By TIOL News Service

MUMBAI, DEC 01, 2014: THE appellantplaced a ship building contract on M/s. Hyundai Heavy Industries Co. Ltd. for supply of crude oil tanker with a capacity of 115000 DWT. The said vessel was delivered to the appellant on 27/10/2010. The said vessel called upon India at Sikka Port (Gujarat) for the first time as a conveyance for cargo loading operations during its foreign run. On vessel's arrival in India, a 'nil' cargo IGM was filed and all the procedural formalities were complied with. The vessel was also boarded by the Customs officials for preventive checks. Thereafter, the vessel left India taking on it the export cargo, after complying with the formalities, including filing of EGM and obtaining port clearance from the Customs authorities. Thereafter, during 2010-12 the vessel called upon India several times while being on foreign run.

On 22/02/2012, the vessel called upon Mumbai Port and complied with all the procedural formalities including filing of IGM dated 21/02/2012. The appellant also sought conversion of the vessel from 'foreign run' to 'coastal run' as the vessel was to undertake coastal trade.

When the said request was made for conversion, the Customs authorities informed the appellant that an IGM and Bill of Entry for the import of the vessel as 'goods' were required to be made. Accordingly, the appellant filed an IGM dated 21/02/2012 and also filed the Bill of Entry for the vessel as 'goods'. The Bill of Entry was provisionally assessed and the vessel was allowed to be converted to coastal run and to sail. At the time of filing of the IGM in February, 2012, the appellant also sought for amendment of the IGM to include the vessel as 'goods' on 28/02/2012 and the same was allowed without imposing fine or penalty.

Thereafter, a SCN was issued in May 2013 on the ground that the appellant had failed to comply with the import formalities under the Customs Act, as it had not declared the vessel in question in the IGM on its arrival for its clearance at the Indian Port of call, namely, Sikka, on 14/11/2010 and the appellant had not filed Bill of Entry for the vessel declaring the same as 'goods'. By not doing so, the vessel has become liable to confiscation under Section 111(f) and the appellant is liable to penalty under Section 112 of the Customs Act, 1962.

The Commissioner of Customs (Import), NCH, Mumbai passed an order confiscating the vessel, allowing the redemption of the same on payment of fine of Rupees One Crore and by imposing penalty on the appellant.

Before the CESTAT the appellant submitted that Section 111(f) of the Customs Act, 1962 envisages any 'dutiable or prohibited' goods as liable to confiscation. Inasmuch as since the oil tanker is completely exempt from payment of Customs duty under Notification 21/2002-Cus, therefore, the vessel is not dutiable goods. Reliance is inter alia placed on the apex court decision in Associated Cement Companies Ltd. vs. Commissioner of Customs 2001 (128) ELT (SC) - 2002-TIOL-08-SC-CUS in support. Moreover, the vessel is not prohibited goods either, as there are no restrictions under the EXIM policy and, therefore, Section 111(f) is not attracted, the appellant added.

The appellant also relied on Circular No. 16/2012-Cus dated 13/06/2012 wherein in para 5 it is clarified that:

"…all vessels including foreign going vessels for its entry into / exit from the country during its journey as foreign going vessel and the Indian flag vessel / Indian Ship for subsequent use as foreign going vessel would not require filing of IGM and Bill of Entry as conveyance, since the same are not imported goods to be cleared for home consumption."

Based on the above it is submitted that since the vessel was brought for the first time into Indian Port, Sikka, as a foreign going vessel, there was no need to file any IGM or Bill of Entry in respect of the vessel and, therefore, the order of the adjudicating authority is required to be set aside.

The AR merely reiterated the finding of the adjudicating authority.

The Bench observed -

++ From the show cause notice, it is evident that the charge against the appellant is that they did not file IGM or Bill of Entry when the vessel first arrived at Sikka Port on 14/11/2010. Sikka port is situated in Gujarat and, therefore, offence, if any, has taken place in Gujarat. The Customs Commissioner at Bombay does not have jurisdiction over the Sikka port and, therefore, he could not have issued any show cause notice proposing confiscation and imposition of penalty in respect of an act which was committed beyond his jurisdiction. On this ground alone, the impugned order is liable to be set aside.

++ Secondly, it is seen that the vessel, even if treated as 'goods' were not liable to any Customs duty as the same was exempt from payment of duty under Notification No. 21/2002-Cus. Thus, the total duty implication was nil. Therefore, the vessel could not be considered as 'dutiable goods', in the light of the apex Court's decision in the case of Associated Cement Companies, cited supra, and the Tribunal's decision in the case of Jay AR Enterprises (supra). If the goods are not dutiable, and there is no prohibition in importing oil tankers to India, the provisions of Section 111(f) are not at all attracted. Consequently, the appellant is not liable to any penalty under Section 112(a)(b) of the Customs Act, 1962 either.

Holding that the order of Commissioner of Customs (Import), NCH, Mumbai was clearly unsustainable in law the same was set aside and the appeal was allowed.

Fumbling on basics…what next?

(See 2014-TIOL-2407-CESTAT-MUM)