Calcutta High Court
South India Corporation (Agencies) ... vs Collector Of Customs And Ors. on 11 July, 1986
Equivalent citations: AIR1989CAL10, 1987(11)ECC372, 1987(11)ECR38(CALCUTTA), 1987(30)ELT100(CAL), AIR 1989 CALCUTTA 10, (1987) 11 ECC 372, (1987) 11 ECR 38, (1987) 30 ELT 100, (1986) 2 CAL HN 257
ORDER Sudhir Ranjan Roy, J.
1. The instant application under Article 226 of the Constitution raises a short but interesting point, namely, whether smaller vessels or daughter vessels carrying cargo to the port from bigger or mother vessels bringing goods from foreign ports, which on account of their size, weight etc., cannot enter the port and remain berthed outside but within Indian territorial waters, fall within the definition of -- "Foreign going vessel" so as to attract the provision of Section 87 of the Customs Act, 1962.
2. The petitioner is a Shipping Agent and has been and is still acting as the local agent of M/s. A. Halcoussis Shipping Ltd., a foreign company incorporated in the United Kingdom, which at all material times owned a motor tanker, namely, M.T. "PERICIES HALCOUSSIS."
3. By and under a Charter party Agreement dated 24th Sept. 1981 between the said Shipping Company and the President of Union of India, the said vessel was to carry bulk cargo of wheat from ports in U.S. Gulf at the Carterer's option and the said Charter party Agreement also provides, inter alia that the cargo is to be delivered at one or two safe ports or anchorages East Coast of India through its lightening vessel or one or two safe ports/anchorages West Coast of India through its lightening vessel or entire delivery at Calcutta through its lightening vessel at Charterer's option declarable on completion of the loading of mother vessel.
4. The Charterer opted for delivery of the entire cargo at the port of Calcutta which necessarily required engagement of lightening vessel to carry the cargo from Saugor Roads to the Calcutta Port. In contemplation of engagement of the lightening vessels, the petitioner as the local agent of the said mother vessel by a letter dated Dec. 21, 1981 wrote to the respondent No. 2 and/or the respondents for permission to discharge the cargo of wheat in bulk through daughter vessels, namely, M.V. "ANTILIA", M.V. "JALAPANKI", M.V. "JALA RAJAN" and M.V. "SWEDE SURPRISE". Such permission was granted to the petitioner.
5. The mother vessel arrived at Saugor Roads on or about Jan. 27, 1982 and during the period from Jan. 27, 1982 to Feb. 7, 1982 the cargo carried by the mother vessel was discharged into the port of Calcutta by transhipment on to the said four daughter vessels at Saugor Roads since the mother vessel could not approach or enter through the Hooghly River for discharge of cargo at the port of Calcutta.
6. On or about Feb. 21, 1986, the petitioner received a letter of demand for duty on stores from the respondent No. 2. By the said letter the respondent No. 2 alleged that a duty amounting to Rs. 44,107.16p. is leviable on the stores of one of the daughter vessels, namely. M.V. "SWEDE SURPRISE".
7. Thereafter by another letter dated April 18, 1986 the respondent No. 3 again called upon the petitioner to pay the said sum within three days from the date of receipt of the letter failing which enforcement of the guarantee given by the petitioner under Section 142 of the Customs Act, 1962 was threatened.
8. Subsequently, by another letter dated April 24, 1986 the respondent No. 3 intimated the petitioner that a sum of Rs. l,38,652.60p. has been assessed as leviable on the stores consumed by M.V. "JALA RAJAN" one of the four daughter vessels engaged in lightening cargo from the mother vessel.
9. According to the petitioner, the said daughter vessels were engaged with the permission of the Customs Authorities to carry the said bulk cargo from the mother vessels which is in the nature of transhipment of cargo carried from outside India to a port in India which was contemplated and expressly covered in the Charter Party Agreement. The transhipment of the bulk cargo from Saugor Roads to the Calcutta Port is nothing but completion of the contract of carriage of the said goods by the mother vessel inasmuch as the mother vessel could not approach the river Hoogly and was not able to discharge the cargo at the port of Calcutta.
10. It is further the case of the petitioner that under the Customs Act, 1962 coastal goods means goods other than imported goods transported in a vessel from one port of India to another, but in the instant case the goods were imported into India within the meaning of the Customs Act by having the goods into India from a place outside India. The Customs Act provides that imported stores may be consumed on board a foreign going vessel or aircraft without payment of duty to be consumed thereon as stores during the period such vessel or aircraft is a foreign going vessel or aircraft. The carriage of the goods by the said daughter vessels were merely a continuation of what the mother vessel was required to do and, as such, the said daughter vessels were foreign going vessels within the meaning of the Customs Act during the period for which the said cargo were carried by the said daughter vessels from the mother vessel to the port of Calcutta.
11. The respondents in the aforesaid circumstances are not entitled to levy any duty on the stores said to have been consumed by the said daughter vessels in course of carriage of the said cargo from the mother vessel. However, the Customs Authorities having insisted for payment of such duly, the petitioner moved this Court under Article 226 of the Constitution for the issue of a writ in the nature of Mandamus calling upon the respondents to cancel and/or rescind and/or withdraw the purported demands contained in the letters of the Customs Authorities dated Feb. 17, 1986, April 18, 1986 and April 24, 1986 being Annexures 'C', 'E' and 'F' to the writ petition and for certain other reliefs.
12. The respondents in their affidavit in opposition controverted all the material averments contained in the writ petition. According to the respondents, a 'foreign-going-vessel' within the meaning of Section 2(21) of the Customs Act means any vessel engaged in the carriage of goods or passengers between any port in India and any port outside India whether touching in intermediate port in India or not. In the instant case. M.T. "PERICIES HALCOUSSIS" is the foreign going vessel, described as the mother vessel. If for transhipment of goods from the said foreign going vessel to the Indian Port concerned, certain coastal vessels known as daughter vessels have to be requisitioned, they cannot be said to be 'foreign-going-vessels' within the meaning of the Customs Act as they do not carry goods from any Indian Port to a foreign port. That being so, the stores consumed by the said daughter vessels are not exempt from payment of duty Moreover, in terms of the Bonds executed by the petitioners in favours fo the Customs Authorities, the petitioner is liable to pay the amount of duty on the imported stores consumed on the said daughter vessels, which are merely coastal vessels and not 'foreign going vessesls'.
13. Before entering into the rival contentions of the parties, it may be useful to remember certain important facts which are not in dispute, namely, that the 'foreign-going vessels' M.T. "PERICIES HALCOUSSIS" carrying wheat from ports in U.S. Gulf arrived at Saugor Roads within the territorial waters of India and that the cargo was to be discharged at the port of Calcutta. It is also not in dispute that the mother vessel on account of its size, weight etc., could not enter the river Hoogly consequent to which the cargo had to be carried from the mother vessel to the Calcutta Port by four daughter vessels.
14. Section 87 of the Customs Act, 1962 provides that "any imported stores on board a vessel or aircraft (other than stores to which Section 90 applies) may, without payment of duty, be consumed thereon as stores during the period such vessel or aircraft is a "foreign going vessel' or aircraft."
15. "Foreign going vessels" has been defined in Section 2(21) of the Customs Act and according to the said definition "foreign going vessel or aricraft" 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."
16. It is, therefore, clear that in view of Section 87 of the Customs Act "imported stores on board a vessel or aircraft may, without payment of duty, be consumed thereon as stores during the period such vessels or aircraft is a foreign going vessel or aircraft."
17. The question, which, therefore, arises for consideration is whether the imported stores on board the daughter vessels could be consumed without payment of duty and answer to this question rests on the answer to another question, namely, whether such daughter vessels carrying cargo to a port from the mother vessel, which undoubtedly is a 'foreign going vessel', are also 'foreign going vessels' within the definition' of foreign going vessel' as given in Section 2(21) of the Customs Act, 1962.
18. According to the respondents, the daughter vessels enagaged in the instant case for discharging the cargo to the port of" Calcutta from the mother vessel berthed at Saugor Roads, could not be termed as foreign going vessels' since, they did not carry the cargo between any port or airport in India and any port or airport outside India. In fact, the daughter vessels carried the cargo from within the territorial waters of India to a port of India and, that being so, the imported stores on board the daughter vessels could not be consumed without payment of duty under Section 87 of the Customs Act.
19. In my view, however, this interpretation of the respondents does not appear to be correct.
20. There can be no dispute regarding the fact that the mother vessel which carried the cargo from foreign ports, could not discharge such cargo at the port of Calcutta since it could not enter the river Hooghly due to its size, weight etc. It was on account of this that some lightening vessels or daughter vessels had to be engaged for carrying the cargo from the mother vessels to the port of Calcutta from the place where the mother vessel was berthed on account of its inability to proceed further. And, that being so, the journey of the daughter vessels from the mother vessel berthed at Saugor Roads up to the port of Calcutta was nothing but the continuation of the journey of the mother vessel up to the Calcutta Port. That being so, the daughter vessels engaged in discharging cargo from the mother vessel to the Calcutta Port could very well be termed as foreign going vessels' within the meaning of Section 2(21) of the Customs Act.
21. As a matter of fact, the point is no longer res interga and is covered by the Bench decision of this Court in Turner Morrison & Co. Ltd. v. Assistant Collector of Customs for Exports/1976 Cal HN 538 : (1976 Tax LR 2108). There supertankers carrying massive quantities of wheat under P.L. 480 Aid, could not enter ports for landing the cargo directly. The said supertankers in such circumstances worked in the moorings outside and discharged the cargo into a number of small. vessels for carriage to the destination ports.
The cargo which the mother vessels carried was transferred within the territorial waters of India into the lightening vessels or daughter vessels and the daughter vessels were performing the duties of the mother vesseles. It was held that Section 2(21) of the Customs Act only prescribes that a vessel or aircraft engaged in carrying goods or passengers from a foreign port to an Indian Port would be considered 'foreign going vessel' or 'aircraft'. The provision does not contain a further condition that the entire length of the journey should be undertaken by only one vessel or aircraft. Therefore, where, on account of their size, weight etc. supertankers bringing goods from foreign ports remained berthed away from Indian ports but within the territorial waters and the cargo was brought to the ports by smaller vessels, the latter would also fall within the definition 'foreign going vessel' and that, therefore, stores consumed by them during the period they were so engaged, were not dutiable under Section 87 of the Customs Act.
22. The facts of the instant case are exactly identical with the case referred to above and the decision made therein also covers fully the question which is directly involved in the instant case.
23. Mr. Mitra, the learned Advocate representing the respondents, submitted that the Bench decision of this Court in Turner Morrison's case (1976 Tax LR 2108) (supra) was under appeal before the Supreme Court but could not give any further particulars. On instructions Mr. Mitra submitted that a Special Leave Petition was filed before the Supreme Court but its results were not known. It may be recalled that the Bench decision of this Court in Turner Morrison's case (supra) is of May, 1976. More than 10 years having elapsed since then it cannot ordinarily be presumed that the Special Leave Petition is still pending in the Supreme Court. In case the said Special Leave Petition was allowed and the appeal was admitted, the Customs Department would have been in a position to give further information regarding the course and/or fate of the said appeal. It may, therefore be held that no appeal is pending against the Bench decision of this court in Turner Morrison's case (supra) and even presuming that any such appeal is still pending the decision will have to be given its due weight until it is set aside or reversed in appeal.
24. Thus, in view of the Bench decision of this Court in Turner Morrison's case (supra) the stores consumed on board the daughter vessels during the period they were engaged in carrying goods from the mother vessel to the port of Calcutta, would be exempt from payment of Customs duty in view of the provisions of Section 87 of the Customs Act.
25. Mr. Mitra, the learned Advocate representing the respondents, in this connection, drew my attention to the Bond executed by the petitioner in favour of the Customs Authorities agreeing to pay the amount of duty on imported stores consumed on board the daughter vessels and contended that in that view of the matter the petitioner cannot now deny its liability to pay the duty. This contention, however, does not seem to have any merits in it since an agreement to pay the Customs duty can be of no consequences where under the Statute no such duty is payable. Here, as already seen, the daughter vessels being also foreign going vessels' as per the Bench decision of this Court, the stores consumed on board the said vessels during the relevant period were not chargeable to duty under Section 87 of the Customs Act. And that being so, merely on the basis of the Bonds executed by the petitioner in favour of the Customs Authorities, the petitioner cannot be made to pay the Customs duty which it is not liable to pay under the law. It may be recalled here that in Turner Morrison's case (1976 Tax LR 2108) (supra) the appellant gave a bank guarantee of Rs. 50,000/- as security for payment of duty on stores and fuel if levied by the Customs Authorities, but in spite of that it was held that the appellant was not liable to pay any Customs duty for the stores consumed on board the daughter vessels during the period they were engaged in carrying cargo from the mother vessel to the Indian Ports.
26. As a result, the writ application succeeds. The Rule issued be made absolute and the respondents are directed by the issue of a writ in the nature of Mandamus to cancel and/or rescind and/or withdraw the purported demands contained in the letters dated Feb. 17, 1986, April, 18, 1986 and April 24, 1986, which are Annexures 'C, 'E' and 'F' to the writ petition, forthwith. The respondents are also prohibited from proceeding with or further proceeding with the said impugned letters.
No order is made for costs.
Verbal prayer made by Mr. Mitra for stay of operation of this order is considered and rejected.