Custom, Excise & Service Tax Tribunal
Samudra Dredgers Uk Ltd vs Cochin-Cus on 13 September, 2024
Customs Appeal Nos. 21591, 21593 & 21594 of 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
Regional Bench COURT-2
Customs Appeal No. 21591 of 2014
[Arising out of the Order-in-Original No. COC-CUSTM-000-COM-072-12-13
dated 26.02.2014 passed by the Commissioner of Customs, Cochin-9.]
M/s. Samudra Dredgers (UK) Ltd.,
Nilhat House, Bristow Road,
Cochin, Kerala- 682003 .......Appellant
VERSUS
Commissioner of Customs,
Cochin
Custom House, Willingdon Island
Kerala - 682009 ..... Respondent
WITH Customs Appeal No. 21593 of 2014 [Arising out of the Order-in-Appeal No. COC-CUSTM-OOO-COM-072-12-13 dated 26.02.2014 passed by the Commissioner of Customs, Cochin-9.] M/s. Universal Dredgers Ltd., Nilhat House, Bristow Road, Cochin, Kerala- 682003 .......Appellant VERSUS Commissioner of Customs, Cochin Custom House, Willingdon Island Kerala - 682009 ..... Respondent AND Customs Appeal No. 21594 of 2014 [Arising out of the Order-in-Appeal No. COC-CUSTM-OOO-COM-072-12-13 dated 26.02.2014 passed by the Commissioner of Customs, Cochin-9.] M/s. Manthan Dredging, Ltd.
1801, Dina House, Ruttonjee Centre, 11 Duddell Street Central, Hongkong.
Parekh Marine agencies Pvt., Ltd.,
Nilhat House, Bristow Road,
Cochin, Kerala .......Appellant
VERSUS
Commissioner of Customs,
Cochin
Custom House, Willingdon Island,
Kerala - 682009 ..... Respondent
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Appearance:
Mr. T. Viswanathan, Mr. Robert Karia Advocates for Appellant. Mr. Rajesh Shastry, Authorized Representative for Respondent. Coram:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) FINAL ORDER No. 21005-21007 of 2024 Date of Hearing: 14.03.2024 Date of Decision: 13.09.2024 Per: P.A. Augustian The issue in the present appeal is whether the demand of duty confirmed by Adjudication Authority and penalty imposed on appellants are legally sustainable.
2. The brief facts of the case are that a dredger "Darya Manthan"
owned by M/s Manthan Dredging Ltd., Hongkong, arrived in Cochin Port on 28.01.2012 on being chartered by M/s. Dharti Dredging and Infrastructure Ltd., for dredging operations at Cochin. As per the investigation conducted by Cochin Customs, the dredger was imported, and no duty was paid in terms of Notification No. 21/2002-Cus dated 01.03.2002 or 19/2012-Cus dated 17.03.2012. On further investigation, it is found that the said dredger having foreign flag reached Paradip Port on 11.06.2011 and it was chartered on lease by M/s Dhamra Port Co., Ltd., for dredging at Dhamra Port Channel for the period from 06.06.2011 to 15.01.2012. Thereafter, it was converted into coastal run on 12.06.2011 at Paradip Port and filed a NIL cargo IGM No. 290/2011 dated 08.06.2011. On further investigation it is found that neither a bill Page 2 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 of entry was filed, nor the dredger was covered as a foreign flag vessel in terms of Section 2(21) of Customs Act, 1962 and CBEC Circular Nos. 450/79/2010-Cus IV dated 23.09.2010 and 16/2012-Cus dated 13.06.2012.
3. Accordingly, a Show Cause Notice dated 30.01.2013 was issued to the owner of the dredger i.e. M/s Manthan Dredging Ltd. and the disponent owners M/s Samudra Dredgers Ltd, U.K, M/s Universal Dredgers and their agents seeking demand of Customs duty of Rs.3,28,42,609/- during the period 28.01.2012 to 10.10.2012 and 16.10.2012 to 08.01.2013.
4. Another Show Cause Notice (SCN) dated 07.05.2013 was issued to the owner of the dredger i.e. M/s Manthan Dredging, Ltd., and the disponent owners M/s Universal Dredgers and their agents seeking demand of Customs duty of Rs.46,73,440/- covering the period 09.01.2013 to 28.02.2013. Both SCNs proposed penalty under Section 114A of Customs Act, 1962 and were adjudicated by the impugned order dated 25.02.2014, confirming the duty demanded jointly on the owner of the dredger "Darya Manthan" and the disponent owners along with interest and imposed equal penalty under Section 114A. Aggrieved by same, appeals were filed.
5. The appeals were heard by this Bench and while hearing the matter following issues were framed: -
(i) Whether the impugned vessel MV „Darya Manthan‟ is a foreign going vessel in terms of Section 2(21) of Customs Act, 1962;
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(ii) Whether the appellants are entitled to the benefit of Notification No.94/96 dated 16.12.1996;
(iii) Whether Commissioner of Customs, Cochin has jurisdiction over the import, which initially occurred at the port of Paradip on 11.6.2011;
(iv) Whether the vessel MV „Darya Manthan‟ is liable to pay duty on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013;
(v) Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV 'Darya Manthan' can be initiated; and
(vi) Whether Commissioner of Customs was correct in confirming the duty liability jointly on different parties.
6. Thereafter vide Final Order No. 20442-20444/2020 dated 17.08.2020, this Tribunal has allowed the appeal with the following observations.
"6. Learned counsel for the appellants makes a spirited plea to the effect that the vessel is a foreign going vessel and as such, is not hit by the clarification contained in Circular No.16/2012 dated 13.6.2012. He contends that the definition of foreign going vessel under Section 2(21) of the Customs Act, 1962, is a definition having „means‟ and „inclusive‟ parts. He claims that as per Clause
(ii) of the definition any vessel engaged in fishing or any other operations outside the territorial waters of India is deemed to be a foreign going vessel or aircraft. He takes pains to explain that, Customs Act does not define territorial waters of India and such definitions is found only in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone Act, 1976. However, we find that the appellants have obtained permission for coastal run in Dhamra Port till 15.1.2012 and from Page 4 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 28.1.2012 for dredging operations near Cochin Coast in connection with the LNG Terminal near Cochin Port.
Understandably, the work undertaken by the vessel is in the port premises and even going by the definition of the Territorial Waters as provided by the counsel himself, the work undertaken is within Territorial Waters. Appellants have not been able to provide any definitive proof to show that during the period in dispute the vessel did proceed to a place beyond Indian territorial waters for any purpose. Therefore, we are of the considered opinion that the appellants cannot take recourse to the definition contained in Section 2(21) (ii) of Customs Act, 1962, to claim that the impugned vessel is a foreign going vessel. Therefore, we hold that the impugned vessel cannot be treated as a foreign going vessel during the impugned period.
7. The appellants have also vehemently argued, even if the vessel is treated as goods and not a conveyance, it has been going in and out from different Indian Ports. The first import has taken place in 2007, when there was no duty leviable on such dredgers. Thereafter, the subsequent visits to the Indian Ports by the impugned vessel should be treated as „reimport‟ and benefit of Notification No.94/1996-Cus should be made available and duty should be charged to the extent of repair or maintenance charges incurred. We find that this argument is not tenable. We find that the import and export activities as claimed by the appellant are not recorded. The appellants themselves agree that no Bills of Entry and Shipping Bills have been filed. In the absence of clear record to correlate the import and export of the vessel and the extent of repairs claimed to have been undertaken, we find that the appellant‟s claim cannot be entertained. We find that learned Commissioner has correctly observed that:
"44. The vessel, thus, having illegally entered into India and not imported through a due process during any of its prior sorties, clearly falls outside the definition of a re-imported cargo as well. In any case, it is no longer res integra that re-imports do not carry a blanket Page 5 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 exemption from customs duty. The findings of the Hon‟ble Supreme Court in the matter of Super Cassettes Industries Ltd. (reported in 2008 (225) ELT 401 (SC) that on re-importation of goods assessee would be liable to pay same duty as had been paid when goods were imported for first time, applies to the instant case."
We find that the appellants cannot claim the benefit of a notification, retrospectively, that too having not established the fulfilment of conditions envisaged in the notification. In view of the above the argument of the appellants is not acceptable.
8. As regards to the issue of Jurisdiction, hotly contested by rival parties, we find that the impugned dredger 'MV Darya Manthan' has been making trips in and out of Indian Ports right from 2007 onwards. Though the vessel touched the Indian port of Nagapattinam on 12.5.2011, it did not engage in any activity in that port. It reached Paradip Port on 11.6.2011. At Paradip Port, a Bill of Entry was filed for the ship stores and bunkers and permission for converting from foreign run to coastal run was obtained from Paradip Customs to work at Dhamra Port. Later on it moved to Cochin Port. Cochin Customs vide Order No. SAV/56/2012 dated 24.8.2012 put the vessel on restraint and the same was provisionally released on 30.8.2012. The argument of the Revenue is that the vessel though imported on 11.6.2011 at Paradip, no Bill of Entry was filed; Bill of Entry was required to be filed and duty needed to be discharged in terms of Notification No.19/2012-Customs dated 17.3.2012. Learned Commissioner finds in the impugned order that the import duty was payable at the time of import, however, the importer volunteered to complete the act of import and pay duty in 2012 in terms of the above cited Notification. Learned Commissioner takes note of the applications dated 15.5.2013 and 22.5.2013 filed by the appellants for amending the respective Bill of Entries including the vessel, as goods. Learned Commissioner relies on the fact that the deposit towards the duty irrespective of the fact that the same is final or provisional was made with the Customs Cochin; the formality of import has been completed at Cochin and therefore, the jurisdiction Page 6 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 of Cochin has been invoked by the appellant themselves; as such, the relevant date to issue a demand Notice would also be the date of payment of such duty. We find that the vessel under dispute did not arrive at Cochin Port from a foreign port. In fact, it was already under a coastal run at Dhamra Port duly permitted by Paradip Customs. No act of import vis-a-vis the impugned vessel has taken place at the port of Cochin. We find that there is no legal backing to come to a conclusion that the act of import has occurred/completed at Cochin. The only change in circumstances with regard to the vessel at Cochin is that either the disponent and/or the lessee has changed, vis-a-vis its position in Dhamra Port, where the vessel was already in coastal run as permitted by Paradip Customs. Per contra, the appellants submit that it is accepted by the department that in May 2011, when it was converted into coastal run; it is evident that the dredger was imported into India for home consumption in Paradip first by its conversion to coastal run; therefore, Cochin Customs has no jurisdiction to demand duty on imports made at Paradip Port. Learned counsel for the appellants relies upon Samsung Maritime Ltd. (supra), wherein Tribunal has held as follows:
"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."Page 7 of 27
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9. We find that while demanding and confirming duty, learned Commissioner observed that separate proceedings for confiscation as regards the vessel will be initiated by Commissioner of Customs at Paradip. We find that such an argument is incorrect. In case, Paradip Customs can only take action in respect of the violation committed if any, by the appellants in respect of the import of the impugned vessel, we do not find what logic would support the action of Cochin Customs in demanding duty on the same without invoking the provisions laid for confiscation and penalty. As submitted by the learned counsel for the appellant, the jurisdiction of Cochin Customs has not been extended till Paradip; Cochin Customs have also not been empowered by a specific order to exercise the powers of Paradip Customs. We find that Section 28 has been invoked by the Customs Cochin to demand duty. The word „Proper Officer‟ needs to be understood in the context of the scheme of recovery provided under Section 28. Section 28 provides for duties not levied or not paid or short levied or short paid or erroneously refunded. Each of the words mentioned therein refer to the „Proper Officer‟, which necessarily has to be read as the officer in whose jurisdiction such non-levy, non-payment, etc, have taken place. Levy of Customs duty is on the completion of act of import. There is no dispute in the instant case that the act of import was complete in Paradip Port, where permission for conversion to coastal run was accorded by the Proper Officer after examining all the facts and circumstances of the case and after accepting the bill of entry filed for ship stores and consumables on board. Paradip Customs were well within their rights to issue demand for customs duty non-levied and / or not paid for whatsoever reason. Simply because the Customs Paradip have not advised the appellants to file a Bill of Entry showing the „vessel‟ as „goods‟; have accepted Bill of Entry for ship stores and consumables and have accorded permission for coastal run, it is not free for Cochin Customs to take over the powers of Paradip Customs. Learned Commissioner, in the impugned order, has taken the argument that since the duty, whether provisional or final, was paid in the jurisdiction of Cochin Page 8 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 Customs, it can be assumed that the importers have declared their intention to complete the act of import within Customs Cochin jurisdiction. We find that this argument is not supported by Law. It is very clear that the appellants have deposited an amount to obtain provisional release in terms of Section 110A of Customs Act, 1962 when the subject vessel was restrained by Cochin Customs. Hereto, we find that the duty was not paid but was deposited along with a bond and a bank guarantee. Moreover, the duty was not paid in full as demanded. Therefore, by no stretch of imagination, the same can be deemed to be payment of duty. Such amounts deposited do not take the character of duty. In the instant case, the payment was „not of any duty but was a deposit, that too not in full‟, made to secure provisional release of the vessel and the appropriation has been appealed against. Therefore, it is not free for Cochin Customs to reckon date of making of deposit as the relevant date in terms of Section 15 of the Customs Act, 1962. Section 15 is relevant only for the purposes of fixing the rate of duty, and not be reckoned for issuance of a demand notice.
10. Further, the impugned vessel was operating in the jurisdiction of Cochin Customs. As per Cochin Customs, applicable duty has not been paid on the vessel. Cochin Customs were free to consider the impugned vessel to be „smuggled goods‟, in terms of Section 2(39) of Customs Act, 1962 and seize the vessel under Section 110 of the Customs Act, 1962 and consequent action under Section 124, 125, etc, would have followed, while intimating customs Paradip to take action with reference to the collection of duty on the impugned vessel. We find that Section 124 does not specify any „Proper Officer‟, as in the case of Section
28. This being the legal position, the findings in the impugned order that action vis-a-vis confiscation, penalty, etc., will be taken by Paradip Customs defies reason or logic. Moreover, we find that the impugned order confirmed duty for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013. Learned Commissioner, while holding Page 9 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 that separate proceedings would be initiated by Paradip Customs in respect of confiscation and penalty was silent on the duty recoverable for the period between 11.05.2011 and 28.01.2012. We fail to understand the logic of collecting duty on each change of lease, though not ordained in law, after the vessel got converted to coastal run, was not applicable for the period when the impugned vessel was in coastal run at Dhamra Port. The impugned order is silent on duty payable during the period 11.05.2011 and 27.01.2012. We find that it‟s not open for Customs to demand and confirm duty for a particular period without any logic.
11. Moreover, the impugned order confirms duty on the vessel imported in 2011, in terms of a Notification issued in 2012. The said Notification is not retrospective, as it effects the substantial rights of an importer. Moreover, we find that duty has been demanded for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013 depending on the disponent owners and the companies, who took the vessel on lease. We fail to understand as to how duty could be demanded and confirmed for three different periods, when there is no change in the status of the impugned vessel i.e., the vessel continued to be in the coastal run throughout the period. We find that the Notification No.19/2012 dated 17.3.2012, did not envisage any such collection of duty from different lessees during the period. Moreover, customs duty is charged when the act of importation is done. Understandably, the act of import is not evident during the three periods. At the most it would be in the first period itself. It is not understood as to how Customs duty could be charged on subsequent lessees after the vessel is imported and is under coastal run, that too ignoring the period when the vessel was under coastal run at Dhamra Port. We find that a stand, taken even due to mistaken appreciation of law, cannot be selective. However, we find that learned counsel for the appellants has not raised this issue. Therefore, we refrain from giving any opinion on this issue.
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12. We find that learned counsel has correctly relied upon decision of Tribunal in the cases of N.C.R. Corporation of India Ltd. Vs. CC (Preventive) Mumbai (supra) and Devilog Systems India (supra). We also find that as held by Tribunal in Bakeman's Home Products Pvt. Ltd. Vs. CC, Bombay: 1997 (95) ELT 278 (Tri.), demand and confiscation proceedings cannot be initiated in a truncated manner. In view of our discussion above, we further conclude that Cochin Customs had no jurisdiction to demand duty on the impugned vessel and we find that the show-cause notice and adjudication order have been issued without proper authority of law. Moreover, in the instant case, the vessel has been traveling between foreign ports and Indian ports. During the current Journey, the vessel arrived at Paradip Port on 11.05.2011. If duty was chargeable on vessels as per change in law if any, and if a Bill of entry was needed to be filed in view of the Circular issued by CBEC, it was incumbent upon Paradip Customs to advise the appellants. Paradip Customs have not only permitted costal run for the vessel but also have accepted bills of entry for ship stores, bunkers etc. Proper officers have boarded the vessel and inspected the documents at various places. Every movement and intention of the vessel was known to the department. Therefore, extended period cannot be invoked in this case. Moreover, as submitted by the appellants, we find that various Circulars have been issued on the subject of necessity of filing Bills of entry by the vessels, which could be treated as goods as well, under similar circumstances. We find that action cannot be taken on a vessel imported in 2011 on the basis of a clarification issued vide Circular in 2012. If the department can view the issue differently at different periods of time, the appellants also can understandably, entertain a bona fide belief on the taxability of the impugned vessel and the procedures to be adopted thereof. In any case, suppression of fact, etc., cannot be alleged, and extended period cannot be invoked.
13. We find that the show-cause notice was made answerable jointly and severally to the owners of the dredger - M/s. Manthan Page 11 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 Dredging Ltd., their disponent owners M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd. and their agents. M/s. Chellaram Shipping (UK) Ltd., M/s. Chellaram Shipping (Hong Kong) Ltd. and the agents in Cochin M/s. Parekh Marine Agencies Pvt. Ltd. and the Indian charterers M/s. Dharthi Dredging and Infrastructure Ltd., Hyderabad and M/s. AFCONS Infrastructure Ltd., Mumbai. Learned Commissioner while passing the impugned order confirmed the duty of Rs.3,28,42,609/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. He also confirmed duty of Rs.46,73,440/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. We find that such a joint confirmation has no sanctity of law, inasmuch as the exact amount payable by the individual noticees is not given. The order is not enforceable also for the said reason. On this count also, the impugned order is liable to be set aside.
14. The appellants have also submitted without prejudice to the other submissions that the duty demanded at the rate of 6% CVD is not correct. CVD at the rate of 1% is applicable in terms of Notification No.1/2011. They also submit that the value of the dredger is inflated, relying on a news report about the controversy on Sethusamudram Project, even though the appellants have placed on record the purchase cost of the dredger. We find that this issue does not require consideration, as we hold that the impugned order is not maintainable on the count of jurisdiction, limitation and for the reason that the same is not legally enforceable being jointly confirmed without specifying the due amount payable by individual noticees.
In the result, impugned order is set aside and all the appeals are allowed with consequential relief, if any, as per law. Page 12 of 27
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7. Aggrieved by said order an appeal was filed by Revenue before the Hon‟ble High Court of Kerala and Hon‟ble High Court vide judgment dated 11.11.2022 in Customs Appeal No 11, 12 and 13/2021 remanded the matter to this Tribunal with following observations.
"10. We have taken note of the draft suggestions made by both the learned Counsel appearing for the parties, and we set aside the findings of the Tribunal on issue no. (iii) and remit the matter to the Tribunal for reconsideration afresh on the following issues.
(i) Whether, in the facts and circumstances of the case, where and when the import of the Dredger has occasioned?
(ii) Whether, in the facts and circumstances of the case, on the assumption that on 24.08.2012, the Dredger was within the jurisdiction of the Commissioner of Customs, Cochin, the Commissioner of Customs, Cochin, has jurisdiction to demand duty under Section 28 of the Act?
(iii) Whether, in the facts and circumstances of the case, the application of an extended period of limitation is available and justifiable or not?
(iv) Whether, in the facts and circumstances of the case, the confirmation of duty liability on different parties is valid and legal?
(v) Whether, in the facts and circumstances of the case, in the event of the duty liability is attracted on the import of Dredger, subject to a finding on the above issues, the further issue for consideration is what is the value and duty payable on the imported Dredger and by whom?"
8. As directed by the Hon‟ble High Court, the appeals were taken up for final hearing. Learned Counsel for the appellants submitted that as per the judgment of the Hon‟ble High Court, the finding related to issue no. 3 is only set aside and the finding recorded by the Tribunal on other issues are not set-aside. Learned Counsel further submitted that Page 13 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 Section 15(1)(c) cannot be the basis to demand duty and in any case duty payable will only be in terms of Notification No. 94/96-Cus. Learned Counsel for the appellants further submits that section 15 (1)
(c) is not applicable as the date of import and the place of import are known, there is no clandestine import to avoid or evade taxes. Learned Counsel for the appellants further submits that on the date of the first import, i.e. on 20.12.2007, BCD was exempt as per Sl. No. 353A of Notification No.21/2002-Cus. Further, tariff rate for Dredgers was 'NIL' under Central Excise Tariff till March 2011. Thus, CVD was also exempt. Regarding SAD, it was also exempt as per Sl. No.1 of the Notification No.20/2006-Cus till February 2011. Thus, it had unconditional exemption on the date of import i.e., in 2007 and the import of the dredger was completed on 20.12.2007.
9. Regarding non-filing of bill of entry at the time of initial import, Learned Counsel for the appellant submits that non filing of Bill of Entry is not deliberate and does not make the vessel liable to duty on the date of seizure or subsequently. As evident from Circular No. 450/79/2010-Cus IV dated 23.09.2010 and Circular No.16/2012-Cus dated 13.06.2012, it was the practice adopted by the trade and the customs department. No bill of entry is to be filed or insisted for the vessels brought to India, when such a vessel is exempt from duties during the period in question. The vessel in question was imported into India for undertaking work on 20.12.2007, 20.11.2009 and 12.06.2011; the vessel was a foreign flag vessel, exempt, and came to India for the purposes of dredging and not for clearance for home consumption. Learned Counsel further submitted that when the vessel was converted from a foreign run to coastal run, filing of bill of entry was insisted only Page 14 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 for the stores and consumables on board of the vessel. Further submitted that circular did not make it clear, the position with regard to foreign flag vessel. Therefore, the Appellants cannot be faulted with for not filing a bill of entry, since it was the practice and department never insisted on the same even, while allowing conversion from a foreign run to coastal run.
10. Learned Counsel for the appellant relied on the decision of this Tribunal in the matter of Samson Maritime Ltd Vs. Commissioner of Customs (Import), Mumbai-2016 (333) ELT 148 (Mum), wherein it is held that when customs never insisted on filing of bill of entry, customs duty cannot be demanded, subsequently. Similarly, this Tribunal in Hede Ferrominas Pvt Ltd Vs. Commissioner of Customs (Import, Mumbai)-2016 (334) ELT 540, held that as regards non-filing of Bill of Entry, we find that once goods are exempted by customs exemption notification, non-filing of Bill of Entry at the time of import is merely a procedural lapse, as there is no mala fide intention of the appellant as no benefit accrues to the appellant by non-filing of Bill of Entry. Learned counsel also relied on a number of decisions including the decision of the Tribunal in Devshi Bhanji Khona Vs. CC, Cochin 2019 TIOL 3369, Noble Asset Co. Ltd - 2006 (205) ELT 901.
11. Learned Counsel submitted that in the present proceedings, customs duty is not demanded for the initial imports made in 2007 and 2009 as the vessel was exempt from duty; duty is demanded only for the entry made in 2011, as the exemption given to dredger was withdrawn during the period in question; if the case of the department is correct, duty ought to have been demanded for the initial imports too; it is not done so in the present case itself shows that the demand Page 15 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 of duty is arising only on account of the change in the practice, adopted by the customs department.
12. Learned Counsel further submitted that duty demanded by applying rate of duty of 6% as CVD is not correct. CVD ought to have been computed by applying rate of duty of 1% in terms of Notification No.1/2011-C.E, dated 01.03.2011, since effective rate of CVD is only 1% on all goods classifiable under the Chapter Heading 89.05. Learned Counsel relies on the decision of the Supreme Court in the case of SRF Ltd Vs. Commissioner of Customs, Chennai- 2015 (318) ELT 607 (SC). wherein appellants were entitled to exemption from payment of CVD in terms of Notification No. 6/2002.
13. Regarding the valuation adopted by the Respondent, Learned Counsel submitted that, though appellant had placed on record the purchase cost of the dredger, department has relied upon a news report about the controversy on Sethusamudram project and proceeded on the basis of the value indicated therein, it is not authentic and only hearsay.
14. Learned Counsel submitted that invoking extended period of limitation under Section 28(4) of the Customs Act is unsustainable since there is no fraud, collusion etc. Customs formalities have been complied with at the time of every entry into India and dredger was duly converted from foreign run to coastal run and vice versa; further, IGM as well as EGM were filed for the dredger; department had knowledge of the import; bills of entry had been filed for the consumables; the details of the documents, which have been submitted at various points of time before the customs authorities to show that the department was aware of the import of the vessel into India, have been mentioned in Page 16 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 the list of dates and events in the table; moreover, Circular dated 13.06.2012 was issued by the CBEC clarifying that the importer needs to file bill of entry for imported vessels; hence, when there existed ambiguity and uncertainty in practice resorted to by the Customs Authorities till 2012, mis-statement or suppression by the Appellant cannot be alleged; non-filing of bill of entry does not mean that the appellants have sought to evade duty; The dredger was exempt from duty, when they were imported initially; on the third occasion, the duty if any was payable not on full value of the vessel, but only on the repair costs; as the appellants did not gain any benefit, omission, if any, can at best be a technical lapse but not wilful; this does not warrant invocation of extended period of limitation. Learned counsel relies on the decision of Aban Lloyd Chiles Offshore Ltd. Vs. Commissioner of Customs, Maharashtra, 2006 (200) ELT 370 (SC), wherein it was held that demand invoking the extended period of limitation will not be sustainable when the facts were within the knowledge of the department. Penalty under 114 A is not imposable as the duty has not been paid by the Appellant due to suppression or misrepresentation of facts etc; appellants have filed applications under Section 149 of the Customs Act, for amendment of the bills of entry for consumables dated 14.12.2007 and 19.11.2009 to include the dredger in question as an item of import; if the applications are allowed, the allegation that Dredger was not re-imported in 2009 would not survive; hence, upon re-import, duty would be restricted only to the cost of repair abroad as per Sl. No.2 of Notification No.94/1996-Cus, dated 16.12.1996.
15. Learned Authorised Representative (AR) reiterated the findings in the impugned order and further submitted that the vessel M V 'Darya Page 17 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 Manthan' was seized, when it was plying near Cochin port on operations, based on intelligence and on examination it is found that there is no Bill of Entry filed for import and considering the omission on the part of appellant, proceedings were initiated as per Section 110 of the Customs Act,1962 and the limitation commences from the date of such payment of duty as per 15(1)(c) of the Customs Act. Cochin Customs examined the issue and issued the SCNs for the violations and confirmed duty and imposed penalty. Regarding the contention of the appellant that 'No' duty is payable on vessel re-imported into India, as the vessel ceases to be goods, when re-imported into India. the vessel was first imported in 2007 as „‟goods‟‟, and thereafter, on re-import, it assumed the character as „‟conveyance‟‟, and hence no duty would be leviable. He submits that this issue was examined elaborately in the case of M/s. SEAMEC Ltd.- 2017(12) TMI 1281- CESTAT Mumbai, this Tribunal held as follows.
"62. When the vessels remained as "goods" all along i.e. from point of first entry to India and during the re-import from time to time that was classifiable under CTH 89059090, for the reasons stated hereinbefore taking the criteria of classification prescribed by the said CTH. All the vessels did not possess the character of the goods covered by CTH 89019090 not being used for carriage of cargo or passenger according to the mandate of the said CTH.
Accordingly, stand of Revenue that the vessels on re-import shall be classifiable under CTH 89059090 as "goods" only is correct and that is upheld".Page 18 of 27
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16. Learned AR also relies on the decision in the cases of M/s. SEAMEC Ltd (Supra) at Para 59 & 65; Devshi Bhanji Khona and others: 2019(11) TMI 22-Cestat Bangalore and Noble Asset Co Ltd Vs. Commissioner of Customs (Prev) 2006(205) ELT 901 wherein, it was held that the subsequent imports will be conveyance; in the instant case, there was no such import in the first place; no IGM was filed including the vessel as cargo and no Bill of Entry was filed for the import of the vessel. Learned Authorised Representative (AR) submitted that the appellant‟s contention, to categorise the import of the vessel in 2011 as re-import, thus eligible for concession under Notification 94/96-Cus, is refuted with detailed reasoning in Para 46 (i) and (ii) of Order-in-Original; Notification No. 94/96-Cus is a conditional notification, where proper export and import documents are filed and identity of the goods established; conditions of the notification have to be strictly satisfied with at the time of export and subsequent re-import to avail the benefit under the notification.
17. Heard both sides and perused the records.
18. The entire finding in the impugned order is based on the grounds that the dredger was not covered as a foreign flag vessel in terms of Section 2(21) of Customs Act, 1962 and CBEC Circular No. 16/2012, dated 13.06.2012. Further, though NIL cargo IGM No. 290/2011, dated 08.06.2011 was filed, no bill of entry was filed for the vessel. Thus, it is alleged that there is clandestine import of Dredger to avoid or evade taxes. But it is an admitted fact that the dredger having foreign flag reached Paradip Port on 11.06.2011 and it was chartered on lease by M/s Dhamra Port Co. Ltd., for dredging at Dhamra Port, Channel for the Page 19 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 period 06.06.2011 to 15.01.2012. Thereafter it was converted into coastal run on 12.06.2011 and filed a NIL cargo IGM No. 290/2011 dated 08.06.2011. Thus, the Dredger was first imported in 2007 and at the relevant time, it was exempted from Basic Customs Duty (BCD) vide Notification No. 21/2002-Cus (Sl. No. 353A), effective from March 2007. Upon re-import on 11.06.2011, duty would be payable only on the cost incurred for repairs abroad and to and fro freight as per Sl. No.2 of Notification No.94/1996-Cus. Hence, as per the evidence produced by the appellant, duty payable would be only on Rs.82,95,600/-. Appellants are entitled to the benefit of exemption under Notification No. 94/1996-Cus at the time of every subsequent re- import; the benefit of exemption Notification can be claimed even after clearance of the goods, as held by Hon‟ble Supreme Court in Share Medical Care Vs. UOI-2007 (209) ELT 321 (SC). However, respondent rejected evidence produced by the appellant on the ground that the costs could not be verified. The other grounds to deny the exemption regarding change in the ownership are also found factually incorrect. Appellant M/s Manthan Dredging Ltd, continued to be the owner of the dredger and have not transferred the ownership to any other persons, others are only disponent owners and authorised only to decide and control the commercial operations of the ship/vessel.
19. However, since the Hon‟ble High Court remanded the matter to ascertain the issues framed by the Hon‟ble High Court, we are limiting our finding on those issues.
1. Whether, in the facts and circumstances of the case, where and when the import of the Dredger has occasioned? Page 20 of 27
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2. Whether, in the facts and circumstances of the case, on the assumption that on 24.08.2012, the Dredger was within the jurisdiction of the Commissioner of Customs, Cochin, the Commissioner of Customs, Cochin, has jurisdiction to demand duty under Section 28 of the Act?
20. We find that even if it is found that the Dredger was illegally imported without payment of duty and on 24.08.2012, it was under the jurisdiction of the Commissioner of Cochin, respondent does not have jurisdiction to demand duty in the present case. It is an admitted fact that the vessel entered India in May 2011 through Nagapattinam, wherein it was idling as a foreign going vessel. It was duly converted from foreign run to coastal run in Paradip Port. If at all its opined that the Dredger was imported into India for home consumption, it was in Paradip. Thus, as held by this Tribunal earlier the Customs department in Cochin has no jurisdiction to demand duty on imports made at Pardeep Port. Section 15(1)(c) or Section 28 also does not confer jurisdiction on Customs Department at Cochin to demand duty from the Appellants for the import occasioned at Paradip Port. This is more so when the department is stating that the bill of entry ought to have been filed, when the vessel was converted into coastal run at Paradip Port. However, since Hon‟ble High Court of Kerala has set aside the finding of this Hon‟ble Tribunal on the jurisdiction issue, issue is not considered at this stage of denovo proceedings. Further, as regards;
3. Whether, in the facts and circumstances of the case, the application of an extended period of limitation is available and justifiable or not?
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21. Considering the facts and circumstances of the case, extended period of limitation is not invokable in terms of Section 28(4) of the Customs Act, 1962 as there is no fraud, collusion, etc. Customs formalities have been complied with at the time of every entry into India. As held by this Tribunal earlier, the dredger was duly converted from foreign run to coastal run and vice versa; further, IGM as well as EGM were filed for the dredger; department had knowledge of the import; bills of entry had been filed for the consumables; the details of the documents, which have been submitted at various points of time before the customs authorities to show that the department was aware of the import of the vessel into India, hence extended period of limitation is not invokable in terms of Section 28(4) of the Customs Act; even though the SCN dated 30.01.2013 covers the period of lease from 28.01.2012 to 28.02.2013, still the relevant date for the purpose of Section 28 will be 12.6.2011; duty has not been demanded under Section 125 of the Customs Act, 1962; in terms of the Circular No.16/2012-Cus, dated 13.06.2012 issued by the CBIC, bill of entry for home consumption has to be filed and duty discharged on conversion from foreign run to coastal run; appellants were directed to only file bill of entry for the stores and consumables on board the dredger; there has been confusion about the exact procedure to be followed in the case of import of vessels, which has been acknowledged by a number of decisions of the Tribunal; invocation of extended period of limitation is not tenable as there is no fraud, collusion etc., as all facts were disclosed before the customs department at Paradip port and the vessel was also boarded by the Customs officers at Dhamra Port; Department‟s reliance on SEAMEC Limited Vs. CC (Imports), Page 22 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 Mumbai, 2017 (12) TMI 1281 - CESTAT Mumbai is misplaced as this decision has been since recalled-2018 (364) ELT 611 (Tri.- Mum). Moreover, CBEC clarifying that the importer needs to file bill of entry for imported vessels; hence, when there existed ambiguity and uncertainty in practice followed by the Customs Authorities till 2012, mis-statement or suppression by the Appellant cannot be alleged; non- filing of bill of entry does not mean that the appellants have sought to evade duty; the dredger was exempt from duty when they were imported, initially; on the third occasion, the duty, if any was payable not on full value of the vessel, but only on the repair costs; as the appellants did not gain any benefit, omission, if any, can at best be a technical lapse but not wilful; the facts and circumstances in the case does not warrant invocation of extended period of limitation. As per the judgment of Hon‟ble Supreme Court in Aban Lloyd Chiles Offshore Ltd. Vs. Commissioner of Customs, Maharashtra- 2006 (200) ELT 370 (SC), demand invoking the extended period of limitation will not be sustainable, when the facts were within the knowledge of the department; penalty under 114 A is not imposable as the duty has not been paid by the Appellant due to suppression or misrepresentation of facts etc; appellants have filed applications under Section 149 of the Customs Act, for amendment of the bills of entry filed for consumables dated 14.12.2007 and 19.11.2009 to include the impugned 'Dredger' in question as an item of import; if the applications are allowed, the allegation that Dredger was not re-imported in 2009 would not survive; hence, upon re-import, duty would be restricted only to the cost of repair abroad as per Sl. No.2 of Notification No.94/1996-Cus, dated 16.12.1996. As regards;
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4. Whether, in the facts and circumstances of the case, the confirmation of duty liability on different parties is valid and legal?
22. Regarding confirmation of duty liability on different parties, on the said issue also specific finding are given by this Tribunal, where it is held that; "we find that the show-cause notice was made answerable jointly and severally to the owners of the dredger-M/s. Manthan Dredging Ltd., their disponent owners M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., and their agents M/s. Chellaram Shipping (UK) Ltd., M/s. Chellaram Shipping (Hong Kong) Ltd., and the agents in Cochin M/s. Parekh Marine Agencies Pvt. Ltd., and the Indian charterers M/s. Dharthi Dredging and Infrastructure Ltd., Hyderabad and M/s. AFCONS Infrastructure Ltd., Mumbai. Learned Commissioner while passing the impugned order confirmed the duty of Rs.3,28,42,609/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. He also confirmed duty of Rs.46,73,440/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. We find that such a joint confirmation has no sanctity of law, inasmuch as the exact amount payable by the individual noticees is not given. The order is not enforceable also for the said reason. On this count also, the impugned order is liable to be set aside". Since the Hon‟ble High Court has not set aside the said findings and considering the facts and evidence available Page 24 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 on record. We are also endorsing the above findings. Further, as regards;
5. Whether, in the facts and circumstances of the case, in the event of the duty liability is attracted on the import of Dredger, subject to a finding on the above issues, the further issue for consideration is what is the value and duty payable on the imported Dredger and by whom?
23. We find that even though the issue was contested before this Tribunal even in previous proceedings and as per the final order, it is stated that; "The appellants have also submitted without prejudice to the other submissions that the duty demanded at the rate of 6% CVD is not correct. CVD at the rate of 1% is applicable in terms of Notification No.1/2011-CE. They also submitted that the value of the dredger is inflated, relying on a news report about the controversy on Sethusamudram Project, even though the appellants have placed on record the purchase cost of the dredger. We find that this issue does not require consideration, as we hold that the impugned order is not maintainable on the count of jurisdiction, limitation and for the reason that the same is not legally enforceable being jointly confirmed without specifying the due amount payable by individual notices".
24. It is an admitted fact that dredging operations in Cochin has been undertaken after the vessel was imported into India; therefore, demanding duty in terms of the Notification No.19/2012-Cus for operations is incorrect and not sustainable; CVD is being demanded in terms of Notification No.19/2012-Cus on the dredging operations, whereas it is leviable on dredgers at the time of their importation into Page 25 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 India; dredger was imported into India at Paradip port and was converted from foreign run to coastal run; import was complete in Paradip. Further, we find that the impugned order confirmed duty for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013. Learned Commissioner, while holding that separate proceedings would be initiated by Paradip Customs in respect of confiscation and penalty was silent on the duty recoverable for the period between 11.06.2011 and 28.01.2012. We fail to understand the logic of collecting duty on each change of lease, though not ordained in law, after the vessel got converted to coastal run, it is was not applicable for the period, when the impugned vessel was in coastal run at Paradip Port. The impugned order is silent on duty payable during the period 11.06.2011 and 27.01.2012. We find that it is not open for Customs to demand and confirm duty for a particular period without any logic. Hence, the confirmation of duty jointly of Rs.3,28,42,609/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. and also, confirmation of duty of Rs.46,73,440/- jointly on the owner of the dredger „MV Darya Manthan‟, M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. are not sustainable and are liable to be set aside, consequently the confirmation of demand of interest is also liable to be set aside.
25. Regarding penalties, since demand of duty by invoking extended period alleging suppression or misrepresentation of facts etc., is held as Page 26 of 27 Customs Appeal Nos. 21591, 21593 & 21594 of 2014 unsustainable, penalty imposed on appellants under section 114A are unsustainable and are liable to be set aside.
26. In view of the above discussion and in the facts and circumstances, the appeals are allowed.
(Order pronounced in open court on 13.09.2024) (P.A.Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) Sasidhar Page 27 of 27