Custom, Excise & Service Tax Tribunal
Cc, Visakhapatnam-Cus vs Oia No. 14/2007 (V) Ch Dt. 03.08.2007 on 30 November, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Bench SMB
Court I
Sl. No.
Appeal No.
Appellant
Respondent
Impugned Order
1. C/755/2007 Pragathi Sea Foods Ltd CC, Visakhapatnam-Cus OIA No. 14/2007 (V) CH dt. 03.08.2007
2. C/756/2007 G.G.Tilak CC, Visakhapatnam-Cus OIA No. 14/2007 (V) CH dt. 03.08.2007
3. C/757/2007 Navodaya Sea Foods Ltd., CC, Visakhapatnam OIA No. 15/2007 (V) CH dt. 03.08.2007
4. C/758/2007 Sri. G.G.Tilak CC, Visakhapatnam-Cus OIA No. 15/2007 (V) CH dt. 03.08.2007
5. C/759/2007 Sri Raghavendra Associates CC, Visakhapatnam-Cus OIA No. 16/2007 (V) CH dt. 03.08.2007
6. C/760/2007 G.G. Tilak CC, Visakhapatnam-Cus OIA No. 16/2007 (V) CH dt. 03.08.2007
7. C/761/2007 Y.G.K.Murthy CC & ST, Visakhapatnam-Cus OIA No. 17/2007 (V) CH dt. 03.08.2007
8. C/762/2007 Gopal Krishna Enterprises CC, Visakhapatnam-IV OIA No. 18/2007 (V) CH dt. 03.08.2007
9. C/763/2007 Y.G.K.Murthy CC & ST, Visakhapatnam-Cus OIA No. 18/2007 (V) CH dt. 03.08.2007
10. C/764/2007 Gopal Krishna Associates CC & ST, Visakhapatnam-Cus OIA No. 19/2007 (V) CH dt. 03.08.2007
11. C/765/2007 Y.G.K.Murthy CC & ST-Visakhapatnam-Cus OIA No. 19/2007 (V) CH dt. 03.08.2007
12. C/766/2007 Fatima Seafoods Managing Partner Capt S Sayeed CC & ST, Visakhapatnam-Cus OIA No. 22/2007 (V) CH dt. 03.08.2007
13. C/767/2007 Managing Partner, Capt. S. Sayeed CC & ST, Visakhapatnam-Cus OIA No. 22/2007 (V) CH dt. 03.08.2007
14. C/769/2007 Sri Nandini Sea Foods Partner Shri M. Shetty CC & ST, Visakhapatnam-Cus OIA No. 24/2007 (V) CH dt. 03.08.2007
15. C/770/2007 Shri M Shetty Partner M/s. Sri Nandini Sea Foods CCE, C & ST, Visakhapatnam-i OIA No. 24/2007 (V) CH dt. 03.08.2007
16. C/771/2007 Victory Marine Exports CC & ST, Visakhapatnam-Cus OIA No. 25/2007(V) CH dt. 03.08.2007
17. C/772/2007 Shri Thiagarajn Sekhar M/s. Victory Marine Exports CC & ST, Visakhapatnam-Cus OIA No. 25/2007(V) CH dt. 03.08.2007
18. C/773/2007 Zeenath Se Foods CC & ST, Visakhapatnam-Cus OIA No. 26/2007 (V) CH dt.03.08.2007
19. C/ 774/2007 Balaji Exports CC & ST, Visakhapatnam-Cus OIA No. 27/2007 (V) CH dt. 03.08.2007
20. C/775/2007 Susi Seafoods (P) Ltd., CC & ST, Visakhapatnam-Cus OIA No. 28 & 29/2007 (V) CH dt. 03.08.2007
21. C/776/2007 T.M. Chowdhury, Susi Seafoods (P) Ltd., CC, Visakhapatnam-Cus OIA No. 28 & 29/2007 (V) CH dt. 03.08.2007
22. C/777/2007 D. Babu Rao, Susi Sea Foods CC, Visakhapatnam-Cus OIA No. 28 & 29/2007 (V) CH dt. 03.08.2007
23. C/778/2007 Kaveri Fisheries CC & ST, Visakhapatnam-Cus OIA No. 30/2007(V) CH dt.03.08.2007
24. C/779/2007 Shri Sahok Karkera M/s. Kaveri Fishers CC, Visakhapatnam-Cus OIA No.30/2007 (V) CH dt. 03.08.2007
25. C/780/2007 Shri D. Babu Ro Ms Jagannadh Associates CC & ST, Visakhapatnam-Cus OIA No. 20/2007 (V) CH dt. 03.08.2007
26. C/781/2007 Dwaraka Sea Foods CC & ST, Visakhapatnam-Cus OIA No. 21/2007 (V) CH dt. 03.08.2007
27. C/782/2007 B.G.K. Murthy M. Partner M/s. Dwaraka Sea Foods CC & ST, Visakhapatnam-Cus OIA No. 21/2007 (V) CH dt. 03.08.2007
28. C/1687/2010 CC & ST, Visakhapatnam- Cus Anzara Marines OIA No. 10/2010 (V) CH dt. 08.04.2010
29. C/1688/2010 CC & ST, Visakhapatnam- Cus Abdul Rasheed OIA No. 10/2010 (V) CH dt. 08.04.2010
30. C/1689/2010 CC & ST, Visakhapatnam- Cus Victory Marine Export Pvt. Ltd., OIA No. 07/2010 (V) CH dt. 12.03.2010
31. C/1690/2010 CC & ST, Visakhapatnam- Cus T. Sekhar Magaging, Victory Marine Exports OIA No. 07/2010 (V) CH dt. 12.03.2010 For approval and signature:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial)
1.
Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordship wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
Appearance Shri. V.M. Doiphode, Advocate for the Appellant. Shri. Nagraj Naik & Shri. Arun Kumar, Deputy Commissioners (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of hearing: 17/10/2016 03/11/2016 29/11/2016 Date of decision: ...
FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The issue involved in these appeals being the same, they are disposed by this common order. In the above appeals, some are main appellants and others are partners/directors of the main appellants who are owners of Fishing Trawlers. The appeals Nos. C/761 to 767, 769,771 to 782/2007 were heard on 17.10.2016 and appeals Nos. C/755 to 760, 1687,1688,1689,1690/2010 were heard on 03.11.2016 and appeal No. C/770/2007 was heard on 29.11.2016. The appeal Nos. 1678/2010 to 1690/2010 are filed by department against the order passed by Commissioner (Appeals) who set aside the duty demand, interest and penalty. The parties are referred to as Assessee and department hereafter for convenience.
2. The brief facts as put forward by Assessee is as under:
a) The main Assessee had entered into Hire Agreement for deployment of trawlers as Chase Boat in connection with Oil exploration activities being carried out by M/s. ONGC Ltd., and M/s. Reliance Industries Ltd. The Assessee were issued Fishing Pass and NOC from Customs for getting duty free mid-sea bunkers under section 87 of the Customs Act, 1962. The mid-sea bunkering facility was granted by the Ministry of Food Processing Industries to the Fishing Trawlers as an incentive to encourage and develop the fishing industry. The Assessee were also granted the security clearance by the Naval authorities for deploying the trawler in the survey/environmental study operations. The letter from Ministry of shipping, road transport and high ways Department clarified that the services like rescue, co-ordination support in line with the fishing activity need not be considered as un-connected activity to fishing. Visakhapatnam Customs on gathering intelligence that some local fishing trawlers-vessels which are availing duty free bunkers were engaged in seismic survey/environmental study operations conducted by ONGC and Reliance Industries Ltd., conducted investigations and issued Show Cause Notices proposing confiscation of bunker quantity under section 111(d) and 111(o) of the Customs Act, 1962, demanding customs duty under section 28(1), interest under section 28AB and imposition of penalty under section 117/114A and 112(a) of the said Act on the following main grounds:
i) Duty free bunkers for fishing purposes was diverted for use in oil exploration activity.
ii) Fishing trawlers were deployed as chase boat in connection with oil exploration activities conducted by M/s. ONGC and M/s. Reliance Industries Ltd., the Ministry of External Affairs vide Notification dated. 07.02.2002 has extended the jurisdiction of the Customs Act, 1962, Customs Tariff Act, 1975 to the whole of the Exclusive Economic Zone and Continental Shelf of India for the purpose of extraction of mineral oil and supply of goods for such activities.
iii) As per the CBEC Circular No. 22/2002-Cus. dated. 23.04.2002 bringing of any goods from any other country to any place in EEZ or continental shelf of India in connection with any activity related to extraction or production of mineral oils, shall be treated as import under the Customs Act, 1962 and would be charged to duty accordingly.
iv) By diverting the mid-sea duty free bunkers by reasons of collusion or willful mis-statement or suppression of facts, extended period is invokable and mid-sea duty free bunkers received by fishing trawlers and utilized in oil exploration activities shall be considered to have been improperly imported into India in contravention of Section 11 of the Customs Act, 1962 and therefore the quantity of mid-sea duty free bunkers are liable for confiscation under section 111(d) and 111(o) of the said Act.
3. After due process of law, the original authority confirmed the duty demand along with interest and imposed penalties. In appeal, the Commissioner (Appeals) confirmed the duty demand along with interest and penalties, but however, reduced the penalty imposed on individuals. Hence the assessee are now before the Tribunal.
4. The Commissioner (Appeals) in impugned order in appeals Nos. 1687/2010 to 1690/2010 set aside the duty demand, interest and penalty holding that the fishing vessels would fall under the definition of foreign going vessel or aircraft as defined under Section 2(21) (ii) of the Customs Act, 1962. Being aggrieved, the department has filed the appeals.
5. On behalf of the Assessee, the Ld. Counsel Shri. V.M. Doiphode submitted the following main arguments:
i) The officers of Customs, are appointed vide Notification No.14/2002-Cus (NT) dated. 07.03.2002. At Sr. No. 16, the Commissioner of Customs, Visakhapatnam is appointed Commissioner of Customs, Add. Commissioner, Jt. Commissioner or Dy. Commissioner only for the airport of Visakhapatnam, Visakhapatnam Special Economic zone and the area of special municipal corporation in the state of A.P. At Sr. No. 3, Commissioner of Customs (Gen.), Mumbai, Commissioner of Customs (Imports), Nhava Sheva, etc. are appointed as Commissioner of Customs for areas specifically including designated area in the Continental Shelf of India and Exclusive Economic Zone (EEZ) and declared by the Govt. of India form time to time. Thus, the Customs officers of Visakhapatnam were not proper officers for the area of Continental Shelf of India and Exclusive Economic Zone and consequently had no jurisdiction to issue Show Cause Notice or confirm the demand and impose penalty in respect of consumption of mid-sea bunkers obtained by the Assessees in Continental Shelf of India and Exclusive Economic Zone area.
ii) The issue of jurisdiction is squarely covered by the Honorable Tribunal decision in the case of Sagarika Vs. Commissioner of Customs, Visakhapatnam reported in 2010 (261) ELT 825 (Tri-Bang). In Para 4.1 the Tribunal following the judgment of Nobel Asset Company Ltd. [2006 (2005) ELT 901 (Tri.)] held that the jurisdiction of Commissioner of Customs, Visakhapatnam does not include EEZ. Therefore, the Jt. Commissioner of Customs could not have demanded duty on bunkers received by Trawlers in Continental Shelf of India and EEZ.
iii) The Assessee/trawlers were not directly or indirectly connected with the prospecting for extraction or production of mineral oils in the Continental Shelf of India or the Exclusive Economic Zone of India. Such activities are conducted only by specially designed seismic vessels which are fitted with specialized equipments for the said survey. Such vessel will carry suitable scientists and lab technicians. Assessee vessel is a mere fishing boat fitted with fishing gear meant for trawler and this is primarily doing only fishing work and therefore the provisions of Circular No. SO/189 (E) dated. 07.02.2002 applying to activity of oil exploration will not apply and benefit of Section 87 would be applicable.
iv) Indian navy and Ministry of agriculture had given clearance for undertaking activity as chase boat. Ministry of Shipping, Road Transport and Highways Department vide letter dated. 20. 09.2005 had clarified that fishing trawlers are permitted to undertake the activity such as rescue, co-ordination support in line with the fishing activity and therefore the activity undertaken by the fishing trawlers is in line with fishing activity and they had rightly availed the benefit of duty free bunkers as stores under section 87 of the Customs Act, 1962.
v) The Ld. Commissioner erred in relying upon the Honorable Bombay High Court Judgment in the case of Pride Foramer Vs. Union of India-AIR 2001 Bombay 332 as that case concerns supply of imported spares or goods or equipment to the rigs by the ship and in that case the ship was employed for the transshipment and therefore not a foreign going vessel.
vi) The Assessee had submitted the copies of Log Books and Advice Books to the Customs in support of their claim that simultaneously during the agreement period apart from chase boat they have undertaken fishing. There is no evidence that the fishing trawlers were not used for fishing activity.
vii) All the demands are time barred having issued beyond the period of 6 months as Assessee had undertaken the activity with proper permission from Indian Navy and Department of Agriculture and Assessee were under bonafide belief that as they are also simultaneously doing fishing while working as chase boat. Assessee had also purchased diesel oil on payment of duty in addition to taking diesel without payment of duty and therefore they had bonafide belief that they are entitled for benefit under section 87 of the Customs Act, 1962.
viii) It would be seen from the chart produced by them that procuring mid-sea bunkering is much prior to the engagement of fishing trawlers as chase boats. The Assessee have also purchased diesel oil on payment of duty from the outlets of land and therefore it can never be said that duty free bunkers which were procured almost two months prior to engagement of fishing work were used while working as chase boat.
6. The Ld. AR, Shri. Nagraj Naik and Shri. Arun Kumar appearing for the department reiterated the findings in the impugned order and also the grounds stated in the appeals filed by department. They strongly relied upon the judgment rendered in Pride Foramer Vs. UOI [2002 (148) ELT 19 (Bom)] and the case of Aban Loyd Chiles Offshore Ltd., Vs. UOI [2008 (227) ELT 24 (S.C.)]. It was submitted that Commissioner(Appeals) has failed to take note of the Apex Court observations in regard to the definition of foreign going vessel as rendered in the case of M/s. Aban Loyd Chiles Offshore Ltd., [2008 (227) ELT 24 (S.C.)]. That Commissioner (Appeals) erred in holding that the impugned vessels are foreign going vessels, and are eligible for duty free stores under Section 87 of Customs Act.
7. I have heard both sides.
8. The foremost contention raised by the counsel for assessee is that the Customs officers of Visakhapatnam were not proper officers for the area of Continental Shelf of India and Exclusive Economic Zone and consequently had no jurisdiction to issue the show cause notice or confirm the demand or impose penalties. The Ld. Counsel relies on the judgment passed in the case of Sagarika Sea Crafts Ltd., Vs. CC, Visakhapatnam [2010 (261) ELT 825 (Tri. Bang.)]. The Co-ordinate Bench of the Tribunal in the said case of Sagarika Sea Crafts Ltd., has analyzed the issue of jurisdiction and has held that the Customs, Visakhapatnam has no jurisdiction and therefore could not have demanded duty on bunkers received by vessels plying in the EEZ beyond territorial waters off the coast in his jurisdiction. The facts of Sagarika Sea Crafts case are identical to the facts of the present case. The relevant paragraph is reproduced as under:
We find that the Commissioner held that the EEZ was part of Indian territory and the Act applied as regards the activity of petroleum exploration/production and therefore fuel consumed in connection with such activities was import into India and duty was chargeable. In holding this view, the Commissioner relied on the judgment of the Apex Court in M/s. Aban Loyd Chiles Offshore Ltd. case (supra). The Commissioner held that the liability to duty on the impugned fuel arose at the time of its consumption during the operations other than fishing, activities in the EEZ. We find from the decision of the Tribunal in Noble Asset Company Ltd. case (supra) that the Commissioner of Customs was not competent to exercise jurisdiction over regions not specified in the relevant notification appointing the Commissioner. The jurisdiction of the Commissioner was entire area of Visakhapatnam Port Trust, Airport, municipal limits of Visakhapatnam, Visakhapatnam SEZ and Gangavaram port. The jurisdiction does not include the EEZ. Therefore, the Commissioner could not have demanded duty on bunkers received by vessels plying in the EEZ beyond territorial waters off the coast in his jurisdiction. However, we hold that the subject bunkers were not entitled to the exemption under Sl. No. l & 24 of List 12 of Notification No. 21/2002 in the absence of Essentiality Certificate issued by the DGHC covering them as prescribed in the notification.
9. The Tribunal in the above case has distinguished the judgment in M/s. Aban Loyd Chiles Offshore Ltd., 2008 (227) ELT 24 (S.C.) relied by department, where the judgment rendered by Honorable High Court of Bombay in Pride Foramer Vs. UOI 2008 (227) ELT 24 (S.C.) was approved. The issue of jurisdiction is discussed in the case of Noble Asset Co. Ltd., Vs. CC, (Preventive) Mumbai 2006 (205) ELT 901 (Tri.-Mum) which was relied by the Tribunal in Sagarika Sea Crafts Ltd. The judgment in Nobel Asset Co. Ltd., was affirmed by Honorable Bombay High Court reported in [2008 (230) ELT 22 (Bom.)]. The department has not brought to my notice that the judgment in Sagarika Sea Crafts was challenged by department before higher authority. Following the decision in Sagarika Sea Crafts [2010 (261) ELT 825 (Tri. Bang)], I am of the view that facts being identical the Customs Authorities of Visakhapatnam has no jurisdiction during the relevant period to issue show cause notice and confirm demand or impose penalties.
10. The Commissioner (Appeals) in the orders impugned in appeal Nos. 1687 to 1690 has held that the fishing trawlers are foreign ongoing vessel and therefore the duty demand is not sustainable. The relevant portion is reproduced as below:
In view of the same, I hold that the extended areas of application of Customs Act, 1962 and the Customs Tariff Act, 1975 will have no bearing on the definition of a foreign going vessel or aircraft in as much as there has been no change in the definition of the territorial waters of India as defined in section 3(2) of the Territorial Waters Continental shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976. As per Section 2(21)(ii) of the Customs Act, 1962, Foreign going vessel or aircraft includes any vessel engaged in fishing or any other operations outside the territorial water of India. As per section 87 of the Customs Act, 1962, Imported stores may be consumed on board a foreign going vessel or aircraft-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. In view of the same, I find that the vessels of the appellants in question, while in operation on high-seas i.e. outside the territorial waters of India, should be reckoned as foreign going vessel and for reasons discussed herein above, I hold that the provisions of Section 87 of the Customs Act, 1962 have to be extended, to the bunker in question, consumed onboard the vessels of the appellants, while acting as chase boas, beyond the territorial waters of India. It is for this very reason alone, I find that the order of the Additional Commissioner is liable to be set aside. In view of the same, I do not find it necessary to go into the merits of other substantive issues raised by the appellants, including that of jurisdiction of the adjudicating authority.
11. From the foregoing, the impugned orders in the appeals filed by assessee are set aside. The appeals filed by Assessee are allowed with consequential reliefs, if any. The appeals filed by department are consequently dismissed.
(Pronounced in open court on..) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Lakshmi.
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