2013 (1) TMI 416 - AT - Customs

Custom Duty on vessel - Ocean going vessel Breaking up of vessel - Excise duty was paid when vessel was built in 1975 and cleared - The appellant had purchased the vessel in an auction in 1993 - on as is where is basis - Whether the vessel should be assessed and levied to duty as the vessel imported for breaking up or not Vessel has to be considered as of Indian origin or imported - Question of payment of customs duties at the time of breaking up does arise Notification No. 162/65 - Notification No. 133/87-Cus Held that - Following the decision in case of JALYAN UDYOG (1993 (9) TMI 108 - SUPREME COURT OF INDIA) considered the exemption Notification No. 162/65 and observed - the principle of the notification is no duty on import of such vessels but when after plying for a number of years, they are scrapped, pay duty on the supposition that it is imported for breaking-up on the date it is broken-up . (date of grant of permission for breaking up, for DG shipping). The notification shifts the date of import in the case of a ship which is imported as an ocean going vessel but subsequently broken up - from the actual date of import to the date of breaking up by creating a legal fiction. The vessel is an Indian origin and therefore cannot be levied to duty at the time of breaking up cannot be accepted. Section 2(25) of the Act when the vessel was purchased by the appellant, importation had not taken place. Importation took place subsequently when the appellant decided to beach the vessel and took permission for the same. Beaching the vessel was for the purpose of breaking it up. Therefore the appellant was advised to file a bill of entry which he filed and this series of events would show clearly that appellant was the owner as well as the importer at the time of filing bill of entry. Therefore appellant has to be held as the importer. In favour of revenue

Issues Involved:

1. Duty liability of the vessel M.V. Jagat Priya.
2. Applicability of Section 20 of the Customs Act, 1962.
3. Relevance of the vessel's Indian origin and previous excise duty payment.
4. Applicability of various customs notifications.
5. Determination of the importer for duty liability.
6. Impact of auction sale terms ("as is where is" basis) on duty liability.
7. Legal precedents and their applicability to the case.

Detailed Analysis:

1. Duty Liability of the Vessel M.V. Jagat Priya:

The primary issue is whether the appellant is liable to pay customs duty on the vessel M.V. Jagat Priya when it was brought for breaking up. The vessel was built in India by Hindustan Shipyard Ltd. and sold to Dempo Steamships Ltd., with central excise duty paid at the time of clearance. The appellant contends that since the vessel is of Indian origin and excise duty was already paid, customs duty should not be applicable at the time of breaking up.

2. Applicability of Section 20 of the Customs Act, 1962:

The Tribunal examined Section 20 of the Customs Act, 1962, which states that goods re-imported into India after exportation are subject to duty as if they were imported for the first time. The Tribunal concluded that the vessel, regardless of its origin, is liable to customs duty upon re-importation for breaking up unless exempted by a specific notification.

3. Relevance of the Vessel's Indian Origin and Previous Excise Duty Payment:

The Tribunal found that the vessel's Indian origin and the payment of central excise duty at the time of its initial clearance are irrelevant for determining customs duty liability upon re-importation for breaking up. The focus is on the vessel's status at the time of importation for breaking up, not its origin or previous duty payments.

4. Applicability of Various Customs Notifications:

The Tribunal considered several notifications, including Notification No. 118/59-Cus, 163/65-Cus, and 133/87-Cus. The relevant notification at the time of the vessel's sale and importation for breaking up was Notification No. 133/87-Cus, which exempts vessels from customs duty unless imported for breaking up. Since the vessel was intended for breaking up, the exemption did not apply, and customs duty was payable.

5. Determination of the Importer for Duty Liability:

The Tribunal addressed whether the appellant could be considered the importer liable for customs duty. The appellant argued that actions by Hindustan Shipyard Ltd. or the auction terms should not impose duty liability on them. However, the Tribunal held that the appellant, having purchased the vessel and decided to break it up, is the importer under Section 2(25) of the Customs Act, 1962, and thus liable for the duty.

6. Impact of Auction Sale Terms ("As Is Where Is" Basis) on Duty Liability:

The Tribunal noted that the vessel was sold in an auction on an "as is where is" basis, free from encumbrances. This sale did not include any condition that the vessel was to be broken up, leaving the decision to the purchaser. Since the appellant decided to break up the vessel, they were responsible for filing the bill of entry and paying the applicable customs duty.

7. Legal Precedents and Their Applicability to the Case:

The Tribunal reviewed several legal precedents cited by the appellant, including the Supreme Court's decision in Baijnath Melaram and various Tribunal decisions. The Tribunal found these precedents inapplicable or distinguishable based on the specific facts of the case. The Tribunal emphasized that the duty liability is determined by the Customs Act and relevant notifications, not by the vessel's origin or previous duty payments.

Conclusion:

The Tribunal concluded that the appellant is liable to pay customs duty on the vessel M.V. Jagat Priya when it was brought for breaking up, as per Section 20 of the Customs Act, 1962, and Notification No. 133/87-Cus. The appeals were rejected, and the duty liability was upheld.

← Previous Next →