Great Eastern Shipping Company Ltd. and Anr. Vs Union of India (Orrisa High Court)
Great Eastern Shipping Company Ltd (GESCO) (Petitioner) has filed the current writ petition seeking relief to provide a declaration that Condition No. 82 of Sl. No.462 of Notification No. 12/2012. dated March 17, 2012, (Exemption Notification 2012) to the extent of making the import of vessel “Jag Arnav” retrospectively amenable to Customs Duty is violative of Sections 12, 25 and 46 of the Customs Act, 1962 and Articles 14, 19 (1) (g), 265 and 300A of the Constitution of India. Along with that, the Petitioner has sought a relief to provide a direction from the Assistant Commissioner, Central Excise, Customs & Service Tax, Balasore Division, Orissa (Respondent No. 3) and the Commissioner, Central Excise, Customs & Service Tax, Bhubaneswar-1 (Respondent No.4) not to deny the Petitioner, the permission to convert the vessel ‘Jag Arnav’ to ‘coastal status’ and further not charge any Customs Duty on the same.
The Petitioner’s imported vessels namely; ‘Jag Arnav’, ‘Jag Ratan’ and ‘Jag Rani’ were exempted from the payment of custom duty when they were first called in Indian Port. The Petitioner’s contention relied on the fact that the Exemption Notification 2012 which levied custom duty on imported vessels was passed after the import of their vessel and cannot have a retrospective application. Hence exempted the Petitioner from the payment of custom duty.
The Hon’ble Orissa High Court seconded the contentions of the Petitioner, while relying on landmark judgment of SEAMEC Limited v. Union of India [Writ Petition (L) No.2921 of 2011 dated January 11, 2021], and observed that the Petitioner is exempted from the payment of custom duty and the notification dated March 17, 2012 cannot be applied retrospectively.
Further relying on the case of Great Offshore Limited Vs. Commissioner of Customs (Import) [Writ Petition (LOD) No.104 of 2012 dated February 13, 2012] wherein it was held that where the vessels were imported before the coming of notification which has been applied in the current case, the Respondents could not have insisted on levy of customs duty at a later stage.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. The Great Eastern Shipping Company Limited (Petitioner No.1) and its Company Secretary (Petitioner No.2) have filed this writ petition seeking three reliefs. First, for a declaration that condition No.82 of Sl. No.462 of Notification No.12/2012 Cus. dated 17th March, 2012 issued by the Department of Revenue, Ministry of Finance, Government of India to the extent it has made the import of the vessel ‘Jag Arnav’, retrospectively amenable to customs duty is ultra vires under Sections 12, 25 and 46 of the Customs Act, 1962 (‘Act’) and Articles 14, 19 (1) (g), 265 and 300A of the Constitution of India. The second prayer is for a direction to the Assistant Commissioner, Central Excise, Customs & Service Tax, Balasore Division, Orissa (Opposite Party No.3) and the Commissioner, Central Excise, Customs & Service Tax, Bhubaneswar-1 (Opposite Party No.4) not to deny Petitioner No.1 permission to convert the vessel ‘Jag Arnav’ to ‘coastal status’ and not to charge customs duty. The third is to prohibit Opposite Party No.3 from withholding permission to convert the foreign going vessels of Petitioner No.1 to ‘coastal run’ and from demanding any customs duty on all of the vessels of Petitioner No.1, including ‘Jag Arnav’, imported into India prior to 17th March, 2012.
Background
2. Petitioner No.1 is stated to be a private sector shipping service provider involved in transportation of crude oil, petroleum products, gas and dry bulk commodities. It is stated to be a member of the Indian National Ship Owners Association (INSA).
3. Petitioner No.1, on 3rd July, 2001 acquired from Panama, a motor ship, ‘Jag Arnav’. In terms of Section 406 of the Merchant Shipping Act, 1958 (MS Act), a general licence for ‘Jag Arnav’ to undertake worldwide trade and coastal trade in Indian waters was obtained by Petitioner No.1. ‘Jag Arnav’ arrived at Paradeep Port, Orissa on 30th April, 2003 for the first time. At that relevant time the import of a foreign going vessel was exempt from customs duty in terms of Serial No.352 of Notification No.21/2002-Cus, dated 1st March, 2002 as amended, read with the relevant tariff heading under the Central Excise Tax. The said Entry 352 read as follows: “Heading 8901: All goods (excluding vessels and other floating structures as are imported for breaking up).”
4. Section 12 of the Act is its charging section. Its levies duties on goods imported into India. The rate of duty applicable to imported goods is a function of the prescribed duty rate mentioned in the First Schedule to the Customs Tariff Act, 1975 (CT Act). Classification of goods under the appropriate tariff entry is necessary for determining the applicable rate of customs duty. Under Section 15 the relevant date for determination of the duty payable, in case of goods entered for home consumption under Section 46, is “the date on which a bill of entry is respect of such goods is presented”. In the case of other goods (i.e. other than those cleared from a warehouse under Section 68 of the Act) it is the rate prevalent on the “date of payment of duty.”
5. Under Section 2 (9) of the Act, the expression ‘conveyance’ includes a vessel, an aircraft and a vehicle. Under Section 2 (21) the expression ‘foreign going vessel’ 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.”
6. Section 2 (22) of the Act, the expression “goods” includes “vessels, aircrafts and vehicles”. The expression “import” under Section 22 (23) of the Act “with its grammatical variations and cognate expressions, means bringing into India from a place outside India.” Section 2 (25) of the Act defines the expression “imported goods” to mean “any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption”.
7. In relation to ships, vessels, etc. Chapter 89 of the CT Act is relevant since it deals with the classification of ‘ships, boats and floating structures.’ The Customs Tariff Heading (CTH) 8901 relates to ‘vessels for transport of persons and goods.’ Two broad types of duties are leviable. One is the Basic Customs Duty (BCD) under Section 2 of the CT Act and the other is the Countervailing Duty (CVD), a duty in lieu of Excise Duty levied under Section 3 of the CT Act. Prior to 1st March, 2011 BCD in respect of the import of ships was ‘nil’ in terms of Serial No.352 of Notification No.21/2002-Cus. The CVD too was nil in terms of prescribed tariff rate for CTH 8901.
8. This position continued till 16th March, 2012 as far as BCD is concerned. As far as CVD was concerned, the position of ‘nil’ duty continued under Clause 129 of the Finance Act, 2012 read with Notification No.6/2006-CE and 38/2011-CE. Therefore, till 16th March, 2012 there was no requirement of payment of customs duty on foreign going vessels imported into India.
9. Under Section 46 of the Act, in respect of goods other than goods intended for transit or transshipment, a Bill of Entry (BOE) is required to be filed for clearance of goods for home consumption. Therefore, during the period when ‘Jag Arnav’ was imported into India by Petitioner No.1 the prevalent practice was for the Customs Authorities not to insist on filing of BOE for clearing of a foreign going vessel. It was also accepted that vessels imported into India would undertake foreign voyages in international waters. While discharging/loading cargo in India or undertaking a coastal run in Indian waters, these vessels entered and exited India without filing a BOE.
10. When an attempt was made by the Central Board of Excise and Customs (CBEC) (Opposite Party No.2) by instruction dated 23rd September, 2010 to require BOE to be filed even in cases where a vessel imported is exempted from payment of duty, a representation was filed by the INSA on 12th October, 2011 asking that Indian flag ship owners should file BOE at single customs house specifically designated in respect of vessels falling under CTH 89.01, 89.02, 89.04, 8905.10 and 8905.90 imported prior to 2001 and such BOE should be allowed to be taken on record and processed irrespective of the vessel being physically present in India but had at some point in time been in India waters. INSA further requested that non-filing of BOE hitherto be treated as procedural delay and no penalty be imposed on members of INSA.
11. The Union Budget, 2012 saw the issuance of a fresh Notification No.21/2002-Cus dated 17th March, 2012. Specific to foreign going vessels, Serial Nos.461 and 462 of the said notification (corresponding to Serial No.352 of the earlier Notification No.21/2002-Cus), exempted them from both BCD and CVD subject to the conditions 81 and 82 respectively. The relevant extract of the said Notification is read as under:
