2018 (3) TMI 128 - AT - Customs

Transshipment of ship stores - Whether the appellants are required to discharge the customs duty on the transshipment of the ship stores from the vessel MSV Sundaram to SV Shivam belonging to the same owner? Held that - A plane reading of the Sec.86 of the Customs Act,1962 reveals that it is not required that the ship stores at the time of transfer is necessarily be to another foreign going vessel only, but, on the contrary, it would suffice if the vessel later undertakes foreign voyage and the Ship stores transferred to it is consumed on board as per Sec.87 of the Customs Act,1962 - It is not in dispute that after necessary certification by the proper authorities, the new vessel SV Shivam commenced sailing on foreign voyage and there is no dispute of the fact that the ship stores transferred earlier had been used in the said vessel on board as prescribed under Section 87 of CA, 1962. Merely because as on the date of transfer of ship stores to the newly built vessel SV Shivam, which was not ready for voyage, the transfer of ship stores under Section 86 and later consumed on board as per Sec. 87, becomes incorrect and duty could be recovered on the ship stores, cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal by Revenue against order-in-appeal No. 160/Commr.(A)/JMN/2009.
2. Appellant's request for transshipment of ship stores from one vessel to another.
3. Demand of customs duty, interest, penalty, and confiscation of ship stores.
4. Appeal by assesse against confirmation of duty demand.
5. Revenue's challenge against setting aside of confiscation and penalty.

Analysis:
1. The appeals were filed by both the Revenue and the assesse against the order-in-appeal No. 160/Commr.(A)/JMN/2009 passed by the Commissioner of Customs (Appeals) Jamnagar. The case revolved around the transshipment of ship stores from a damaged vessel to a newly built vessel owned by the same entity.

2. The appellant's vessel sustained damages and needed repairs, prompting the transshipment of ship stores to a newly built vessel. The Customs Department granted permission for transshipment, but later issued a Show Cause Notice (SCN) for recovery of customs duty, interest, and proposed confiscation of ship stores. The Ld. Commissioner (Appeals) partly allowed the appeal, setting aside the penalty and confiscation but upholding the duty demand.

3. The appellant argued that the transshipment was done in accordance with the Customs Act, 1962, even though the new vessel had not undertaken a foreign voyage at the time of transfer. The appellant contended that duty on ship stores consumed during a subsequent foreign voyage should not be demanded immediately upon transfer, citing a judgment of the Hon'ble Gujarat High Court.

4. The Revenue opposed, stating that the new vessel was not ready for sailing at the time of transshipment, thus not meeting the definition of a foreign-going vessel under the Customs Act, 1962. They argued that duty should be charged on ship stores transferred earlier, regardless of subsequent foreign voyages undertaken by the new vessel.

5. The Tribunal analyzed the relevant provisions of the Customs Act, 1962, and concluded that the duty demand on ship stores transferred from the damaged vessel to the new vessel was not justified. The Tribunal noted that the new vessel eventually undertook a foreign voyage and consumed the transferred ship stores onboard, aligning with the provisions of the Act. Citing a similar judgment by the Hon'ble Gujarat High Court, the Tribunal modified the order, setting aside the duty demand. Consequently, the Revenue's appeal was dismissed, and the assesse's appeal was allowed.