2017 (12) TMI 1162 - AT - Customs

Demand the duty that had not been paid at the time of import - Non-compliance with import procedure - case of Revenue is that the goods were not ship stores and, covered by transhipment provisions in the Customs Act, 1962, are liable to the customs duties that had not been discharged at the time of clearance - the case of the appellants is that the goods, having been placed on board a vessel and not intended for home consumption, was not required to follow any procedure other than that of transhipment and was not liable to duties of customs. Held that - Description in the airway bill is of no statutory relevance under the Customs Act, 1962 which bases liability to import duty on the entry made under section 46 of Customs Act, 1962. The airway bill is of relevance in the filing of the import general manifest under section 30 which enables shifting of the responsibility for due discharge of duty liability from the person-in-charge of conveyance to the importer acknowledging the latter as possessor of right to clear the goods. The manifest will clearly indicate the destination of the goods for home consumption at port of discharge or for transhipment to another customs station or on transit to another customs station or place outside India. Needless to say, goods that are described as spares/stores in the airway bill may well be destined to other customs stations or locations outside India with the liability to duty also deferred accordingly till due arrival at such destination. In the absence of such details, goods that have been found to be excluded from stores cannot be subject to duty liability unless it has been destined for home consumption in India. The impugned order has proceeded to recover duty and visit the appellants with detrimental consequences after considering the nature of the goods and holding that these are not ship spares ; however, there is a marked lack of material pertaining to the goods or any finding on the ultimate disposal of the goods. Taking note of the submission of the appellants that the vessel is a research vessel for which research equipment are ship stores , the adjudicating authority finds that the vessel, even if under a foreign flag, does not become a foreign going vessel merely for that reason and, more so, as research vessels are excluded from scope of engagement in foreign trade. Rejecting the claim of the appellants that these are ship stores covered by the inclusive portion - other articles of equipment. With the contractor having absented itself from proceedings, the adjudicating authority, placing reliance on section 147 of Customs Act, 1962, transferred the duty liability to M/s JM Baxi & Co as deemed agent of the contractor inferred from the inclusion of their name in the commercial invoice and in the airway bill, the filing of application for transhipment permit and the execution of transhipment bond on behalf of the Master of MV Mezen - all of which, according to her, would bring them under the ambit of agent. The correspondence and electronic mail are cited by the adjudicating authority to conclude that the appellants were all aware that they were circumventing the provisions of Customs Act, 1962 and, hence, by acts that rendered the goods liable to confiscation, they were subject to the penalties under section 112 of Customs Act, 1962. Matter remitted back for fresh determination.

Issues Involved:
1. Identity of the importer from the airway bill and import manifest.
2. Whether M/s JM Baxi & Co is an agent of the importer under section 147 of Customs Act, 1962.
3. Whether the goods were intended as transhipment or as stores at the time of arrival at Mumbai Air Cargo Complex.
4. If intended as stores, whether they were to be warehoused without assessment or covered by section 86 of Customs Act, 1962.
5. Whether the relevant documents for import as stores were filed.
6. Whether the relevant document for onward shipment as stores to a foreign-going vessel was processed.
7. If not, whether the goods were transshipped to a customs station or sent to a place outside India as per section 54 of Customs Act, 1962.
8. Whether MV Mezen can be considered as a place outside India.
9. Whether the goods were delivered on board MV Mezen.
10. Whether there was any breach of provisions of chapter VIII of Customs Act, 1962 or of the bond executed for transhipment.
11. Whether the ultimate destination of the goods was India for home consumption.
12. Whether M/s JM Baxi could be held liable to duty under section 148 of Customs Act, 1962.

Detailed Analysis:

1. Identity of the Importer:
The airway bill recorded the Master of MV Mezen as the consignee, suggesting the goods were ordered on behalf of the vessel. No bill of entry was filed, and the goods were not seized under section 110 of Customs Act, 1962, indicating proceedings pertain to absent goods.

2. Agency of M/s JM Baxi & Co:
The adjudicating authority inferred that M/s JM Baxi & Co acted as an agent for the contractor, M/s Laboratory of Regional Geodynamics Ltd, based on their inclusion in the commercial invoice and airway bill, the filing of the transhipment application, and the execution of the transhipment bond on behalf of the Master of MV Mezen.

3. Intention as Transhipment or Stores:
The impugned order and submissions revolved around whether the goods were considered stores. The adjudicating authority found the goods were not ship spares and were intended for use on the ocean bottom, not on the vessel, thus not qualifying as stores under section 2(38) of Customs Act, 1962.

4. Warehousing and Section 86 Compliance:
The adjudicating authority noted that the goods were not warehoused without assessment or covered by section 86 of Customs Act, 1962, as they were not considered stores.

5. Filing of Relevant Documents:
The adjudicating authority found no documents linking M/s JM Baxi & Co with the agreement between the survey contractor and the Indian entity, nor any formal arrangement between them.

6. Onward Shipment as Stores:
The adjudicating authority held that the goods were not eligible for transhipment as stores due to the vessel not being a foreign-going vessel and the goods not being ship stores.

7. Transshipment Compliance:
The adjudicating authority rejected the eligibility for transhipment, noting that the goods were engaged in a contract with an Indian entity and did not touch a foreign destination, thus not qualifying for transhipment under section 54 of Customs Act, 1962.

8. MV Mezen as a Place Outside India:
The adjudicating authority, referencing the definition in section 2(21) of Customs Act, 1962, and the decision in Pride Foramer v. Union of India, held that the exclusive economic zone is part of India, and thus MV Mezen was not considered a place outside India.

9. Delivery on Board MV Mezen:
The adjudicating authority found that the goods were not intended for use on the vessel but were placed on the seabed, thus not qualifying as ship stores.

10. Breach of Chapter VIII Provisions:
The adjudicating authority concluded that the transhipment procedure was incorrectly adopted to circumvent formalities, leading to a breach of chapter VIII provisions.

11. Destination for Home Consumption:
The adjudicating authority found that the goods were not intended for home consumption but were part of a survey project, thus not subject to duty for home consumption.

12. Liability of M/s JM Baxi:
The adjudicating authority held M/s JM Baxi & Co liable for duty under section 148 of Customs Act, 1962, as a deemed agent of the contractor, based on their involvement in the transhipment process.

Conclusion:
The impugned order was set aside, and the matter was remitted back to the original authority for fresh determination based on the outlined chain of findings. The adjudicating authority must rectify deficiencies to enable a credible adjudication of the issue.

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