1986 (7) TMI 119 - HC - Customs

Summary

Issues Involved:

1. Definition and scope of "foreign going vessel" under Section 2(21) of the Customs Act, 1962.
2. Applicability of Section 87 of the Customs Act, 1962 to daughter vessels.
3. Liability of the petitioner to pay customs duty on stores consumed by daughter vessels.
4. Validity of the bonds executed by the petitioner agreeing to pay customs duty.

Issue-wise Detailed Analysis:

1. Definition and scope of "foreign going vessel" under Section 2(21) of the Customs Act, 1962:

The primary issue is whether daughter vessels carrying cargo from a mother vessel, which cannot enter the port due to size and weight constraints, fall within the definition of "foreign going vessel" as per Section 2(21) of the Customs Act, 1962. According to the respondents, daughter vessels cannot be considered "foreign going vessels" as they do not carry goods between an Indian port and a foreign port. However, the court interpreted that the journey of daughter vessels from the mother vessel berthed at Saugor Roads to the port of Calcutta is a continuation of the mother vessel's journey. Therefore, daughter vessels can be termed as "foreign going vessels" within the meaning of Section 2(21) of the Customs Act.

2. Applicability of Section 87 of the Customs Act, 1962 to daughter vessels:

Section 87 of the Customs Act, 1962 allows imported stores on board a vessel to be consumed without payment of duty if the vessel is a "foreign going vessel." The court held that since the daughter vessels were engaged in the continuation of the mother vessel's journey to discharge cargo at the port of Calcutta, they qualify as "foreign going vessels." Consequently, the stores consumed on board these daughter vessels during this period are exempt from customs duty under Section 87.

3. Liability of the petitioner to pay customs duty on stores consumed by daughter vessels:

The respondents demanded customs duty on stores consumed by the daughter vessels, alleging they were not "foreign going vessels." The court, referencing the decision in Turner Morrison & Co. Ltd. v. The Assistant Collector of Customs for Exports and Others, 1976 CHN 538, held that daughter vessels performing the duties of the mother vessel within territorial waters are considered "foreign going vessels." Thus, the petitioner is not liable to pay customs duty on the stores consumed by the daughter vessels.

4. Validity of the bonds executed by the petitioner agreeing to pay customs duty:

The respondents argued that the petitioner is liable to pay the duty based on bonds executed in favor of the customs authorities. The court dismissed this contention, stating that an agreement to pay customs duty is inconsequential if the statute does not impose such a duty. Since the daughter vessels are deemed "foreign going vessels," the stores consumed are not chargeable to duty under Section 87. Therefore, the bonds executed by the petitioner do not create a liability to pay customs duty.

Judgment:

The court ruled in favor of the petitioner, making the rule absolute and directing the respondents to cancel and withdraw the demands for customs duty contained in the letters dated February 17, 1986, April 18, 1986, and April 24, 1986. The respondents are also prohibited from proceeding with the impugned letters. The verbal prayer for a stay of operation of this order was rejected. No order as to costs was made.