2019 (5) TMI 1361 - AT - Customs

Levy of duty - goods recovered from a ship that was wrecked off the shores of India - finalization of provisional assessment - HELD THAT - The intent of importing the impugned vessel for breaking up is not on record to evince. Intent is an inextricable element of heading no. 8908 of the First Schedule to Customs Tariff Act, 1975 and, absent such qualification, the sole alternative is heading no. 8901 of the First Schedule to Customs Tariff Act, 1975 which cannot apply to wrecks. The impugned order has erred by considering only these two alternatives. The admittance of bills of entry to which section 21 of Customs Act, 1962 applies suffices for consideration of the third option. The disposal of articles that were landed India on salvage from the vessel would need appropriate treatment under Customs Act, 1962. There is no duty liability on goods that are not sought to be cleared for home consumption. Wrecks are not imported but any wreck or part thereof sought to be imported are. To that extent, remission on the wreck that remains has no consequence. The discharge of duty liability on the goods that were removed from the wreck and whose quantity or value is not in dispute, would be the appropriate discharge of appropriate duties. The impugned order is therefore set aside and remanded back to the original authority with a direction to restrict the decision to the contents of such bills of entry that were presented or such bills of entry that should have been presented under section 21 of Customs Act, 1962 - Appeal allowed by way of remand.

Issues Involved:
1. Statutory provision under Customs Act, 1962 for levy of duty on goods recovered from a wrecked ship.
2. Applicability of section 21 of Customs Act, 1962 for wrecks versus assessment as imported goods for breaking.
3. Interpretation of exemption notifications for 'ocean going vessels' and their applicability.
4. Legal consequences of vessel wrecking versus breaking up.
5. Remission and relinquishment of duty under section 23 of Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Statutory Provision for Levy of Duty:
The dispute centers on whether the duty on goods recovered from a wrecked ship should be assessed as though the ship itself was imported for breaking or under section 21 of the Customs Act, 1962, applicable for wrecks. The appellant contested the demand of ?98,79,542/- assessed on the ship's light displacement tonnage, arguing that only ?10,61,460.90 was due based on ten bills of entry for 732.60 metric tons cleared between 1987 and 2005.

2. Applicability of Section 21 for Wrecks:
The appellant argued that the shipwreck should invoke section 21 of the Customs Act, 1962, which deals with wrecks, rather than treating the ship as imported for breaking. The court noted that the vessel was not intended for breaking but was salvaged to clear the navigation channel, thus distinguishing it from a deliberate commercial transaction of shipbreaking.

3. Interpretation of Exemption Notifications:
The court examined the historical context and evolution of exemption notifications for 'ocean going vessels.' It was noted that the exemption applied unconditionally at the time of import and that the vessel, if intended to be broken, must be assessed separately. The exemption continued until superseded by notification no. 133/87-Cus dated 19th March 1987.

4. Legal Consequences of Wrecking vs. Breaking Up:
The court differentiated between wrecking (often accidental) and breaking up (deliberate commercial activity). It concluded that the wrecking of the vessel did not equate to breaking up, and thus, the vessel should not be assessed as imported for breaking. The vessel's salvage was forced by statutory obligation, not for commercial appropriation.

5. Remission and Relinquishment of Duty:
The appellant contended that relinquishment of title vests the goods in the government, escaping duty liability. The court acknowledged that duty liability arises on presentation of goods for import, and the salvaged parts of the wreck should be treated under section 21 of the Customs Act, 1962. The court found no breach of exemption conditions and thus no penalty imposition.

Conclusion:
The court set aside the impugned order and remanded the case to the original authority, directing it to restrict the decision to the contents of bills of entry presented under section 21 of the Customs Act, 1962. The proceedings were to be completed within 180 days. The judgment emphasized that there is no duty liability on goods not cleared for home consumption and that wrecks are not imported but parts of wrecks sought to be imported are.

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