Custom, Excise & Service Tax Tribunal
C. C.-Jamnagar (Prev.) vs M/S Reliance Industries Ltd on 7 March, 2018
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad C/Cross/46-49/2011-SM Appeal No. C/43-46/2011-SM [Arising out of 159-162-Commr(A)-JMN-2010 dated 22.10.2010 passed by Commissioner of Customs-(Appeals) Jamnagar] C. C.-Jamnagar (prev.) Appellant vs M/s Reliance Industries Ltd. Respondent
Atlantic Shipping Pvt. Ltd.
Represented by:
For Appellant: Mr. A. Mishra (A.R.) For Respondent: Mr. J.C.Patel, Ms. Shilpa Balani (Advocates) CORAM:
HONBLE DR. D.M. MISRA, MEMBER (JUDICIAL) Date of Hearing:08.11.2017 Date of decision:07.03.2018 Final Order No. A/ 10432-10435 /2018 Per: Dr. D.M. Misra:
These four appeals are filed by the Revenue against order-in-appeal No. 159-162-Commr(A)-JMN-2010 passed by the Commissioner of Customs (Appeals) Jamnagar. Even though common question of law is involved, the facts are marginally different, hence, narrated separately. Appeal No. C/44/2011
2. Briefly stated the facts of the case are that the first respondent M/s Reliance Industries Ltd. was the charterer of the vessel MT Sinar Agra. On 09.06.2008, the said vessel was at port Qasim and arrived at Port Sikka on 20.06.2008 at 06:48 hours. On 20.06.2008 they addressed a letter to Superintendent of Customs informing that the vessel after completion of foreign voyage, intent to convert it to coastal run vessel. The master of the said vessel submitted the list of 10 Port on call dated 20.06.2008 at arrival of the said vessel at Sikka Port. From the said list it reveals that from Port Qasim to Sikka it was in ballast, without any cargo bound for Sikka. The master of the vessel has also declared the ship stores on her arrival at Sikka Port as on 20.06.2008. The said vessel has also received bonded bunkers from the Mundra Port SEZ supplied by M/s Adani Enterprises Ltd., Ahmedabad against shipping bill No. 181 dated 19.06.2008 of furnace oil weighing 430 MT. As per the Certificate dated 21.06.2008 issued by the master of the vessel only 246.830 MT of furnace oil was received on Board. At the time of commencement of coastal run on 21.06.2008, the master of the vessel further declared the details of bunkers on Board as on 21.06.2008 at 00:48 hours. The Respondent No. 2, M/s Atlantic Shipping Pvt. Ltd. Sikka, filed bill of entry No. F-26 dated 24.06.2008 in respect of bunkers and provisions estimated to be consumed by the vessel during the coastal voyage. Alleging that since the respondent M/s Reliance Industries Ltd. as on the date of receipt of the duty free bunkers i.e. 246.830 MT of furnace oil from M/s Adani Enterprises Ltd. was aware of the fact that the vessel MT Sinar Agra was not meant to undertake foreign voyage but to undertake coastal run, therefore, the furnace oil received duty free, is incorrect and accordingly total duty of Rs. 14,68,419/- payable on the bunker i.e. 246.830 MT of Furnace Oil proposed to be recovered from them by issuing the Show Cause Notice on 15.09.2009, with a proposal for confiscation and penalty on them and penalty on the second Respondent.
Appeal No. C/43/2011
3. The Respondent M/s Reliance Industries Ltd. was also charterer of the vessel MT High Spirit which arrived at Sikka Port at 17:30 hours on 08.06.2008 from Mumbai Port under Port clearance Certificate No. 168 dated 31.05.2008. The master of the said vessel produced a list of Port on call on 08.06.2008 at Sikka Port of the previous journeys of the vessel. From the said list, it revealed that the last journey of the vessel was from Mumbai to Sikka in Ballast and without any cargo meant for foreign ports. The master of the vessel declared the ship stores on arrival of the vessel at Sikka Port from Mumbai on 08.06.2008. Later, the vessel took on Board duty free bunkers from M/s Adani Enterprises against shipping Bill No. 145 dated 06.06.2008, furnace oil 299.755 MT and under shipping bill No. 152 dated 06.06.2008, HSD 89.800 MT, which were supplied on 08.06.2008. The master of the vessel on 09.06.2008 requested the superintendent of Customs to convert the vessel from foreign trade to coastal trade and declared the estimated consumption of bunkers for subsequent 10 days and also furnished the details of stores available on Board. The vessel was converted into coastal vessel at 2:45 hours on 09.06.2008. The respondent M/s Atlantic Shipping Pvt. Ltd. filed the bill of entry No. F/23 dated 10.06.2008 in respect of the bunkers and provisions estimated to be consumed by the said vessel during the coastal voyage for next 10 days. The bill of entry was provisionally assessed on 10.06.2008 by the superintendent of customs and the customs duty of Rs. 13,02,685/- was paid by the said agents on 03.07.2008 against challan No. 127 dated 03.07.2008. Alleging that journey between Mumbai to Sikka cannot be considered as the foreign voyage and the status of the vessel, on her arrival at Sikka, as on 08.06.2008, cannot be considered as a vessel on foreign run or the foreign going vessel, accordingly the vessel was not entitled to obtain duty free bunkers on board on her arrival at Sikka, after completion of necessary investigation, SCN was issued to the Respondent M/s Reliance Industries Ltd. on 18.9.2009 for recovery of customs duty amounting to Rs. 26,28,680/- along with interest and proposal for penalty and confiscation of the goods, also penalty on the second Respondent.
4. Both the notices dated 15.09.2009 and 18.09.2009 issued for recovery of duty of Rs. 14,68,419/- and 26,28,680/-, respectively, were adjudicated by the Joint Commissioner of Customs (Prev.) Jamnagar and the duty was confirmed against M/s Reliance Industries Ltd. with interest and penalty and penalty on the Respondent No. 2 M/s Atlantic Shipping P. Ltd. was also imposed. Aggrieved by the said order, the Respondents filed appeals before the Ld. Commissioner (Appeals), who in turn, allowed their appeals. Hence, the Revenue is in appeal. The Respondents had filed cross objection against the said order of the Ld. Commissioner (Appeals).
5. Ld. AR for the Revenue has submitted that the Ld. Commissioner (Appeals) has set aside the order of the adjudicating authority observing that the adjudicating authority has no jurisdiction in confirming the demand against the respondent for receiving the duty free bunkers supplied by M/s Adani Enterprises Ltd., since the goods were cleared from SEZ unit. It is his contention that the Respondent M/s Reliance Industries Ltd. and the Shipping agent were fully aware of the fact that the respective vessels were not to undertake foreign voyage but to be used for coastal run; however received the bunkers duty free from SEZ unit, therefore, the demand has been rightly issued to the respondent for recovery of the duty by the Customs. It is his contention that Section 30 of SEZ Act,2005 is not applicable to the present case inasmuch as on the basis of necessary declaration by the Respondent M/s Reliance Industries Ltd., the goods were cleared from SEZ duty free and its subsequent use in the coastal run of the Vessels, only created a liability on the duty free bunkers, received by M/s Reliance Industries Ltd. It is his contention that therefore the adjudicating authority has jurisdiction to decide the case on recovery of the customs duty from the respondent. It is his contention that merely because the goods were cleared from SEZ ipso facto cannot oust the jurisdiction of the customs authority when the duty free bunkers were delivered to be used in the vessel, which was initially declared for foreign voyage but later converted to coastal run. In support of his contention the Ld. AR referred to the judgment of Honble Gujarat High Court in the case of UOI vs Oswal Agricomm Pvt. Ltd. 2011 (268) ELT 21 (Guj.) and Diamond and Gem Development Corpn. Vs UOI 2011 (268) ELT 3 (Guj.).
6. Ld. Advocate Sh. J.C. Patel for the Respondent has submitted that on the arrival of the vessel MT Sinar Agra at Port Sikka on 20.06.2008 at 6:48 hours, it was initially kept on standby to undertake a foreign voyage for BENZENE Cargo. While the said vessel was engaged at Sikka on 20.06.2008, it had received duty free bunkers supplied by M/s Adani Enterprises Ltd., SEZ Unit Mundra, which were cleared by the SEZ Unit against shipping bill No. 181 dated 19.06.2008. The said duty free bunkers were received at the vessel for consumption during its voyage as a foreign going vessel. It is his contention that though initially the said vessel MT Sinar Agra was kept on standby for undertaking foreign voyage, the alternative vessel became available for such foreign voyage and accordingly it was decided that the vessel MT Sinar Agra would proceed on coastal run for Dahej Port. The vessel agent Atlantic Shipping Pvt. Ltd. through their letter dated 20.06.2008, informed the Superintendent of Customs Sikka after receiving the duty free bunkers that the vessel would sail in ballast for Dahej and requested to depute the Preventive Officer on board of the vessel. The Preventive Officer of Customs boarded the vessel on 20.06.2008 and took inventory of the ship stores/ bunkers provisions. On 21.06.2008, the vessel was converted from foreign run vessel to coastal run vessel. The Preventive Officer of customs also signed on 21.06.2008 a Landing Certificate certifying that a quantity of 246.83 MT of bunker (furnace oil) which was cleared from the SEZ unit against shipping bill No. 181 dated 19.06.2008 had been received on board of the vessel. The said vessel after undertaking voyages between Sikka, Dahej, Vijar, Kandla and Sikka subsequently proceeded to Karachi and Port Qasim around 08.08.2008. It is his contention that during such foreign voyage to Karachi and Port Qasim, the duty free bunkers procured on 21.06.2008 from the said SEZ unit were consumed. He has submitted that on 20.06.2008 when the vessel received duty free bunkers from the SEZ unit, it had sufficient quantities of bunkers for carrying out voyages within India and the duty free bunkers procured on 20/21.06.2008 from the SEZ unit were consumed only during the subsequent foreign voyage to Karachi and Port Qasim. He submits that the respondent had contested the demand on jurisdiction, limitation as well on merits.
7. In relation to Appeal No. C/43/2011, the Ld. Advocate submitted that the vessel MT High Spirit which was at Mumbai Port on 31.05.2008 obtained port clearance for port Sikka and it sailed from Mumbai on 07.06.2008 and arrived at Port Sikka on 08.06.2008. He has submitted that while the said vessel was at Mumbai Port it was planned that on reaching Sikka Port it would load HSD around 05th/ 06th.06.2008 and proceed for EGPC Suez i.e. on a foreign voyage. Accordingly, on 28.05.2008, the respondent M/s Reliance Industries Ltd. placed an order on Adani Enterprises Ltd. for supply of duty free bunkers, namely 300 MT of fuel oil and 90 MT of HSD for consumption of such foreign voyage. While, the vessel was at Sikka on 08.06.2008, it received duty free bunkers from Adani Enterprises Ltd. Mundra SEZ Unit, under shipping bill No. 145 dated 06.06.2008 and 152 dated 06.06.2008. The said duty free bunkers were received for consumption during voyage of the vessel as a foreign going vessel. Though initially it was planned that the vessel MT High Spirit would make a foreign voyage, on account of a failure of its cargo pumps, the foreign voyage was cancelled and it was used for coastal run to Hazira on 11.06.2008. The vessel was converted to coastal run on 09.06.2008 following the laid procedures. The necessary certificate of inventory of the ship stores, bunkers were issued by the Master of the vessels which was carried out in the presence / supervision of the Preventive Officer of Customs. Since the vessel proceeded for a coastal run bill of entry No. F/23 dated 10.06.2008 was filed with Customs Department in respect of the bunkers to be consumed during coastal run, by the Respondent no.2.
8. He has submitted that the bunkers were cleared as exports without payment of duty from the SEZ unit under shipping bill No. 181 dated 19.06.2008 for the vessel MT Sinar Agra, and Shipping Bill Nos. 145 dated 06.06.2008 and 152 dated 06.06.2008 for supply of duty free bunkers to the vessel MT High Spirit at Sikka Port. The said shipping bills were assessed by the Authorized Officers of SEZ units for clearance of the bunkers to the said vessels without payment of duty. It is his contention that the jurisdiction to question such duty free clearance from the SEZ unit and demand duty vests with the Authorized Officers of the SEZ unit under the Provisions of SEZ Act 2005, and the rules made thereunder and not with the Additional Commissioner Customs (Preventive) Jamnagar, exercising jurisdiction under the Customs Act, 1962, therefore, the demand notice is without jurisdiction. Further, taking recourse to Section 51 and the SEZ Act, 2005 which has an overriding effect against any other law including Customs Act, 1962, he has submitted that the SEZ Act and the Rules constitute a special self contained code which does not include the jurisdiction of Customs officer to demand duty in respect of goods cleared from SEZ, the charge for levy of customs duty on goods cleared from SEZ is not created by Section 12 of the Customs Act,1962, but by the Specific Provision viz. Section 30 of the SEZ Act, 2005. Accordingly, the power to assess and demand the duty, for which the charge is created by Section 30 of the SEZ Act, 2005, necessarily flow from the provisions of SEZ Act and such power cannot be traced to the Provisions under the Customs Act.
9. Further, he has submitted that the demand under Section 28 of the Customs Act, 1962 is wholly without jurisdiction as the taxable event in the present case is specified under Section 30 of the SEZ Act, 2005. Further, he has submitted that the judgment of the Honble Gujarat High Court in Oswal Agricomm Pvt. Ltd. case was under a different set of circumstances hence, not applicable to the facts of the present case. Also, he has submitted that demand notice issued under Section 28 of the Customs Act, 1962 is barred by limitation inasmuch as the bunkers were cleared without payment of duty from the SEZ in June 2008, whereas the demand notice was issued on 18.09.2009. On the issue of confiscation, Ld. Advocate has submitted that Section 111(o) of the Customs Act cannot be made applicable in respect of goods cleared from SEZ, the duty is leviable not under the Customs Act but under Section 30 of the SEZ Act, 2005. On merits, the Ld. Advocate has submitted that the SCN proceeded on a misconception that to be eligible to receive duty free bunkers which are to be consumed when the vessel is a foreign going vessel, the vessel must also be a foreign going vessel at the time of bunkers are received on Board of the vessel. The Ld. Commissioner (Appeals) ought to have held that Section 86 (2) of the Customs Act, 1962 should have read with Section 87 of the said Act which clearly provides that imported stores may be transferred to any vessel as stores for consumption thereon during the period such vessel is foreign going vessel. He should have accordingly, held that it is not necessary at the time when the stores are transferred to a vessel, it should be a foreign going vessel. The transfer may be to any vessel, but the consumption of the stores must be during the period when the vessel is a foreign going vessel. He has further submitted that the Ld. Commissioner (Appeals) erred in holding that Section 86 of the Customs Act, 1962 does not apply to the present case because the stores were not imported on the vessel MT Sinar Agra. Further, he has submitted that the Ld. Commissioner(Appeals) should have held that in the case of vessels MT High Spirit on 08.06.2008 when vessel received the stores at Sikka Port was though not a foreign going vessel, since it was initially planned that the next voyage of the vessel would be a foreign voyage to EGPC Suez, the vessel was entitled to receive duty free bunkers. The initial plan for foreign voyage is clear from the statement of Mr. Laxmikant Shukla dated 28.08.2008 as the foreign voyage was cancelled due to failure of the cargo pumps.
10. Heard both the sides and perused the records.
11. The facts narrated above in both the appeals are not in dispute. The vessel MT Sinar Agra arrived at Sikka Port on 20.06.2008 and received the duty free bunkers supplied by Adani Enterprises Ltd. SEZ. The said vessel was converted from foreign going vessel to coastal run vessel on 21.06.2008. Similarly, the vessel MT High Spirit arrived at Sikka Port on 08.06.2008. The said vessel also received the duty free bunkers on 08.06.2008; later the said vessel was also converted to coastal run on 09.06.2008. The Ld. Commissioner(Appeals) interpreting the provisions of Section 30 of the SEZ Act, arrived at the conclusion that the charging provision on goods removed from the SEZ to the domestic tariff area is Section 30 of the SEZ Act, therefore, the jurisdiction to demand duty on the fuel oil cleared from the SEZ to both the vessels rests with the authorized officer of SEZ and the Joint Commissioner of Customs at Sikka Port has no jurisdiction. I find fallacy in the said interpretation of the Ld. Commissioner (Appeals) inasmuch as on the date of clearance of the fuel oil from Adani Enterprises Ltd. the SEZ Unit, necessary declaration was made that the said goods are cleared to M/s Reliance Industries Ltd. to be used in the respective vessels which are foreign going vessel and to undertake foreign voyage. Accordingly, shipping bills were prepared for export of the duty free bunkers and assessed by the concerned authority. The fuel oil were received at Sikka Port in both the vessels when the vessels were meant to be on a foreign voyage and were foreign going vessel. Due to some exigency, the foreign voyage of both the vessels were cancelled and the Respondent M/s Reliance Industries Ltd. filed necessary bill of entry for consumption of the duty free bunkers to be used in the coastal run of the said vessels and discharged duty. It is illogical and incorrect to say that the goods which were received from the SEZ on a declaration that the same would be used in the vessels meant to undertake a foreign voyage, and if the foreign voyage is cancelled then the assessment made earlier by the SEZ authority be considered as a DTA clearance and accordingly it should be assessed under Section 30 of the SEZ Act,2005 revising earlier assessment being cleared as an export. On the other hand, once, the goods are received in the vessel, and later the vessel is converted to a coastal run vessel, the duty is required to be paid on the bunkers received duty free on such conversion to coastal vessels i.e. on subsequent development. Therefore, following the appropriate method/route, the respondent M/s Reliance Industries Ltd. had filed bill of entry and discharged duty provisionally on the bunkers to be used on coastal run. In such scenario, when the Respondents have themselves submitted to the jurisdiction of the customs to assess the bunkers received duty free from the SEZ unit, but to be used in coastal run, then to hold that the customs authorities has no jurisdiction to demand duty on the duty free bunkers received on the respective vessels and to be used in coastal run, in my opinion is untenable in law. The Revenues allegation/ attempt to establish that the Respondent was aware of the fact that the vessels would not undertake foreign voyage which though not corroborated by evidence, even otherwise also if accepted, it is immaterial and irrelevant since as on the date of clearance of bunkers from the SEZ as export, the vessels were not converted to coastal run vessels. In the above facts and circumstances, the provisions of SEZ Act, 2005 and the Rules made thereunder is clearly not applicable to assess the duty free bunkers received and later used for costal run. Therefore, I do not have any hesitation to hold that Joint Commissioner has rightly exercised jurisdiction in demanding the customs duty on the duty free bunkers when used in the coastal run. Since, the Ld. Commissioner (Appeals) has not considered other issues raised by the Respondent in their grounds of appeal before him and reiterated in the cross objection before this Tribunal, in my opinion, it is prudent to remand the matter to the Ld. Commissioner (Appeals) to consider all issues raised including merit and limitation and record a finding on the same. In the result, the impugned Order is set aside and the Revenues appeals are disposed by way of remand as above. Cross Objections are also disposed of.
( Pronounced in the open court on 07.03.2018 )
(Dr. D.M. Misra)
Member (Judicial)
Neha
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