Custom, Excise & Service Tax Tribunal
Century Star Shipping Ltd vs Kolkata(Prev) on 3 November, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Customs Appeal No. 75066 of 2015
(Arising out of Order-in-Original No.01/CUS/CCP/WB/2014 dated:14.10.2014 passed by
Commissioner of Customs (Prev.)W.B.), Kolkata.
M/s. Century Star Shipping Ltd.
(4, Fairly Place, HMP House, 2nd Floor, Kolkata-700 001.)
...Appellant
VERSUS
Commissioner of Customs (Preventive), Kolkata
(Customs House, 15/1, Strand Road, Kolkata-700 001.)
...Respondent
WITH Customs Appeal No. 75062 of 2015 (Arising out of Order-in-Original No.01/CUS/CCP/WB/2014 dated:14.10.2014 passed by Commissioner of Customs (Prev.)W.B.), Kolkata. M/s. Babaji Shivram Clearing & Carriers (Circular Court, Block 48. 4th Floor, 8, A.J.C. Bose Road, Kol-700017.) ...Appellant VERSUS Commissioner of Customs (Preventive), Kolkata (Customs House, 15/1, Strand Road, Kolkata-700 001.) ...Respondent 2 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 AND Customs Appeal No. 75065 of 2015 (Arising out of Order-in-Original No.01/CUS/CCP/WB/2014 dated:14.10.2014 passed by Commissioner of Customs (Prev.)W.B.), Kolkata. M/s. B. Ghose & Co. Pvt. Ltd., (19/1, Camac Street, Kolkata-700 017.) ...Appellant VERSUS Commissioner of Customs (Preventive), Kolkata (Customs House, 15/1, Strand Road, Kolkata-700 001.) ...Respondent APPERANCE :
Present for the Appellant: Mr. Arijit Chakraborty & Mr. N. K. Chowdhury, both Advocate Present for the Respondent : Mr. Manish Mohan, Authorized Representative CORAM:
HON'BLE MR. P.K. CHOUDHARY MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON MEMBER (TECHNICAL) FINAL ORDER No...77435-77437/2023 DATE OF HEARING :08.09.2023 DATE OF PRONOUNCEMENT :03.11.2023 PER: RAJEEV TANDON The impugned appeals have been filed by the appellants against the Order in Original No. 01/CUS/CC(P)/WB-2014 dated 14.10.2014 passed by the learned Commissioner of Customs (Prev.) whereby he ordered confiscation of the dumb barge Century Star-3002 (without
3 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 1 self propulsion) under the provisions of the Customs Act 1962 and ordered redemption thereof on payment of redemption fine of Rs. 30,00,000/- (Rupees Thirty lakh only) in terms of Section 125(1) of the Act. Vide the said order it was further ordered that the tug Century Star-1 was liable for confiscation under Section 115 of the Customs Act, however as the same was not available for confiscation a redemption fine of Rs. 75,00,000/- (Rupees Seventy five lakh only) under Section 125(1) of the Act was imposed. The learned Commissioner also imposed penalty under Section 112 of the Act on the Master of the tug Century Star-1, M/s. Century Star Shipping Pvt. Ltd., M/s. Atlantic Shipping Pvt. Ltd., M/s. B. Ghose & Co. Pvt. Ltd. and M/s. Babaji Shivram Clearing & Carriers Pvt. Ltd.
2. The broad facts of the case are set out as under:
· During the course of investigations concerning unauthorized import of a cruise vessel Pandaw-IV, seized by the Officers of Customs on 01.06.2009 the officers cultivated information that the tug Century Star-1, which had towed vessel Pandaw-IV, had also towed a barge Century Star-3002, in November 2008 from Mayu River, Sittwe,
1. The Act.
4 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 Myanmar and that it had detached the same at Sagar Point/Sagar Road (a virtual jetty) on 09.11.2008. Subsequently on 21.11.2008, the tug Century Star-1 reached Kolkata Port. The IGM thereof filed by M/s.
Atlantic Shipping Pvt. Ltd. however, did not mention anything about the barge Century Star-3002.
· Investigations conducted by the department confirmed that M/s. Atlantic Shipping Pvt. Ltd. had handled the movement of the tug Century Star-1 in the month of October 2008, (after being appointed as agents by M/s. Babaji Shivram Clearing & Carriers Pvt. Ltd.). · M/s. Babaji Shivram Clearing & Carriers Pvt. Ltd., who were the Customs House Agents, informed that they had never chartered the vessel tug Century Star-1 and had no authority to file the IGM as they were not registered as a Steamer Agent at Kolkata and therefore they had outsourced the job to M/s. Atlantic Shipping Pvt. Ltd. and they had only done export and import clearance of the survey equipments, brought back by the tug that were earlier exported out of Kolkata. · M/s. Century Star Shipping Ltd. however informed that the tug Century Star-1 was chartered by M/s. Geo Star Surveys India Pvt. Ltd. for trip to Myanmar (Sittwe). The barge Century Star-3002 was tied at virtual jetty at Sagar Point and was detached, as towing was not allowed in the channel by the port authorities (owing to its size being huge-as recorded in the show cause notice). This condition for the barge to be kept at Sagar Virtual Jetty was also intimated to M/s. Atlantic Shipping Pvt. Ltd. as they were appointed as charterer's for the vessel.
5 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 · M/s. B. Ghose & Co. Pvt. Ltd. had informed that they were appointed merely as the Protecting Agents for the tug Century Star-1 and barge Century Star-3002 and that they had requisite permissions from Director (Marine), Kolkata Port Trust as well as M/s. Atlantic Shipping Company for acting as Inward Agents appointed by the charterer for the particular voyage. These facts were duly informed to the principals of M/s. Century Star Shipping Ltd., further adding that the barge Century Star 3002 was to be towed by tug Century Star-1 and accordingly permission for tie up of the barge Century Star-3002 at virtual jetty was obtained from Kolkata Port authorities.
3. The present order passed by the adjudication authority is in pursuance of the Tribunal's Final Order No. A/491-505/KOL/2012 dated 25.07.2012, remanding the matter to the adjudicating authority to re- examine the matter in the light of Tribunal's decision in the case of 2 Nobel Asset Co. Pvt. Ltd. Vs. CC Preventive , as upheld by the 3 Hon'ble Bombay High Court .
4. The facts are not much in dispute. It is an admitted position that the dumb barge Century Star-3002 was converted for coastal run vide order dated 20.10.2006, issued by the Deputy Commissioner of Customs, Paradip. The tug and the barge were grounded due to storm and the tug after being salvaged and repaired (in 2007) was engaged
2. 2006 (205) ELT 901 (T-Mumbai).
3. 2008 (203) ELT 22 Bom.
6 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 for carrying survey equipments to Myanmar (as per charter party agreement dated 20.10.2008). The tug Century Star-1, on its return voyage from Myanmar carried alongwith survey equipments, towed the barge Century Star 3002 (after being salvaged) and was tied at Sagar Virtual Jetty after obtaining permission from Director (Marines), Kolkata Port Trust. The barge was subsequently taken for repairs (March 2009) to the yard of Maeksin Shipping Co. Pvt. Ltd., Kakdwip, wherefrom it was seized in June 2009. It is on record that Customs Duty amounting to Rs. 6,78,284/- (Rupees Six lakh seventy eight thousand two hundred eighty four only) was paid vide T.R-6/GAR-7 Challan bearing No. 66 dated 30.11.2006 at the time of the conversion of the barge Century Star-3002, for coastal run, said to be paid towards duty on bunkers required to be consumed by tug Century Star
-1 and the barge Century Star-3002.
4.1. A snapshot of the factual matrix of the case is as under:
(i) (a) The barge and the tug were purchased from Singapore (at $ 661500 and $ 675000 respectively)-bearing the names KTS-3002 and KTS- Delta and the payment was made against invoice No. 189386 and invoice No. 189393 both dated 21.08.2006 vide L/C No. 0544001520106 (copies of invoices and letter of credit were enclosed with reply).
(b) The name of the barge and tug was changed to Century Star 3002 and Century Star-1 respectively.
(c) The barge was initially engaged by M/s. Electro Steel Casting Ltd. for coastal run. Permission for the same was granted by DG 7 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 Shipping, valid up to 24.12.2006. It was converted for coastal run by Deputy Commissioner, Paradip vide his order dated 20.10.2006.
(d) The tug and the barge were grounded due to storm and the tug after being salvaged and repaired in 2007, was engaged by M/s. Geo Star Surveys India Ltd., as per the Charter Party Agreement dated 20.10.2008 with M/s. Century Star Shipping Ltd., for carrying Survey Equipments to Myanmar.
(e) The tug Century Star-1, on its return voyage from Myanmar along with the survey equipment, towed the barge Century Star 3002, after being salvaged in 2008, and was tied at Sagar Virtual Jetty after obtaining requisite permission from Director (Marine), Kolkata Port Trust on 17.11.2008.
(f) The barge was taken for repair in March, 2009 to the yard of M/s. Maeksin Shipping Co. Pvt. Ltd., Kakdwip and seized by Customs authorities in June 2009.
(g) M/s. Babaji Shivram Clearing and Carriers Pvt. Ltd. were appointed as a Custom House Agent and M/s. Atlantic Shipping Ltd. as a Steamer Agent; who filed the IGM for the tug Century Star-1 only.
(h) The barge was under Charter Party Agreement and agents were engaged by the Charterer for discharge of Customs matters, who however had no knowledge about the filing of IGM.
8 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
(i) The said barge being a "Dumb Barge" had no self-propulsion. It thus required the services of a tug which towed the barge Century Star-3002 to its destination. It was therefore contended that the "Barge and Tug" comprised a single unit because without the tug, the barge becomes stationary and immobile and cannot move on its own.
(j) As barge is a type of vessel, used to carry goods/cargo for transportation from one place to another, after the said barge and tug were brought by Century Star Shipping Ltd., it got the job of transportation of carriage of cooking coal from Paradip to Haldia under the account of Electro Steel Casting Ltd. and in order to carry out this job, at Paradip port the barge and tug were converted into coastal run on 20.10.2006 and permission from the Deputy Commissioner of Customs, Paradip, pursuant to approval from DG, Shipping, Govt. of India, was obtained.
(k) The value of the barge as per the Fixed Asset Schedule - D of the Balance Sheet of Century Star Shipping Ltd. stood at Rs. 2,10,07,970/-(Rupees Two crore ten lakh seven thousand nine hundred seventy only).
(l) The barge and the tug after return from foreign port in 2007, encountered bad weather and storm near the waters of Myanmar where both ran aground. Efforts were made to salvage the two but only the tug could be salvaged and it proceeded to Kolkata to undergo immediate repairs. Upon completion of repair work, 9 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 M/s. Geo Star Surveys Pvt. Ltd. chartered the tug for carrying survey equipments from Kolkata to Myanmar and back to Kolkata.
(m) M/s. Babaji Shivram Clearing & Carriers were appointed by the Charterers-M/s. Geo Star Surveys Pvt. Ltd., as Clearing and Steamer Agent.
(n) M/s. Babaji Shivram Clearing & Carriers being the Custom House Agent could very well undertake outward and inward clearance of the cargo, but in order to do so for the tug they required license to act as a Steamer Agent which they did not possess, they therefore appointed M/s. Atlantic Shipping Co. Ltd. to do the Outward/Inward clearance of the tug.
(o) The tug proceeded to Myanmar with the survey equipments to undertake survey in terms of the Charter Party Agreement with M/s. Geo Star Surveys India Ltd,. Post completion of the job, it brought alongwith it the said dumb barge Century Star- 3002 which was rendered afloat by then and M/s. Geo Star Surveys India Ltd. accordingly advised of the fact that the tug in its return voyage from Sittwe to Kolkata was bringing alongwith it the said barge enabling them to suitably advise their agent, M/s. Babaji Shivram or Atlantic Shipping to take appropriate action and comply with the statutory requirements with the concerned authorities.
10 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
(p) As Protecting Agent M/s B. Ghose & Co. Pvt. Ltd. duly informed the Director (Marine), Kolkata Port Trust vide their letter dated 17.11.2008, that the barge with the tug was arriving at Sagar Point, and the appropriate authorities granted permission to tie the said barge at the virtual jetty at Sagar Point vide endorsement dated 17.11.2008 on the said letter , and M/s. Atlantic Shipping informed of the developments vide email dated 17.11.2008. M/s. B. Ghose & Co. Pvt. Ltd. therefore contended that it was incumbent upon the steamer agent to complete all the necessary formalities with Customs and all other authorities concerned, with regard to the barge Century Star- 3002, brought by the tug Century Star-1 and therefore it was the duty of M/s. Atlantic Shipping Pvt. Ltd. to mention the Barge in the IGM or to inform the Boarding Officer regarding the Barge being towed by the tug. This, however was not done by Atlantic Shipping.
(q) At least three government bodies namely, Oriental Bank of Commerce, Dy. Commissioner of Customs, Paradip and D.G. Shipping were aware of the existence and plying of the barge and tug since 2006.
4.2. Pleadings were rendered to state that the barge being neither prohibited, nor dutiable goods, nor unloaded from the tug, provisions concerning confiscation of improper importation of goods section 111 read with section 2(22) of the act were not applicable. It was stated that there is no transport or carriage of smuggled goods and also 11 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 'cargo' means goods carried "in or on ship" hence section 115(2) of the act as well as section 30 of the act, dealing with filing of an IGM, as per Import Manifest Vessels Regulation 1971, were not applicable. It was further stated that the contravention under Section 30 of the act, renders the person in charge of the vessel or any other person referred to therein, liable to penalty not exceeding to Rs. 50,000/-. Neither the said provision nor any other provision of the act provides that the contravention of the Section 30 of the act would render the vessel liable for confiscation. The tug Century Star -1 was chartered during Nov. & Dec, 2008, exclusively for carrying out hydrographic survey off Sittwe, Myanmar on behalf of Essar Exploration and Production South East Asia Ltd., as evident from the copy of LOI agreement, Terms and Condition enclosed with the appeal papers. It was placed on record for the charter party that they understood that the tug carried a barge from Sittwe, Myanmar to India, however as they did not have full details (as it was not covered under their contract and agreement) and as also they were not informed by the vessel owner, regarding towing of the barge they obviously could not be held as a party to vessel owners transportation of the barge Century Star-3002, after completion of the survey works. The appellant M/s. Babaji Shivram Clearing and Carriers contended that M/s. Geo Star Survey India Pvt. Ltd was one of their clients, who approached them for undertaking Customs clearance as well as Dock clearance work of the survey equipment at Kolkata Port. They were thereafter also approached by M/s. Geo Star Surveys India Pvt. Ltd.
12 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 to arrange outward and inward movement of the tug Century Star 1, but as they did not possess valid documents, they requested the job to be undertaken by M/s. Atlantic Shipping which was accepted by them.
4.3. It may be observed from the statement of Mr. Prabir Kumar Chatterjee of M/s. B. Ghose & Co., that the towing of barge Star 3002 by tug Century Star-1, was duly planned. He had accordingly stated that they were appointed by M/s. Geo Star Surveys India for clearance of both tug Century Star-1 and barge Star 3002 as incorrect, as they had been assigned the job for undertaking clearance activity of the survey equipments and to arrange outward and inward movement of the tug Century Star-1. Also there is nothing to suggest on record that they the CHA was aware of the activities regarding the towing of the dumb Barge 3002 from Sittwe to Kolkata.
5. We note that in the backdrop aforesaid, the responsibility of complying with the necessary formalities in respect of barge Star-3002 would lie on the Protecting Agent, M/s. B. Ghose & Co. who had completed part of their work, by obtaining the necessary permission from the Kolkata Port Authorities. We note that the said barge had been seized at the shipyard, at Lot-8 of M/s. Maeksin Shipping Co. Pvt. Ltd. under Section 111(a) of the act. However, only goods, which are unloaded or attempted to be unloaded at any other place other than a Customs Port were liable to confiscation under the said section and as it had not been specified in the show cause notice, whether the said place is a place other than a Customs port appointed under clause (a) of Section 13 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 7 of CA' 62 for the unloading of goods, and in the absence of such evidence, the said barge couldn't be confiscated under Section 111(a). Challenge to invoking section 111(d) of the act- the prohibition imposed by or under the act or any other law have also not been specified (in the matter of the seized goods) and as such Section 111(d) couldn't be invoked for confiscation of the seized goods. In so far as action in terms of sections 111(f), (g) and (h) was concerned, the same was certainly not invokable for purpose of confiscation, as it had not been alleged that the seized goods are dutiable or prohibited since there was no demand of duty and no violation of import policy. The plea that non-filing of IGM would render the seized goods as prohibited goods is clearly unacceptable as being too far fetched a proposition. There is nothing in section 30 of the act to allude to such an extreme extension and interpretation in law. It may also be worth pointing out that import of barge Century Star-3002, as an ocean going vehicle is exempted from payment of duty, in terms of Notification No. 165-CUS vide Sr. No. 350. Further, it is too well known as also held in a slew of cases that the barge is classifiable as an "ocean going vessel"-(refer i) Essar Oil Ltd. Vs. Commissioner of 4 5 Customs , ii) Collector of Central Excise Vs. Vipul Shipyard , 6
(iii) Bharati Shipyard (P) Ltd. Vs. Collector of Central Excise .
4. 2002 (142) ELT 657 (T).
5. 1996 (88) ELT 640 (SC).
6. 1998 (101) ELT 33 (T).
14 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
6. For a comprehensive understanding of the issue, reference be had to the following provisions of law-
Customs Act, 1962 Section 2 - Definitions.
"(31) "Person-in-charge" means-
(a) In relation to a vessel, the master of the vessel;
(b) In relation to an aircraft, the commander of pilot-in-charge of the aircraft;
(c) In relation to a railway train, the conductor, guard or other person having the chief direction of the train;
(d) In relation to any other conveyance, the
driver or other person-in-charge of the
conveyance;
112. Penalty for improper importation of goods, etc. Any person,-
(a) who, in relation to any goods, does or
omits to do any act which act or omission
would render such goods liable to
confiscation under section 111, or abets the doing or omission of such an act, or 15 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
(b) who acquires possession of or is in any way concerned in carrying, removing, deposition, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable,-
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees] whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent of the duty sought to be evaded or five thousand rupees, whichever is higher: PROVIDED that where such duty a determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such 16 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. Of the penalty so determined.
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under clauses (i) and (iii), penalty not exceeding the value of the goods or the difference between the declared value and the value and the value thereof or five thousand rupees, whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the 17 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 declared value and the value thereof or five thousand rupees, whichever is the highest.
115. Confiscation of conveyances (1) The following conveyances shall be liable to confiscation:-
(a) any vessel which is or has been within the Indian Customs waters, any aircraft which is or has been in a Customs area, while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods;
(b) any conveyance from which the whole or any part of the goods is thrown overboard, staved or destroyed so as to prevent seizure by an officer of Customs;
(c) any conveyance which having been required to stop or land under section 106 fails to do so, except for good and sufficient cause;
(d) any conveyance from which any warehoused goods cleared for exportation, or any other goods cleared for exportation under a claim for drawback, are unloaded, without the permission of the proper officer;
18 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
(e) any conveyance carrying imported goods which has entered India and is afterwards found with the whole or substantial portion of such goods missing, unless the master of the vessel or aircraft is able to account for the loss of, or deficiency in, the goods.
(2) Any conveyance or animal used as a means of transport in the smuggling of any goods or in the carriage of any smuggled goods shall be liable to confiscation, unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance or animal:
PROVIDED that where any such conveyance is used for the carriage of goods or passengers for hire, the owner of any conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods, as the case may be.
Explanation: In this section, "market price"
means market price at the date when the goods are seized."
19 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
7. It is an undisputed fact and on record that the dumb barge was imported into India in the year 2006, pursuant to permission accorded by D.G., Shipping dated 09.10.2006 and thereafter converted for coastal run, by Deputy Commissioner of Customs, Paradip vide his approval dated 20.10.2006, upon payment of duty, on entry and the permission for carrying cargo to Chittagong was also granted to the tug and the barge by the jurisdictional Customs authorities. Under the circumstances it is evidently clear that for movement in and out of the country the barge in any event will have to be construed as a foreign going vessel and cannot be construed as "Imported goods". It would be appropriate to, extract the relevant portion of the Tribunal's decision in the case of Noble Asset Co. Ltd. Vs. Commissioner of 2 Customs (Preventive), Mumbai as upheld by the Hon'ble Bombay High Court.
"6. We now proceed to deal with the issues raised before us.
(a)...............................
(b)....................................
(c).....................................
(d) As regards demands of duty, it is found:
(i).........................................
(ii) However, no duty has been demanded in respect of all such movements ostensibly, on the basis of the 20 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 practice referred to above in the above case. Demands are restricted on three such movements. Viz-
(i) The first demand is for the year 1992 when the rig came back from Bahrain after repairs, while it was owned by Essar;
(ii) The second is when the rig was brought back from international waters by Noble and deployed at platform NE on 13-12-1997;
(iii) The third when the said rig was brought back after repairs from Sharjah by Noble in the year 1999. While importers claim that the practice as mentioned above should have been equally applicable to these movements also and therefore no duty can be recovered, when Bill of Entry had already been once filed in the year 1987, the Revenue contends that the practice as admitted in Sedcos case has no application, when either the rig moves out of India to another country or when the rig ceases to be operating under the contract with ONGC. In the course of the arguments, the counsel also referred to the expression "foreign going vessel" defined in Section 2(21) of the Customs Act, 1962 and submitted that the rig satisfied, the definition of a vessel, and therefore once a vessel is assessed to duty, it ceases 21 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 to be goods and becomes a conveyance, which was then not liable for payment of duty for movements in and out of India. It was submitted that this was the reason why ships and vessels, imported by various shipping companies in India were only liable to duty once when they were brought to India for the first time and were thereafter not liable to suffer duties for each voyage of movement in and out of the port/country. It was further submitted that after such conversion and acceptance as conveyance, their repairs abroad and subsequent movements in and out of India would not render them liable for payment of duty, as the nature of the vessel did not change, as a result of the repair and the repaired components/parts would become permanent ship stores. In any case, it is not for the Customs to recover duties on such repair charges on vessels nor has been shown that Customs even made an attempt to recover such duty in other cases. We find merits in the submission. The practice, if the Customs as extracted in the case of Sedco Forex's case is the one which flows out of the scheme of the Customs Act as understood by the Department. Under the Customs Act, the expression 'goods' includes vessels. Therefore, when the vessel is brought into the country for the first time, the same 22 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 are liable for payment of duty as any other goods. Once such goods have been assessed to duty and cleared, they no longer remain imported goods by virtue of the definition of imported goods in Section 2(25) which states that imported goods means goods brought into India from a place outside but does not include goods which have been cleared for home consumption. Therefore, once any vessel e.g. the rig in the present case, is brought into India and assessed to duty and cleared for home consumption it would cease to be imported goods. Subsequently, if it acquires the characteristic of foreign going vessel, is not liable for payment of Customs duty for the movements in and out of the country. In this regard, the definition of 'foreign going vessel' is relevant. The definition states that foreign going vessel includes inter alia any vessel engaged in fishing or any other operation outside the territorial waters of India. The Bombay High Court in the case of Amarship 7 Management Pvt. Ltd. Vs. Union of India , has already held that rig is a foreign going vessel. This judgment of the Bombay High Court has not been
7. 1996 (86) E.L.T. 15 (Bom.) 23 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 over-ruled in the case of Pride Forma Vs. Union of 8 India , as was contended by the ld. Counsel appealing on behalf of the revenue. The Hon'ble Bombay High Court in the case of Pride Forma was only concerned with the interpretation of the provisions of Section 86 and 87 of the Customs Act and had accordingly, in para 32 of its judgment, noted that the definition of foreign going vessel in Section 2(21) of the Act qualified words 'unless the context otherwise required.' The Court took a view of the matter in Pride Forma's case, while construing the provisions of Section 86 and 87 of the Customs Act in view of this opening sentence of the definition. This decision does not hold that a rig is not a vessel at all. This being the position, no duty could be demanded on the movement of vessels in and out of India once it has been assessed to duty and cleared for home consumption. The question of duty on ship stores being only different. To take a contrary view would be to unsettle, practice of last 100 years or more, as ships and vessels have been arriving in and
8. 2002 (148) E.L.T. 19 (Bom.) 24 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 going out of India without suffering duties of Customs from time immemorial. Many such ships, also undergo repairs just before their arrival in India. None of these vessels or the addition made to such vessels on account of repairs have been shown to be held liable to duty. To take a contrary view in the present case, would be clearly against the scheme of the Customs as well as the well settled practice of the Customs. In any case demands of duty by changing such practice can be only prospective, and bar of limitation under Section 28 to demand such duty would apply in this case.
(iii)......................................
(iv)............................................
(v) There is another reason to justify the practice which has existed for non-levy of duty on every inward movement of foreign going vessel. This is for the reason that if import duty was payable on every inward movement of a vessel, it would have to be then refunded back by way of Drawback payments, whenever the vessel went to a non-designated location/out of India. Therefore, if a vessel carrying cargo arriving into Bombay Port say on May 1, 2006, would be liable to pay duty on the full value of that 25 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 ship and the Shipping Company would then become entitled to refund of the said amount as Drawback, on May 6, 2006, under Section 74 of the Act, of the duty paid, when it left the Port and goes back to international waters/foreign port. The entire course of international trade would be unnecessarily hampered and the Customs department would be only busy in collecting the duty on day one and refunding the same on day five or earlier. It is possible for this reason that the practice of non-levy of duty on vessels on their subsequent movements in and out of India evolved, i.e., once such vessel had been assessed to duty and cleared for home consumption, further levy and Drawback liabilities not called for.
(vi) The question whether the change of ownership of a vessel, after its first import and clearance from Customs, would render the subsequent owner liable for payment of duty once again. This question assumes relevance as the rig was imported first in the year 1987 by Essar when a Bill of Entry was filed and the rig was cleared for home consumption. Thereafter, in the year 1996 the ownership of the rig changed hands and when the rig came back to India in December, 1997, duty has been demanded from Noble on the premise that Noble had not discharged 26 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 duty on the rig as owners of the rig and that they could not take shelter in the fact that appropriate duty had earlier been discharged on the rig by its previous owner (Essar). We are unable to agree with this contention of the Revenue, as ownership of goods of a vessel, is irrelevant in determining its duty liability under the Customs Act. It is the act of Import, which renders goods liable for duty and no owners. Once an entity has been imported and assessed to duty and cleared for Home Consumption, they cease to be imported goods. The subsequent change of ownership of such goods will not render them again liable for duty. The liability for payment of Customs duty is independent of the ownership of goods and therefore we are of the view that Noble cannot be held liable for payment of duty, merely because they became the owners of the rig. The other reasons on which duty liability has been fastened on Noble for the movement of rig in December 1997 and when it came back from repairs in 1999 is not called for have already been dealt with above.
(vii) We therefore hold that in view of the Scheme of the Customs Act and the practice being followed by the Customs, the rig having already assessed to duty once in 1987, could not be held liable for payment of 27 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 duty either in 1992, or in 1997 or in 1999 for its various movement in and out of India.
(viii)........................................
(ix).............................................
(e)..............................................
(f)..............................................
(g).............................................
(h) As regards the liability of the rig to confiscation for the movement of the rig from Bahrain in September 1992, the Commissioner has found that Essar had not followed the Customs formalities by filing Bills of Entry and had also not discharged duty liability on the value of repairs. As we have observed above, no duty liability was attracted on the repair charges in view of the fact that the rig had already been assessed for duty once in 1987 and had thereafter ceased to be imported goods having acquired the characteristic and Port clearance for foreign going vessel. Since the rig had ceased to be goods and would be a vessel, there could be no requirement for filing of a Bill of Entry for inward movement of such vessel. At the highest, the only requirement under the Customs law could have been to file an import manifest under Section 30 of 28 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 the Customs At and thereafter take necessary approval from the proper officer for unloading of the cargo, if any, on such rig. However, such Manifest is required on calling at a Port. The rig did not call at Bombay Port but went and operated in EEX location which are not notified/declared to be Port Areas of Bombay. Therefore, IGM and BE presentation was not called. It is not the case of the Revenue that at the time of arrival of the rig into EEZ from Bahrain, the rig contained cargo which needed to be declared and disclosed in the import manifest. Essar would be correct in pleading that even after certain parts and components had been replaced in the rig, such parts and components would become a part of the rig and cannot be treated as if they were being separately imported on board a rig as cargo. This is also not the case made out by Revenue. As such, in the absence of any dutiable cargo on board the rig, Essar could not be required to file an IGM at the time of its re-entry into the EEZ from Bahrain. The Commissioner finds in para 192 that there was violation of Sections 30, 31, 34, 35 and 46 of the Customs Act, 1962 and therefore the rig was liable for confiscation under various clauses of Section 111. As we have already held, no violation of Section 30 and no dutiable cargo is alleged 29 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 to have been imported on board the rig. Violation of Section 31 has been found on the finding that the rig being imported goods was offloaded from vessel prior to entry inward being granted. We do not agree with this findings. The rig was not imported goods but a vessel. Likewise, alleged violation of Sections 34, 35 and 46, which proceed on the assumption that the rig was goods and not a vessel cannot be sustained. We, therefore, hold that the movement of the rig in September 1992 did not violate any of the provisions cited in the order and therefore the rig cannot be held liable for confiscation under the clauses of Section 111 as arrived.
(i)..............................
(j).....................................
(k) The next movement of rig on which duty has been demanded and violation alleged is one effected in December 1997 when Noble brought the rig back into Indian waters for the purposes of deploying the same at platform NE (a designated area), for which a contract had been awarded by ONGC to Neptune, who had hired the rig from Noble. The order of the Commissioner proceeds on the premises that the rig was goods, for import of which a Bill of Entry was 30 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 required to be filed and other formalities relating to unloading etc. had to be complied with. For reasons recorded above, we hold that the rig ceased to be imported goods after its assessment and clearance in the year 1987 and thereafter it acquired the characteristic of a foreign going vessel and therefore it did not require any Shipping Bill or Bill of Entry to be filed for its inward or outward movement from India. The requirement of IGM or EGM are not attracted as admittedly no export or import cargo was being carried on board the rig. We find that the reasons assigned by the Commissioner for ordering confiscation of the rig under Section 111 are similar to the ones assigned by him in respect of the movement of the rig in September 1992. These reasons have already been held to be unsustainable in our findings above confiscation arrived cannot be thus upheld.
(l)....................................
(m).......................................
(n).........................................
(o) On the question whether fines and penalties could be imposed on the appellants, even if the rig was considered as 'goods' and not as 'vessels', and if the movements in question were considered as acts of 31 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 imports/exports, we find that it is an accepted position that there was a practice prevailing in the Customs to treat the rig as a vessel. This practice has been acknowledged and accepted in the show cause notice as well as in the order of the Commissioner. The statement made by ld. Counsel Mr. Sethna in Sedco Forex's case corroborate the existence of such practice. Now, if the revenue chooses to depart from the said practice and start treating the rig as goods (even after their Customs clearance) and not as vessels in spite of insisting and granting Port clearances under Customs Act, 1962 applicable to vessels and not goods as has been hitherto done, we cannot hold that such a change in practice will have the effect of rendering the past imports liable for confiscation or the importer liable for penalties.........................................
(7) (a)..........................
(b)..........................
(c) That in view of the statutory definition of 'goods, 'imported goods' and 'foreign going vessel' and the scheme of the Customs Act, the rig was goods liable for duty only at the time of its initial import in 1987 and once it has been cleared for home 32 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 consumption in that year, it ceased to be 'goods' and acquired the characteristic of a 'vessel' which ceased to be 'imported goods'. By virtue of being a vessel, it was no longer liable for duty of customs on any of its subsequent movements in and out of India;
(d)...........................
(e)............................
(f) That the alleged violations of the provisions of the Customs Act, which proceed on the premise that the rig was 'goods' and therefore required filing of Bill of Entry or shipping bill for their inward and outward movements is unsustainable and the rig was a vessel as held by the Bombay High Court in Amership Management Pvt. Ltd. and therefore require only the filing of an IGM or EGM, if the vessel was carrying any export or import cargo. In the absence of any such cargo being carried on board the rig, there was also no violation of the provisions of Sections 30 and 41 of the Customs Act, which require filing of IGM and EGM respectively. Consequently, the rig was not liable to confiscation under any of the clauses of Sections 111 or 113 of the Customs Act as found by the Commissioner;
(g)...............................
33 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
(h)...................................."
(Emphasis Supplied)
8. With reference to invoking Section 115(b) for the confiscation of the tug Century Star-1 the plea taken was it ought to be taken as a whole goods further the dumb barge Century Star 3002, towed by the tug was never thrown overboard, staved or destroyed and also there was no allegation in the said notice that at any time any Officer of Customs was prevented by them or any notice to prevent the seizure of the goods, hence the same was non-invokable. At this point, it may be appropriate to refer to the Hon'ble Bombay High Court's decision in the case of A.P. Moller Singapore Pvt. Ltd. Vs. Assistant Director, 9 D.R.I, Bombay , wherein it was held as under:
"5. Having heard the learned Counsel on both sides, we are of the opinion that in the facts and circumstances of the case, the confiscation of the vessel under Section 115(2) of the Customs Act is wholly unjustified. Under Section 115(2) of the Customs Act, any conveyance used as a means of transport in the smuggling of any goods is liable for confiscation, unless the owner of the conveyance proves that it was so used without the knowledge and connivance of the owner himself, his agents, if any, and
9. 2004 (174) ELT 156 Bom.
34 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 the person in charge of the conveyance. In the present case, admittedly, the adjudicating authority has not recorded any findings that the conveyance was used as a means to transport the smuggled goods with the knowledge or connivance of the owner, agent or the captain of the vessel. Under the circumstances, the confiscating of the vessel under Section 115(2) of the Customs Act cannot be sustained.
6. It appears that the Adjudicating Authority purported to confiscate the vessel on the ground that appropriate precautionary steps had not been taken to prevent the smuggling of the goods on board the vessel. It is pertinent to note that prior to the amendment of Section 115 of the Customs Act with effect from 13th May, 1988, a vessel was liable to be confiscated even if it was proved that there was a lapse on the part of the owner to take appropriate precautionary steps. However, that provision has been deleted with effect from 13th May, 1988. The present case pertains to the period after the amendment of Section 115 of the Customs Act. Therefore, the confiscation of the vessel on the ground that the owner or the captain of the vessel have not taken sufficient precautionary measures, cannot be a ground for confiscation of the vessel.
7. It was contended by the Counsel for the Revenue, that the negligence on the part of the Company/Captain in not 35 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 replacing the lock of the cabin even after being noticed that the duplicate key has been misplaced, was sufficient to confiscate the vessel under Section 115(2) of the Customs Act. We are unable to agree with this submission, because, in the absence of a finding that the negligence on the part of the owner or the Captain of the vessel was with a view aid or abet the act of smuggling, no action could be taken against the owner of the vessel or the master of the vessel. In the present case, having found that there is no nexus between the negligence and the act of smuggling, the Adjudicating Authority has not levied any penalty on the Owner/Captain of the vessel. There is no finding recorded in the order in original that negligence on the part of the Owner/Captain was deliberate with intent to facilitate the smuggling activity. Under these circumstances it is not possible to uphold the confiscation of the vessel."
9. It is on record that the IGM filed in the present matter, was on the basis of information and documents provided by M/s. Babaji Shivram Clearing and Carriers Pvt. Ltd. and since no Bill of Lading, was supplied either by M/s. Babaji Shivram Clearing or by the owner/charterer, hence plea for penalizing, for an act of omission under the provisions of the act was not sustainable in view of the law as propounded in 4 Essar Oil Ltd. Vs. Commissioner of Customs, Mumbai . Further, as regards Section 115 (b) the contention raised was that the barge 36 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 Century Star-3002, was never thrown overboard, staved or destroyed therefore the section cannot be invoked.
10. It has also been strongly pressed by M/s. Century Star Shipping Ltd.
that the notice did not bring out any act or omission on their part, so as to subject them to penalty under Section 112(a) and (b) in addition to their defence regarding confiscability of the barge Century Star 3002.
11. Further, in the case of Shahi Containers Vs. Commissioner of 10 Customs (Import) Mumbai , the Tribunal held that in terms of Section 2(31) of the Act, the responsibility for filing full and correct manifest lies with the master of the vessel and not the slot charterer or the Steamer Agent. Subjecting them to penal consequences therefore does not arise.
12. Thus, in view of the law propounded in the case of Nobel Asset Co. 2 9
Pvt. Ltd. , A.P. Moller Singapore Pvt. Ltd. and Shahi 10 Containers , as discussed in earlier paras, it is amply clear that the adjudicating authority had erred in imposing penalty and confiscating the barge Century Star-3002, even though it was allowed conversion from foreign to coastal run. The plea that the duty paid in respect of
10. 2003 (158) ELT 51 (Tri-Mumbai).
37 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 the barge was with reference to consumables alone that were required for consumption during the coastal run, is only open for consideration of the appropriate juridical authority, who in the first place allowed the conversion or by way of appeal proceedings of the said orders. That being not the case herein, the plea is not open for such an assertion. It need be pointed out that if at all any duty was required to be paid on the dumb barge at the time of conversion, the jurisdiction to collect such duty rested with Paradip Customs only and would certainly not fall within the territorial jurisdiction of the present authority. The fact that the barge was already converted from foreign to coastal run and thereafter Customs Duty was paid on the bunkers for voyage, question of any illegal import of the dumb barge Century Star-3002 into India does not arise. The fact of permitting such conversion incorporates within it fold satisfying all compliances required to be met at the time of initial import. In any case, in the event of any failure to so do, the jurisdiction for which would certainly vest only with the authority permitting such conversion at the last port of call, that had permitted the movement from foreign to coastal. Under the circumstances any consequence flowing out of a mis-conceived assumption of jurisdiction and subjecting the appellants herein to penal consequences, confiscation and imposition of penalty on the barge and accordingly on all others concerned in facilitating the movement of the dumb barge or associated with discharge of other formalities concerned, at subsequent port of call, are not liable to be subjected to any failure or to any consequences of an assumed failure.
38 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015
13. Under the circumstance, we are of the opinion that the confiscation of the dumb barge Century Star-3002, under section 115(2) of the Customs Act is not called for. Further, in terms of section 115(2) of the Act ibid, any conveyance used as a means of transport in the smuggling of goods is liable for confiscation, unless it is proved by the owner of the conveyance that it was so used without the knowledge of the owner or his agent, if any or the persons in-charge of the conveyance. In the present case there is not even a whisper to assert, least of all establish that the tug - Century Star-1 was used as a means of transport for smuggling of goods and that too with the knowledge or connivance of the owner, agent or the captain of the vessel. It is further noted that appropriate permissions from various agencies concerned were in place, hence the charge of smuggling is clearly unsustainable. Moreover, as per the language of section 115(2), as it stood at the material time, there was no provision to take legal/punitive action including confiscation for mere failure to take requisite precautionary measures, as provisions to the said effect were omitted w.e.f. 13.05.1988. Thus, assuming this as a ground for the authorities below for their course of action also would not succeed. Under the circumstances the confiscation of the tug too under section 115(2) of the act cannot be sustained. It is also demonstrated from records that the non-filing of IGM in the present case is certainly without any fraudulent intent, and at best is no more than an inadvertent omission, perhaps spurred because of the peculiarity of circumstances. For the reasons no penalty is also imposable on the 39 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 owner/representatives and others concerned with, managing the affairs of the vessel. Also in view of the clear language of section 2(31) of the act, defining the person in-charge of conveyance in relation to the vessel as Master of the vessel, other agencies and individuals cannot step into the shoes of the Master of the vessel and be subjected to penalty for failure to file a full or a correct manifest or non filing thereof.
14. Further, applying the ratio of the law as propounded by the Tribunal in 11 the case of Ramesh Amritlal Shah Vs. CC(P), Bombay , we are convinced that no penal liabilities can even otherwise accrue on M/s. Babaji Shivram Clearing & Carriers, as also M/s. B. Ghose & Co. Pvt. Ltd, when a nexus about role and functions required to be discharged by them alone, are not clearly established nor delineated. Even otherwise as held by this Tribunal, in the case of Essar Oil Ltd. Vs. 4 Commissioner of Customs, Mumbai , for imposition of penalty u/s 112 of the act, the malicious intent and knowledge on part of alleged offender is to be clearly brought out. Further, when it is on record that relevant approvals of various statutory authorities like DG, Marine, Kolkata Port Trust; DC(Cus), Paradip etc. were on record, it cannot be anybody's case that their was intent of a malicious or contumacious conduct in the conduct of omissions with regard to filing of an IGM. At best the lapse could be construed as an unintended negligence, arisen
11. 1986 (26) ELT 795 T. 40 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015 essentially for failure of proper exchange of communication between and amongst the various parties handling the affairs concerned for which provisions of section 112 are certainly not invokable, as it requires much more than a simple failure to hold somebody accountable to invite the rigours of section 112 of the act.
15. Under the circumstances and for the reasons as arrived, the order of the lower authority suffers from inherent weaknesses and is not in accordance with the legal prescriptions, and therefore liable to be set aside. Since in our view neither confiscation nor imposition of penalty is sustainable and in view of precedent decisions, referred supra, the appeals filed are liable to be allowed and the penalties imposed upon the appellants liable to be set aside.
16. All the appeals, are thus allowed with consequential relief if any, as per law. Ordered accordingly.
(Pronounced in the open Court on ...03.11.2023...) Sd/-
(P.K. Choudhary) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) K.M. 41 of 40 Customs Appeal No. 75066 of 2015 Customs Appeal No. 75062 of 2015 Customs Appeal No. 75065 of 2015