1998 (3) TMI 134 - SC - Customs

Whether vessels which are used as transhippers can also be treated as ocean-going vessels ? Held that - There is no dispute for the Department that by design and equipment, transhippers are intended to be used mostly to carry the cargo from harbours to the high seas and vice-versa. That such transhippers often move into the open sea is also not disputed by the Department. Thus considering the question from all different angles, it is reasonable to take the view that merely because transhippers are used for carrying cargo for loading into the bulk carriers (those being unable to touch the Port) they cannot be excluded from the category of ocean-going vessels. At any rate it has been demonstrated by the Government that it was not very much interested in segregating transhippers from the category of ocean-going vessels as the Government brought out a new notification enveloping all vessels including transhippers within the ambit of ocean-going vessels, almost immediately after pronouncement of the decision in Chowgule Co. Pvt. Ltd. ( 1987 (2) TMI 62 - SUPREME COURT OF INDIA ). That subsequent development on account of its close proximity of time cannot be overlooked as of no impact. Accept the contention of the owners of the transhippers that such vessels are entitled to the benefit of the Notification dated 11-10-1958.

Summary

Issues:
- Whether vessels used as transhippers can be considered "ocean-going vessels."

Analysis:
1. The main issue in this case revolves around determining whether vessels used as transhippers can be classified as "ocean-going vessels." The dispute arose when some importers of transhippers claimed the benefit of a customs duty exemption for "ocean-going vessels" under a government notification. However, the Customs authorities insisted on the importers filing Bills of Entry for payment of customs duty, leading to a legal challenge.

2. The Customs Act, 1962 requires importers to present a Bill of Entry for goods not intended for transit or transhipment. A government notification exempted "ocean-going vessels" from customs duty. The importers argued that transhippers, equipped for transhipping operations, should also qualify as ocean-going vessels to claim the exemption.

3. The Court considered the characteristics of transhippers, vessels used to carry cargo from harbors to the high seas for unloading into larger vessels. Despite being structurally and technically capable of ocean travel, a previous judgment had held that transhippers primarily used for topping up operations in Indian waters did not qualify as ocean-going vessels.

4. The Court examined the definition of "consumption" in fiscal law, emphasizing that utilization of a commodity, even without complete depletion, could constitute consumption. Previous decisions highlighted the broader interpretation of consumption beyond complete use.

5. The Court analyzed the term "ocean-going vessels" in the context of maritime law and customs regulations. It considered the purpose, design, and use of transhippers, ultimately concluding that transhippers, which frequently operate in the open sea, could be classified as ocean-going vessels.

6. The Court also noted a subsequent government notification, issued soon after a previous judgment, which exempted all vessels (excluding those for breaking up) from customs duty. This development, along with the characteristics and use of transhippers, supported the classification of transhippers as ocean-going vessels.

7. Based on the comprehensive analysis of the vessel's characteristics, use, and the subsequent government notification, the Court ruled in favor of the owners of transhippers, granting them the benefit of the customs duty exemption for ocean-going vessels. The appeals were disposed of in favor of the importers.