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2020 (8) TMI 400 - AT - CustomsImport of Foreign Flag Vessel - MV Darya Manthan - non-payment of duty in terms of Notification No. 21/2002 or 19/2012 - foreign going vessel or not - Jurisdiction of Commissioner of Customs, Cochin over the import which initially occurred at the port of Paradeep - It appeared to investigation that the dredger was not covered as a foreign flag vessel in terms of Section 2(21) of Customs Act, 1962 and CBEC Circular No. 16/2012 dated 13.06.2012 - demand of duty along with interest and equal penalty under Section 114A of CA. Whether the impugned vessel MV Darya Manthan is foreign going vessel in terms of Section 2(21) of Customs Act, 1962? - HELD THAT - Understandably, the work undertaken by the vessel is in the port premises and even going by the definition of the Territorial Waters as provided by the counsel himself, the work undertaken is within Territorial Waters. Appellants have not been able to provide any definitive proof to show that during the period in dispute the vessel did proceed to a place beyond Indian territorial waters for any purpose. Therefore, the appellants cannot take recourse to the definition contained in Section 2(21) (ii) of Customs Act, 1962, to claim that the impugned vessel is a foreign going vessel. Therefore, the impugned vessel cannot be treated as a foreign going vessel during the impugned period. Whether the appellants are entitled to the benefit of Notification No.94/96? - HELD THAT - The first import has taken place in 2007 when there was no duty leviable on such dredgers. Thereafter, the subsequent visits to the Indian Ports by the impugned vessel should be treated as reimport and benefit of Notification No.94/1996-Cus should be made available and duty should be charged to the extent of repair or maintenance charges incurred - this argument is not tenable - the import and export activities as claimed by the appellant are not recorded. The appellants themselves agree that no Bills of Entry and Shipping Bills have been filed. In the absence of clear record to correlate the import and export of the vessel and the extent of repairs claimed to have been undertaken, the appellant s claim cannot be entertained - the appellants cannot claim the benefit of a notification retrospectively, that too having not established the fulfilment of conditions envisaged in the notification. Whether Commissioner of Customs, Cochin has jurisdiction over the import which initially occurred at the port of Paradeep on 11.6.2011? - HELD THAT - No act of import Vis a Vis the impugned vessel has taken place at the port of Cochin. There is no legal backing to come to a conclusion that the act of import has occurred/completed at Cochin. The only change in circumstances with regard to the vessel at Cochin is that either the disponent and/or the lessee has changed, vis a vis its position in Dhamra Port, where the vessel was already in coastal run as permitted by Paradeep Customs. Per contra, the appellants submit that it is accepted by the department that in May 2011 when it was converted into coastal run; it is evident that the dredger was imported into India for home consumption in Paradeep first by its conversion to coastal run; therefore, Cochin Customs has no jurisdiction to demand duty on imports made at Paradeep Port. Whether the vessel MV Darya Manthan is liable to pay duty on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013? - HELD THAT - The impugned order confirms duty on the vessel imported in 2011, in terms of a Notification issued in 2012. The said Notification is not retrospective, as it effects the substantial rights of an importer. Moreover, we find that duty has been demanded for three periods i.e., 28.1.2012 to 10.10.2012; 16.10.2012 to 08.01.2013 and 09.01.2013 to 28.02.2013 depending on the disponent owners and the companies who took the vessel on lease. We fail to understand as to how duty could be demanded and confirmed for three different periods, when there is no change in the status of the impugned vessel i.e., the vessel continued to be in the coastal run throughout the period. We find that the Notification No.19/2012 dated 17.3.2012, did not envisage any such collection of duty from different lessees during the period. Moreover, customs duty is charged when the act of importation is done - a stand, taken even due to mistaken appreciation of law, cannot be selective. Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV Darya Manthan can be initiated? - HELD THAT - Cochin Customs had no jurisdiction to demand duty on the impugned vessel and we find that the show-cause notice and adjudication order have been issued without proper authority of law. Moreover, in the instant case, the vessel has been traveling between foreign ports and Indian ports. During the current Journey, the vessel arrived at Paradeep Port on 11-5-2011. If duty was chargeable on vessels as per change in law if any, and if a Bill of entry was needed to be filed in view of the circular issued by CBEC, it was incumbent upon Paradeep Customs to advise the appellants. Paradeep Customs have not only permitted costal run for the vessel but also have accepted bills of entry for ship stores, bunkers etc. Proper officers have boarded the vessel and inspected the documents at various places. Every movement and intention of the vessel was known to the department. Therefore, extended period cannot be invoked in this case - the action cannot be taken on a vessel imported in 2011 on the basis of a clarification issued vide circular in 2012. If the department can view the issue differently at different periods of time, the appellants also can understandably, entertain a bona fide belief on the taxability of the impugned vessel and the procedures to be adopted thereof. In any case, suppression of fact, etc cannot be alleged, and extended period cannot be invoked. Whether Commissioner of Customs was correct in confirming the duty liability jointly on different parties? - HELD THAT - Learned Commissioner while passing the impugned order confirmed the duty of ₹ 3,28,42,609/- jointly on the owner of the dredger MV Darya Manthan , M/s. Manthan Dredging Ltd., Hong Kong and disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Samudra Dredgers Ltd., London, UK. He also confirmed duty of ₹ 46,73,440/- jointly on the owner of the dredger MV Darya Manthan , M/s. Manthan Dredging Ltd., Hong Kong and the disponent owner M/s. Samudra Dredgers (UK) Ltd. and M/s. Universal Dredgers Ltd., London, UK. We find that such a joint confirmation has no sanctity of law, inasmuch as the exact amount payable by the individual noticees is not given. The order is not enforceable also for the said reason. On this count also, the impugned order is liable to be set aside. Duty demanded at the rate of 6% CVD - HELD THAT - CVD at the rate of 1% is applicable in terms of Notification No.1/2011. They also submit that the value of the dredger is inflated, relying on a news report about the controversy on Sethusamudram Project, even though the appellants have placed on record the purchase cost of the dredger - this issue does not require consideration, as it is held that the impugned order is not maintainable on the count of jurisdiction, limitation and for the reason that the same is not legally enforceable being jointly confirmed without specifying the due amount payable by individual noticees. Appeal allowed - decided in favor of appellant.
Issues Involved
1. Whether the impugned vessel MV Darya Manthan is a foreign-going vessel in terms of Section 2(21) of the Customs Act, 1962. 2. Whether the appellants are entitled to the benefit of Notification No. 94/96. 3. Whether the Commissioner of Customs, Cochin has jurisdiction over the import which initially occurred at the port of Paradeep on 11.6.2011. 4. Whether the vessel MV Darya Manthan is liable to pay duty on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013. 5. Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV Darya Manthan can be initiated. 6. Whether the Commissioner of Customs was correct in confirming the duty liability jointly on different parties. Detailed Analysis 1. Whether the impugned vessel MV Darya Manthan is a foreign-going vessel in terms of Section 2(21) of the Customs Act, 1962. The appellants argued that MV Darya Manthan is a foreign-going vessel as per Section 2(21) of the Customs Act, 1962, which includes vessels engaged in operations outside the territorial waters of India. However, the tribunal found that during the disputed period, the vessel was engaged in dredging operations within Indian territorial waters. The appellants failed to provide definitive proof that the vessel proceeded beyond Indian territorial waters. Therefore, the tribunal held that the vessel could not be treated as a foreign-going vessel during the impugned period. 2. Whether the appellants are entitled to the benefit of Notification No. 94/96. The appellants claimed that the vessel should be treated as re-imported and thus eligible for benefits under Notification No. 94/96-Cus, which allows duty to be charged only on repair or maintenance costs. However, the tribunal found that the import and export activities were not recorded, and no Bills of Entry or Shipping Bills were filed. The tribunal upheld the Commissioner’s observation that the vessel was not imported through a due process and thus did not qualify as re-imported cargo. Consequently, the appellants could not claim the benefit of the notification. 3. Whether the Commissioner of Customs, Cochin has jurisdiction over the import which initially occurred at the port of Paradeep on 11.6.2011. The tribunal found that the vessel was first imported at Paradeep Port, where it was converted from foreign run to coastal run. The tribunal noted that Cochin Customs did not have jurisdiction to demand duty on imports made at Paradeep Port. The tribunal cited the case of Samsung Maritime Ltd., which held that a Commissioner at one port does not have jurisdiction over imports at another port. Therefore, the tribunal concluded that Cochin Customs had no jurisdiction to demand duty on the vessel. 4. Whether the vessel MV Darya Manthan is liable to pay duty on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013. The tribunal observed that the vessel continued to be in coastal run throughout the period and that duty could not be demanded for different periods based on changes in lessees. The tribunal found that the duty was demanded under a Notification issued in 2012, which was not retrospective. The tribunal held that the demand for duty for different periods was not justified and lacked legal backing. 5. Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV Darya Manthan can be initiated. The tribunal found that the Commissioner’s decision to initiate separate proceedings for confiscation and penalty by Paradeep Customs while demanding duty by Cochin Customs was incorrect. The tribunal held that demand and confiscation proceedings could not be initiated in a truncated manner and that Paradeep Customs should have taken action if any violation occurred. 6. Whether the Commissioner of Customs was correct in confirming the duty liability jointly on different parties. The tribunal found that the joint confirmation of duty on different parties without specifying the exact amount payable by each noticee had no legal sanctity. The tribunal held that such an order was not enforceable and thus set aside the impugned order on this ground as well. Conclusion The tribunal set aside the impugned order and allowed the appeals with consequential relief, if any, as per law. The tribunal held that Cochin Customs had no jurisdiction to demand duty on the vessel, the vessel could not be treated as a foreign-going vessel, and the appellants were not entitled to the benefit of Notification No. 94/96. The tribunal also found that the joint confirmation of duty on different parties was not legally enforceable.
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