the appeals are allowed with consequential relief, if any, as per law.
