2017 (1) TMI 134 - AT - Customs

Jurisdiction - whether the Customs officers of Visakhapatnam were proper officers for the area of Continental Shelf of India and Exclusive Economic Zone and consequently had jurisdiction to issue the show cause notice or confirm the demand or impose penalties? Held that - Following the decision in Sagarika Sea Crafts 2009 (11) TMI 745 - CESTAT BANGALORE I am of the view that facts being identical the Customs Authorities of Visakhapatnam has no jurisdiction during the relevant period to issue show cause notice and confirm demand or impose penalties. Demand of duty - fishing trawlers - whether foreign ongoing vessel or not? - the vessels of the appellants in question while in operation on high-seas i.e. outside the territorial waters of India should be reckoned as foreign going vessel and I hold that the provisions of Section 87 of the Customs Act 1962 have to be extended to the bunker in question consumed onboard the vessels of the appellants while acting as chase boas beyond the territorial waters of India. It is for this very reason alone I find that the order of the Additional Commissioner is liable to be set aside. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Jurisdiction of Customs officers of Visakhapatnam.
2. Classification of fishing trawlers as foreign-going vessels.
3. Applicability of Section 87 of the Customs Act, 1962.
4. Time-barred demands and bona fide belief of the Assessee.
5. Confiscation and penalties under Sections 111(d), 111(o), 117/114A, and 112(a) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Jurisdiction of Customs officers of Visakhapatnam:
The primary contention raised by the Assessee was that the Customs officers of Visakhapatnam did not have the jurisdiction over the Continental Shelf of India and the Exclusive Economic Zone (EEZ). The Tribunal referred to the judgment in the case of Sagarika Sea Crafts Ltd. vs. CC, Visakhapatnam [2010 (261) ELT 825 (Tri. - Bang.)], which held that the Customs, Visakhapatnam, did not have jurisdiction to demand duty on bunkers received by vessels in the EEZ. The Tribunal emphasized that the jurisdiction of the Commissioner of Customs, Visakhapatnam, did not extend to the EEZ as per the relevant notification, and thus, the Customs authorities of Visakhapatnam were not proper officers to issue show cause notices or confirm demands.

2. Classification of fishing trawlers as foreign-going vessels:
The Commissioner (Appeals) held that the fishing trawlers fell under the definition of foreign-going vessels as per Section 2(21)(ii) of the Customs Act, 1962. This definition includes any vessel engaged in fishing or other operations outside the territorial waters of India. The Tribunal upheld this view, stating that the vessels should be considered foreign-going when operating on high seas, i.e., outside the territorial waters of India, and thus eligible for duty-free stores under Section 87 of the Customs Act, 1962.

3. Applicability of Section 87 of the Customs Act, 1962:
The Assessee argued that they were entitled to the benefit of duty-free bunkers under Section 87 of the Customs Act, 1962, as they were engaged in fishing activities and had the necessary clearances from the Indian Navy and Ministry of Agriculture. The Tribunal agreed, noting that the fishing trawlers were permitted to undertake activities such as rescue and coordination support in line with fishing activities, as clarified by the Ministry of Shipping, Road Transport, and Highways. Therefore, the Assessee rightfully availed the benefit of duty-free bunkers.

4. Time-barred demands and bona fide belief of the Assessee:
The Assessee contended that the demands were time-barred, as the show cause notices were issued beyond the period of six months. They argued that they had undertaken the activities with proper permissions and were under the bona fide belief that they were entitled to the benefit under Section 87 of the Customs Act, 1962. The Tribunal found merit in this argument, noting that the Assessee had simultaneously undertaken fishing activities and had also purchased diesel oil on payment of duty, supporting their bona fide belief.

5. Confiscation and penalties under Sections 111(d), 111(o), 117/114A, and 112(a) of the Customs Act, 1962:
The original authority had confirmed the duty demand along with interest and imposed penalties, which were partially upheld by the Commissioner (Appeals). However, the Tribunal, following the decision in Sagarika Sea Crafts, held that the Customs authorities of Visakhapatnam had no jurisdiction to issue the show cause notices or confirm the demands. Consequently, the Tribunal set aside the impugned orders in the appeals filed by the Assessee and dismissed the appeals filed by the department.

Conclusion:
The Tribunal allowed the appeals filed by the Assessee, setting aside the impugned orders, and dismissed the appeals filed by the department. The Tribunal concluded that the Customs authorities of Visakhapatnam lacked jurisdiction, the fishing trawlers were foreign-going vessels eligible for duty-free stores under Section 87, and the demands were time-barred due to the Assessee's bona fide belief and proper permissions.