2017 (2) TMI 294 - SC - Customs

Import of rigs for repair and reexport - non filing of Import General Manifest of the towing rigs - Confiscation of goods - foreign going vessel - imposition of redemption fine and penalty - benefit of N/N. 153/94-Cus - whether foreign going vessels cease to be so when they enter into Indian territorial waters only for repairs? - goods for the purposes of Section 46(1) of the Act - Held that - the vessel was in operation and primarily used within the territorial waters of India and was not used as an ocean going vessel. As a sequitur, it was held that the vessel were goods imported into India for home consumption for they were primarily to be used as a vessel in India, i.e., in the territorial waters. However, the Court was conscious and expressly guarded the said proposition clarifying that it was not pronouncing any dictum as to what would be the position if these goods (the vessel) were not intended to be primarily used in India or used occasionally for short period in India and whether in such situation, the vessel should be treated as a good for home consumption. As the vessel in the said case was brought in India and was primarily used as a transshipper and occasionally in the open seas, it was held to be a good imported for home consumption. Release of foreign exchange, approval and licence, etc. are prior to the import. Import may not take place in spite of this aforesaid clearances/licence and release of foreign exchange. There may have been violation of another enactment/provision as the rig was not imported, albeit for deciding the question whether the rig was imported into India, the requirement of home consumption has to be satisfied. Then alone, the good , i.e., the vessel/rig would be taxable and customs duty payable under the Act. Pertinently, the adjudication order does not hold that the import had taken place in 1987 when the rig first put into operation in the high seas. This was not treated as the date of import or home consumption. The import as per the authorities had taken place when the rig was brought for repairs. The evaluation of the rig has been done on the basis of the last visit of the rig for repair in 1998. While we are disposed to accept that there was no import, we would not on the said finding hold that the owner had not violated the provisions of the Act, which are much broader and wider in scope. The Act regulates and mandates compliance by the foreign going vessels when they enter the territorial waters. Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a good meant for home consumption. Thus, violations recorded by the tribunal cannot be found fault with. Though Goods are liable to confiscation, reduction in redemption fine by the tribunal is justified.

Issues Involved:
1. Whether the rig was a foreign going vessel when it entered Indian territorial waters for repairs.
2. Whether the rig was imported for home consumption.
3. Whether the rig was liable for customs duty and penalties under various sections of the Customs Act, 1962.
4. Whether the rig was subject to confiscation under the Customs Act, 1962.

Detailed Analysis:

1. Whether the rig was a foreign going vessel when it entered Indian territorial waters for repairs:
The tribunal examined whether the rig, which was engaged in drilling activities outside Indian territorial waters, ceased to be a foreign going vessel when it entered Indian waters for repairs. The tribunal referred to the Bombay High Court decision in Amership Management Pvt. Ltd., which held that a drilling rig engaged in operations outside Indian territorial waters is a foreign going vessel. However, the tribunal opined that when the rig entered Indian territorial waters for repairs, it was not engaged in any operation outside India and lost its character as a foreign going vessel. The tribunal concluded that the rig was not a foreign going vessel when it entered Indian territorial waters for repairs.

2. Whether the rig was imported for home consumption:
The tribunal addressed the contention that the rig was not imported for home consumption and thus a bill of entry was not required to be filed. It referred to the Supreme Court's judgment in Apar Pvt. Ltd., which stated that the act of importation continues until the goods merge with the mass of goods in the country. The tribunal concluded that the rig was not intended to be used in India but only brought in for repairs, and hence, it was not for home consumption. The tribunal further stated that the rig was not in transit through Indian waters for drilling purposes, and thus, it could not be considered as goods for home consumption under Section 46(1) of the Act.

3. Whether the rig was liable for customs duty and penalties under various sections of the Customs Act, 1962:
The tribunal analyzed the applicability of clauses (f), (g), (h), and (j) of Section 111 of the Customs Act, 1962, which pertain to the confiscation of improperly imported goods. It held that the provisions of Section 111 were attracted due to the non-declaration of the rig in the Import General Manifest and the failure to file the bill of entry. The tribunal found that there was no deliberate intention to contravene regulations but clear negligence on the part of the importer. Consequently, the tribunal reduced the fine for the rig's redemption but upheld the imposition of penalties.

4. Whether the rig was subject to confiscation under the Customs Act, 1962:
The tribunal concluded that the rig was liable for confiscation under Section 111 of the Customs Act due to the failure to comply with import formalities. The rig was brought to Indian waters for repairs without proper declaration and documentation, leading to its confiscation. However, the tribunal allowed the rig to be redeemed on payment of a reduced fine, considering the absence of deliberate contravention.

Conclusion:
The Supreme Court upheld the tribunal's decision, agreeing that the rig lost its character as a foreign going vessel when it entered Indian waters for repairs and was not imported for home consumption. The rig was liable for confiscation due to non-compliance with import formalities, but the fine for redemption was reduced due to the lack of deliberate contravention. The appeals were dismissed without any order as to costs.

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