2017 (8) TMI 55 - AT - Customs

Confiscation - penalty - import of Fishing Trawlers - benefit of N/N. 21/2002-Cus. dt.1.3.2002 as amended - whether the disputed goods are in the nature of ship stores or otherwise and in consequence, whether customs duty is required to be paid on the same? - Held that - There can also be no dispute that once the fishing trawler complete its shore modalities and goes to the high seas for their intended fishing operations, they will have to be treated as foreign going vessel in terms of Section 2 (21) of the Customs Act, 1962 reproduced in para 4.6 above. Even the CBEC Customs Manual of Instructions, in Chapter 2, Para-15 thereof clarifies that consumables can remain on board without payment of duty - CBEC vide circular No.89/88/CX.6 dt. 30.12.1988 has further clarified that stores for consumption on board a vessel would cover stores, both consumable and non-consumable, meant for use in a ship. There is no proof or allegation whatsoever that impugned ship bait and other consumables were not used for high seas fishing operations or that they were illicitly removed into the DTA. Especially, when these trawlers themselves have been subject to Nil rate of duty and it is not in dispute that they have come to Indian Customs Waters only for the purpose of completing import formalities and also registering them as fishing vessels, only to go back to high seas for deep sea fishing for export, insistence of payment of duty on the ship stores is definitely not in sync with the provisions for foreign going vessels and certainly run counter to the avowed intent of the government to promote exports. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the disputed goods are considered ship stores or dutiable goods.
2. Whether customs duty is required to be paid on the disputed goods imported along with fishing trawlers.

Analysis:
1. The case involved a dispute regarding the nature of goods imported along with fishing trawlers by a company engaged in fishing and exporting. The Directorate of Revenue Intelligence initiated proceedings proposing demand of customs duties on items like fish bait and consumable goods. The Commissioner dropped the proceedings, leading to the department filing an appeal. The key argument by the department was that the goods were imported and should be subject to customs duty as they were not exported along with the trawlers. On the other hand, the respondent argued that the trawlers were foreign going vessels, and the ship stores were used for fishing operations, thus not constituting an import under the Customs Act.

2. The department contended that since the trawlers were not foreign going vessels at the time of clearance for home consumption, the bunkers, fish bait, and food items on board should be considered imported goods and be subject to customs duty. They relied on legal provisions and a previous tribunal decision to support their stance. However, the respondent argued that the trawlers were foreign going vessels, and the ship stores, including fish baits, were essential for fishing operations and should be classified as ship stores exempt from customs duty. They highlighted that the goods did not become part of the land mass and were not unloaded, thus not meeting the criteria for import under the Customs Act.

3. The Tribunal analyzed the provisions of the Customs Act related to transit and transhipment of stores, defining foreign going vessels, and the treatment of ship stores on board vessels. The Tribunal noted that the fishing trawlers were imported under an exemption and were destined for high seas for deep-sea fishing and subsequent export of the catch. Considering the purpose and usage of the ship stores in fishing operations, the Tribunal concluded that the goods were indeed ship stores for use in foreign going vessels and exempt from customs duty. They emphasized that the procedural requirements should align with the provisions for foreign going vessels and promote exports. Consequently, the Tribunal dismissed the department's appeal, upholding the adjudicating authority's decision in favor of the respondent.

In conclusion, the Tribunal ruled in favor of the respondent, determining that the disputed goods imported along with fishing trawlers were ship stores meant for use in foreign going vessels and thus exempt from customs duty, based on the purpose and usage of the goods in deep-sea fishing operations.