Custom, Excise & Service Tax Tribunal
Shri Sujay Kantawala, Advocate For vs Shri D.K.Sinha, Assistant ... on 10 August, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. C/89941, 89940, 90075/2014-Mum (Arising out of Order-in-Appeal No. 91/2014/CAC/CC(I)/AB/GR.VB dated 22.08.2014 passed by the Commissioner of Customs (Import), Mumbai ) For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
Samson Maritime Ltd.
:
Appellant
Bharat Samant
VS
Commissioner of Customs (Import), Mumbai
Respondent
And
Commissioner of Customs (Import), Mumbai
VS
Samson Maritime Ltd.
:
:
:
Appellant
Respondent
Appearance
Shri Sujay Kantawala, Advocate for Appellant
Shri D.K.Sinha, Assistant Commissioner (A.R) for respondent
CORAM:
Mr. P.S.Pruthi, Member (Technical)
Mr. Ramesh Nair, Member (Judicial)
Date of hearing : 10/08/2015
Date of Pronouncement : 8/10/2015
ORDER NO.
Per : P.S. Pruthi
This appeal is directed against Order-in-Original No. 91/2014/CAC/CC(I)/AB/Gr. VB dated 22/8/2014.
2. The Tug Ocean Garnet was imported and brought into India on contract with Hardy Exploration and Production India Ltd. in November 1997 at Chennai Port. No import duty was payable on ships imported during that period. The Tug was purchased by the appellant on 18/3/1998 and was thereafter regularly used in coastal runs in India and the port clearances were being granted for such coastal runs on numerous occasions over a period of 14 years. At the time of initial import in 1997, Customs duty on bunkers and consumables was paid by filing the Bill of Entry giving details thereof as mentioned in the IGM (IGM No. 1295/97 dated 5/11/1997 and Rotation No. 1324/97) for dutiable items. Customs authorities did not insist on filing of Bill of Entry at that time. By Notification No. 17/2001 dated 1/3/2001 complete exemption from payment of Custom duty was withdrawn and duty of 5% was introduced.
2.1 The Tug was abruptly seized on 20/12/2011 by Customs Preventive. However it was allowed provisional release under Section 110A of the Customs Act on the condition of filing the Bill of Entry, submission of bond of 100% assessable value which was taken to be the value of Tug in 1997, Bank guarantee of 10% of assessable value and payment of appropriate duty at 15.14% on the assessable value. The appellant approached the Honble Mumbai High Court, who vide order dated 13/2/2014 directed Customs to allow the release without payment of Customs duty and on execution of Bank Guarantee of Rs. 10 Lakhs and a Bond. In its order the High Court observed that as the Custom Authorities have permitted the use of the vessel all these years as imported goods Custom authorities are not justified in abruptly seizing the vessel in question The Revenue is not justified in demanding duty for provisional release of the vessel,prima facie it is not undisputed that on the date of initial import on all these ocean going vessels there was total exemption on payment of duty. In adjudication the Commissioner confiscated the vessel with option to redeem on payment of redemption fine of Rs. 55 lakhs. He confirmed the demand of duty of Rs. 92,46,015/- under Section 125(2). He also imposed penalty of Rs. 18 Lakhs on the appellant under Section 112(a), penalty of Rs. 5 Lakhs on the Dy.Managing Director under Section 112(a)/(b) and under Section 114 AA and Rs. 5 lakhs on the Shipping Agent under Section 112(a). The appellant and its Director are in appeal against this order of the Commissioner.
2A. Revenue has also filed appeal against the order of Commissioner on the following grounds:
(i) Duty ought to have been charged under Section 28(4) of the Customs Act and not under Section 125(2) which is only an enabling provision for recovery of duty. The importer willfully suppressed the fact that the vessel was imported as goods for home consumption.
(ii) Therefore penalty equal to the duty amount ought to have been imposed in terms of Section 114A of the Act.
(iii) The vessel was liable to confiscation under Section 111(j) also because the same was removed from Customs area without the permission of the proper officer.
3. Heard both sides.
4. The Ld. Counsel for the appellant drew our attention to the observations of the High Court mentioned in the para above and stated that it is preposterous to levy import duty on the vessel which was imported fourteen years ago when the same was exempted from duty. The fact is that the IGM was filed declaring the stores in 1997 which was well within the knowledge of the Customs when no duty was payable on the vessel at that time and vessel was given Customs clearances for movement inward and outward from the Indian Ports all these years. The Tug become part of the land mass of the country and was regularly in and out of the Custom barriers, therefore duty cannot be demanded now for the mere technical failure of not filing Bill of Entry at the time of initial import. He relied on PRIYANKA OVERSEAS PVT. LTD.Versus UNION OF INDIA[1991(51) ELT 185 (SC)] in which the Honble Apex Court laid down the principle of law in such cases.
4.1 Ld. Counsel further stated that value of the vessel is taken to be that of 1997 i.e. Rs. 4,81,66,900/- whereas the surveyor by report dated 20/2/2012 opined the current value of Tug as Rs.1,20,00,000/-. Further the adjudicating authority confiscated the Tug under Section 111(f) and imposed redemption fine of Rs. 5 lakhs without determining margin of profit which is mandatory under Section 125. He also confirmed duty of Rs. 92,46,015/- under Section 125(2) alongwith appropriate interest which was not the proposal in the show cause notice. He placed reliance placed on the observations of the Honble High Court in judgment dated 11/1/2012 in Writ Petition No. 2921/2011 filed by Seamac Ltd. holding that for securing provisional release of the vessel under Section 110(A), Revenue would not be justified in taking original value of the vessel. Reliance is also placed on the High Court judgment in Writ Petition No. 104/2012 dated 13/2/2012 in the case of Great Offshore Ltd. in which the High Court, while deciding the case of provisional release, observed that since the seized vessel was imported prior to 2000, prima facie, custom duty on the said vessel were not payable. Ld. Counsel also relied upon Tribunal order A/1110/14/CSTB/C-1 dated 2/7/2014 in the case of Samsung Maritime Ltd. which order not considered in the present case. Reliance is also placed on the recent judgment of the Tribunal in the case of Shipping Corporation of India vide order A/1709/14/CSTB/C-I dated 5/11/2014 in which it was held that the vessel brought for the first time into India at Port Sikka was not required to file IGM or Bill of Entry in terms of Circular 16/2012 dated 13/6/2012; further it was held that the Commissioner of Customs at Mumbai not having jurisdiction over Sikka Port could not issue show cause notice proposing confiscation as the act was committed beyond his jurisdiction.
5. Ld. A.R. appearing on behalf of Revenue reiterates the findings of the adjudication order. He emphasized when once the Bill of Entry is filed under Section 46 (in this case it was filed only at the time of provisional release), duty is mandatorily to be paid in terms of Section 15(1)(a) at the rate applicable on the date on which Bill of Entry is presented.
6. We have carefully gone through the facts of the case and submissions made by both sides.
6.1. The fact is that when the impugned vessel was imported 14 years ago in 1997, it was exempted from Customs duty and although IGM was filed in respect of stores when the vessel was imported at Chennai, no IGM was filed for the vessel as goods imported into India. Neither was any Bill of Entry filed for the vessel as goods.
6.2. The vessel was seized and as a precondition for provisional release, the owner was asked to file a Bill of Entry in 2012. The question which arises for our consideration is whether the vessel can be confiscated for non-filing of Bill of Entry in 1997 and whether duty can be demanded in 2012, the exemption having been withdrawn in 2000. It is emphasized by the Ld. Counsel that as a matter of general practice, when the vessels themselves were exempted from Customs duty, no IGM or Bill of Entry was filed declaring them as goods imported into the country. However, the adjudicating authority has pointed to the statutory requirement of filing IGM under Section 30 of the Customs Act. For convenience Section 30 is produced below.
SECTION 30. Delivery of import manifest or import report. -
(1) The person-in-charge of -
(i) a vessel; or carrying imported goods or 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 import manifest prior to the arrival of the vessel or the aircraft, as the case may be, and in the case of a vehicle, an import report within twelve hours after its arrival in the customs station, in the prescribed form and if the import manifest or the import report or any part thereof, is not delivered to the proper officer within the time specified in this sub-section and if the proper officer is satisfied that there was no sufficient cause for such delay, the person-in-charge or any other person referred to in this sub-section, who caused such delay, shall be liable to a penalty not exceeding fifty thousand rupees. The Commissioner also refers to the Import Manifest Vessels Regulations 1971(hereinafter referred as Regulations) which provide the format and procedure for filing the Import Manifest in respect of the imported goods. The finding is that if the vessel was brought as imported goods itself and not as a conveyance only, it should have been specifically mentioned in the IGM. This was not done; instead the IGM only declared the imported cargo, that is, the ship stores and fuel. In other words, the IGM showed the vessel as a conveyance carrying stores and fuel and not as goods. Goods is defined in Section 2(22) of the Customs Act to include
(a) Vessel, Aircraft and Vehicles;
(b) (c ) ..
Therefore, according to the Commissioner, it was incumbent upon the appellant to present a Bill of Entry in terms of Section 46 declaring the import of such vessel in the Bill of Entry as goods imported. Failure to do so, according to the Commissioner rendered the vessel liable to confiscation under Section 111(f) for contravention of Sections 32 & 34 of the Customs Act. Section 32 states that no imported goods required to be mentioned under the Regulations in an import manifest shall be unloaded at any Customs station unless they are specified in such manifest. Section 34 states that imported goods shall not be unloaded from any conveyance except under the supervision of the proper officer. We note that in the case of a vessel, the concept of unloading is not the same as the usual concept of unloading of goods from a vessel. The moment a vessel enters the port, and a Bill of Entry is filed for stores and fuel, which are assessed for duty purpose, it is clear that the vessel has entered the territorial waters and becomes chargeable to duty under Section 12 of the Customs Act. It is not disputed in the present case the Bill of Entry was filed for the stores and the fuel at the time of first import. We wanted to see a copy of the B/E to understand how the vessel was described-whether as a conveyance or as goods. However the Bill of Entry, being very old, could not be shown by either side to us. The fact remains that the vessel was converted to the Indian Flag in 1998 and was granted coastal runs between Indian Ports with the knowledge of Customs. Generally, we find that Customs board a vessel when it enters the port and therefore should have been aware of import of the vessel as goods. The fact that it did many coastal runs and called on various ports in the preceding 14 years itself shows that the Customs were aware that this vessel had been imported into India. After a gap of 14 years when duty has become imposable on import of a vessel, Revenues stand that since IGM/Bill of Entry was not filed in 1997 duty must be paid now is not reasonable.
6.3. As regards confiscation it may be noted that Section 111(f) states that the following goods shall be liable to confiscation ..(f) any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned. Even if the vessel is treated as goods, it was not liable to duty at the time of its import in 1997. Therefore, the vessel cannot be treated as dutiable goods. In the case of Associated Cement Companies Ltd. Vs. Commissioner of Customs 2001 (128) ELT 21 (S.C.) it was held that goods on which no duty is chargeable under the tariff or by way of exemption notification will not be regarded as dutiable goods. Therefore clearly Section 111(f) is not applicable and goods are not liable to confiscation. Contravention of Section 32 is not possible as there is no question of unloading a vessel. Therefore the finding that the vessel is liable for confiscation for violation of Section 32 is also not sustainable.
6.4. Revenue has cited Sections 46 & 15 holding that consequent to the order of Honble Bombay High Court granting provisional release, the Bill of Entry was filed under Section 46 and the rate of duty on the date of filing of Bill of Entry would be applicable for assessment and determination of duty in terms of Section 15. And because the Bill of Entry was filed on 22.3.2012 duty is payable because vessels were leviable to duty on this date. We find that Board issued a Circular (supra) dated 13.6.2012 to remove confusion on the subject and explain the procedures for import of Indian flag vessels and filing of IGM/Bill of Entry. In paras 3.1 & 3.3, while enumerating categories of vessels, it requires that for vessels entering into India for the first time on arrival in the country for registration as Indian Flag vessel, the Customs declarations such as IGM/Bill of Entry are required to be filed. It also requires that in the case of vessels which are intended for conversion from foreign run to coastal run the importer is bound to file fresh Bill of Entry at the time of its conversion and applicable duty is to be paid. Reading the Circular in the proper context clearly shows that the IGM & Bill of Entry were required at the time of first arrival/conversion. In the present case, the vessel admittedly was imported in 1997 and remained on coastal runs thereafter. Board Circular does not require that vessels imported earlier and used in coastal runs should file Bill of Entry now. Instead of acting on Board instructions issued for streamlining the procedures,, the Customs showed misdirected enthusiasm in asking vessels which were imported when there was no duty , to pay duty now. Such over enthusiasm leads to harassment. In our view duty is not required to be paid. Accordingly, the violation of Section 111(j) and consequent confiscation does not arise.
6.5. In the present case, Import, which in terms of the definition under Section 2(23) means bringing into India from a place outside India, had got completed in 1997. Customs duty is charged under Section 12 of the Customs Act when the goods are imported into India. When by general practice the IGM/Bill of Entry was not filed for vessel imported into India when the duty was Nil, the proposition that duty may be levied after 14 years when the Bill of Entry was got filed would lead to a anachronistic situation. Let us take the case of two ships imported at the same time when there was no duty. Under one case a Bill of Entry may have been filed and in the other case a Bill of Entry is filed after 14 years when the vessel became dutiable. Charging duty from the latter when both were imported at the same time would be a most unreasonable proposition. More so when Customs never insisted on filing a Bill of Entry for the import of the vessel and Customs continued to give clearance for coastal runs. For these reasons we hold that there was no deliberate suppression of facts to invoke the provisions of Section 28(4) for demanding duty.
6.6. We have been shown the case of another vessel named Ocean Ruby imported in 1993 when duty was nil, the import of the vessel was regularized in 2003 on the Bill of Entry filed for import of stores simply by making an additional entry on the Bill of Entry to the effect that the vessel is also imported at nil; rate of duty. The matter attained finality by passing of CESTAT Order A/1190/2014/CSTB/C-I dt. 2.7.2014.
We also note that the Indian National Shipowners Association made a Reference No. CEO/145/2011 dt. October 12, 2011 to CBEC giving a list of about 200 vessels out of which more than 100 were imported before 2001 when duty was introduced. It was made clear that Bill of Entry were not filed in these cases. The Association requested for condoning the delay in filing of the Bill of Entry as a procedural delay. It appears that action has not been taken in respect of all the vessels and there is discrimination against the appellant. This indicates that there is no certainty in the legality of the action taken against the appellant.
Therefore in the circumstances the Customs cannot demand duty in the present case.
6.7. It would be relevant to note the decision of the Mumbai High Court in the case of Great Offshore Ltd. (supra). The Honble Apex Court observed that In the case of UOI v. V.M. Salgaonkar Bros. (P) Ltd. reported in AIR 1998 SC 1367 = 1998 (99) E.L.T. 3 (S.C.), the dispute was whether the customs authorities were justified in holding that on importation of transhippers the importer was liable to file B/E and whether the transhippers are ocean going vessels exempt from payment of customs under the then prevailing exemption notification. The Apex Court accepted the contention of the petitioners therein and held that the transhippers were ocean going vessels covered by the Exemption Notification and disposed of the appeal without recording any specific finding as to whether it was mandatory to file B/E on importation of the ocean going vessels.. In our opinion, in the facts of the present case, the demand for duty even before adjudication is unwarranted. The fact that at the time of initial import as also at every time the vessels were taken out and brought back to India, the petitioners have complied with all the Customs formalities save and except the filing of the B/E at the time of initial import. It is also not in dispute that at the relevant time the Customs authorities were also under the belief that it is not necessary to file B/E, where there is total exemption.
In the case of Seamac Limited & Anr. (supra) the Honble High Court observed that On this amount, the duty liability assessed provisionally works out to Rs.12.77 crores. As regards the value of the vessel ofRs.53.55 crores, prima facie, at this stage, Counsel appearing on behalf of the Revenue does not dispute the position that the vessel, when it was imported in 1988 was not subject to the levy of customs duty..Prima facie, at this stage, there appears to be no dispute about the fact that at the relevant time when the vessel was imported, a notification exempting the vessel from customs duty held the field so long as the vessel was not imported for the purpose of breaking. In that view of the matter, for the purposes of securing the provisional release of the vessel under Section 110A, the Revenue would not be justified in including the value of the vessel of Rs.53.55 crores. In the appellants own case at the time of seizure the Honble High Court of Mumbai observed that If the duty was not payable on the date of import and customs authorities have permitted use of the vessels all these years as imported goods, in our opinion, the customs authorities are not justified in abruptly seizing the vessels in question. ..Even in the present case, in our opinion, the revenue is not justified in demanding the duty for provisional release of the vessels when, prima facie, it is not in dispute that on the date of initial import of these ocean going vessels, there was total exemption from payment of duty.
We are aware that in the above judgments the Honble High Court did not express a final view in the matter. However for reasons given in paras preceding, demanding duty at this stage for a mere technical omission that occurred 14 years ago, is not sustainable.
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.
8. Having set aside the confiscation and holding that duty is not payable, the penalties are also set aside accordingly.
In view of the above, the impugned order is set aside. Partys Appeals are allowed and Revenue appeal is dismissed.
(Pronounced in court on 8/10/2015) (Ramesh Nair) Member (Judicial) (P.S.Pruthi) Member (Technical) SM.
16Appeal No. C/89941, 89940, 90075/2014-Mum