Laxmi Cranes & Trailers (P) Ltd vs Union Of India on 14 October, 2011

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Kerala High Court

Laxmi Cranes & Trailers (P) Ltd vs Union Of India on 14 October, 2011

The writ petitioner in W.P.(C) No. 31233 of 2010 is in appeal challenging the judgment dated 14.10.2011 of the learned Single Judge dismissing the same. The writ petition was filed by the appellant challenging the proceedings of the Customs authorities charging him to customs duty on articles salvaged from the wreck of a ship that sank in the territorial waters of India.

2. On 30.6.2007 a foreign vessel, 'M V Maria' made a distress call to the Cochin Port authorities stating that it was sinking. The authorities are said to have guided the vessel 5 nautical miles outside, away from the navigation channel, but within the territorial waters of India, where it eventually sank. The Port directed the wreck to be salvaged, by issuing Ext.P1 W.A.1923/2011.

dated 2.7.2007. In the event of the owners not salvaging the wreck, the Port is empowered by law to conduct the salvage operations at the expense of the owners. For the purpose, a direction to furnish Bank Guarantee to the tune of Rs.12 Crores was issued to the owners as per Ext.P2. Ext.P2 was the subject matter of challenge before this Court in W.P.(C) No. 22117 of 2007 by the owner of the ship. As per Ext.P3 judgment, this Court appointed an Advocate Commissioner to oversee the salvage operations. The Bank Guarantee that was directed to be furnished was reduced to Rs.Two Crores and the writ petition was disposed of. Accordingly the salvage operations are stated to have commenced. Ext.P4 is the interim report submitted by the Advocate Commissioner. However, the salvage operations could not be completed within the time stipulated. According to the counsel for the appellant, the salvage operations were hampered by the climatic conditions as well as the roughness of the sea and the depth at which the wreck had settled. Silting and sinking of W.A.1923/2011.

the wreck deeper into the bottom of the ocean were the other factors that made the salvage operations difficult. It is stated that the salvage operations are still continuing. The appellant is the salvage operator.

3. The appellant approached this court by filing W.P.(C) No. 3000 of 2010 seeking the issue of appropriate directions for removal of the salvaged articles that were remaining in the Port premises. According to the appellant, the owners of the wreck have lost interest in the matter and have authorized the appellant to sell the salvaged articles and to recover the salvage expenses from such sale. The said writ petition was heard by this Court and by Ext.P6 order the appellant was permitted to complete the salvage operations subject to the condition that the Cochin Port Trust would have a lien on the cargo and the articles kept in the Port premises till the entire salvage operations were completed. The Master of the vessel was directed to remain in India until the salvage operations were completed. The Albanian Consulate in India W.A.1923/2011.

(the vessel was registered in Albania) was directed to give an undertaking ensuring the presence of the CEO and President of the Company that owned the ship before the Cochin Port authorities, should their presence be required at any point of time. The salvage operations were directed to be completed within a period of six months. Thereafter, as per Ext.P6(a) order dated 17.9.2010, the time stipulated for completing the salvage operations has been extended.

4. In the above circumstances, the respondents by Ext.P7 charged customs duty on the articles that were salvaged and brought within the customs frontiers of India. According to the appellant, the articles are not chargeable to customs duty. Therefore, the appellant filed W.P.(C). No. 31223 of 2010 challenging Ext.P7. The learned Single Judge considered the contentions of the appellant in the light of Section 21 of the Customs Act, 1962 (hereinafter referred to as the Customs Act for short), found that the contention was unsustainable and has dismissed the writ petition. The said W.A.1923/2011.

judgment is under challenge in this appeal.

5. According to the learned Senior Counsel Sri. Bechu Kurian Thomas, Section 21 of the Customs Act authorises customs duty to be charged only on goods that are imported into India. The wreck in the present case is within the territorial waters of the country. Therefore, no article is brought into the territory of India as a result of the salvage operations that are conducted. In view of the above, Section 21 of the Customs Act has no application to the facts of the present case and no customs duty is chargeable on the articles that are salvaged from the wreck in question. Reliance is placed on Section 12 of the Customs Act that specifies what the 'dutiable goods' are. Going by the provision, according to the learned Senior Counsel, only two categories of goods come within the expression dutiable goods. They are, firstly, goods imported into India and, secondly, goods exported from India. The expression 'import' is defined by Section 2(23) of the Customs Act to mean bringing into India from a place outside W.A.1923/2011.

India. As per Section 2(27), 'India' includes the territorial waters of India. Consequently, it is contended that the salvaged articles in the present case having originated within the territorial waters of India cannot be said to have been brought into India and are therefore not chargeable to duty under the Customs Act.

6. Our attention is also drawn to the provisions of the Merchant Shipping Act, 1958 (hereinafter referred to as 'Merchant Shipping Act' for short) particularly to the definition of 'vessel' under Section 3(55) and that of a wreck under Section 3(58). Sections 391, 399 and 402 are also referred to, to put forward a contention that the charges for salvage operations are to be paid or recovered from the articles salvaged from the wreck. Since the fee for salvage is protected under Section 402 of the Act, such fee cannot be charged with customs duty, it is contended. Therefore, it is contended that the appellant is entitled to recover the fee for the salvage operations by selling the salvaged articles in the W.A.1923/2011.

domestic market, without paying customs duty. The contentions of the counsel for the appellant are refuted by Adv. Sreelal N. Warrier, who appears for the respondent.

7. Heard. It is not in dispute that, the vessel 'M V Maria' was a foreign vessel. In fact, the case is that it was a vessel registered in Albania. It carried goods and articles that were of foreign origin. It contained 3170 metric tonnes of steel billets and 8 trucks. They were not intended to be brought into the territorial waters of India. However, the vessel had encountered trouble and was guided into the territorial waters of India, to a convenient place outside the navigation channel where it sunk. The appellant is the salvage operator. The case is that the appellant has been authorised to recover the salvage charges by selling the salvaged articles. As per Ext.P7, customs duty has been charged on the articles that are salvaged. Customs duty has been charged under Section 21 of the Customs Act. Section 21 reads as under:

W.A.1923/2011. 8

"21. Goods derelict, wreck, etc.- All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be dealt with as if they were imported into India, unless it be shown to the satisfaction of the proper officer that they are entitled to be admitted duty-free under this Act."

The above provision specifically provides that wreck brought or coming into India shall be dealt with as if it is imported into India. Therefore, the wreck which includes salvaged articles also, either coming into India or brought into India, are to be treated as per the above provision as if they were imported into India. In other words, Section 21 employs a fiction to treat a wreck and the articles salvaged from it to be treated as goods imported into India. As we have already noticed above, the ship contains articles that were meant for some other foreign country. They were not intended to be imported into the country. However, the goods did not reach their destination. For, it sank within the Indian territorial waters. The appellant wants to bring the said articles that are salvaged W.A.1923/2011.

into the territory of India. The goods cannot be permitted to cross the customs frontiers of India without being charged to customs duty, in view of Section 21 of the Act. The salvaged goods clearly answer the description of goods that are authorised to be charged with customs duty under Section 21 of the Act. Therefore, the contention that the goods had originated from the wreck located within the territorial waters of India cannot be accepted. The goods that were meant for some other foreign country had by an accident come to rest within the territorial waters of India. If the salvaged goods were to be taken to some outside country, there may not have been any problems. However, since the goods are to be brought into the territory of India, they are liable to be charged with customs duty in view of Section 21 of the Act.

8. The other contention that is put forward is on the basis of Section 402 of the Merchant Shipping Act. According to the learned Senior Counsel for the appellant, the appellant is entitled to be paid the charges for undertaking the W.A.1923/2011.

salvage operations. The appellant has a right to sell the salvaged articles for the purpose of recovering the salvage charges. Therefore, it is contended that, the goods shall not be charged with customs duty. The said contention cannot be accepted. If the goods are to be sold within the country, whether it is for the recovery of charges for conducting salvage operations or for the purpose of being repatriated to the owner of the vessel, the same could be permitted only in compliance with the law in force in the country. Therefore, any act on the part of the appellant to recover charges for conducting the salvage operations by selling the goods could be permitted, only after payment of the customs duty. If the sale of such articles are not sufficient to compensate the appellant for the expenses incurred, the appellant would have to seek recourse to other remedies to recover such amounts from the owner of the vessel in separate proceedings. We are not satisfied that the petitioner is entitled to claim exemption from payment of customs duty on the ground that the charges W.A.1923/2011.

for salvage operations are permitted to be recovered from the sale of the salvaged articles.

For the foregoing reasons, we find no grounds to interfere with the judgment appealed against. The writ appeal fails and is accordingly dismissed.

Sd/-

K. SURENDRA MOHAN JUDGE Sd/-

MARY JOSEPH JUDGE sb

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