2024 (4) TMI 384 - AT - Customs

Levy of Customs Duty - bunkers lying inside the tanks of the vessel including the consumption between Bedi Port to Alang or not - transshipment of cargo - foreign going vessel - Scope of SCN - HELD THAT - Section 86(2) inter alia provides that any stores imported in a vessel or aircraft may with proper permission of the proper officer be transferred to any vessel as stores for consumption therein as provided in Section 87 which inter alia provides that imported stores may without payment of duty be consumed on the vessel as stores during the period such vessel is a foreign going vessel. In order to appreciate the contention raised in the disputed matter it is necessary to notice a basic premise that under Customs Act goods entering into India becomes imported goods and chargeable to duty under Section 12 unless they are exempt from payment of duty by virtue of specific provisions. It is significant to note that ship stores or spares thereof are not exempted from the operation of Section 12 but by virtue of Section 53 of the Act are allowed to be transited without payment of duty - Similar provision is found in Section 54 in respect of the goods imported into a customs port or customs airport but is intended for transhipment of goods. In the present matter it is found that the tug had originally arrived at Bedi ports from overseas port laden on mother vessel. Mother vessel was unable to complete the delivery of the said tug at Alang owing to requirement of deeper draught which was not available at the ship breaking yard at Alang. The said tug had arrived from foreign port it was treated as a foreign going vessel. There is no dispute over the fact that the said tug had not performed any costal voyage or undertaken any coastal operation. Therefore the fuel consumed during their transshipment from Bedi port to Alang cannot be considered as dutiable. The impugned orders are not sustainable hence the same are set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the liability of the appellant to pay customs duty on the bunkers consumed during the voyage from Bedi Port to Alang for tug vessels purchased for breaking purposes, and the interpretation of relevant provisions of the Customs Act, 1962 regarding transshipment and transit of goods.

Issue 1: Liability to pay customs duty on bunkers consumed during the voyage from Bedi Port to Alang:
The appellant contested the duty liability, arguing that the vessels were considered as cargo, not vessels, and that the demand for duty was beyond the scope of the show cause notice. The appellant emphasized that the tug vessels were meant for breaking at Alang and had not undertaken any coastal voyage prior to arriving at Alang. The appellant also raised concerns about double taxation due to the duty demand on bunker consumption. The appellant cited legal precedents to support their arguments.

Issue 2: Interpretation of relevant provisions of the Customs Act, 1962:
The Tribunal examined Section 55 of the Customs Act, which outlines the liability of duty on goods transited or transshipped to a customs station. The Tribunal found that the tug vessels were imported at Alang and were not on a coastal voyage from Bedi Port to Alang, as claimed by the revenue. The Tribunal noted that the vessels were never converted into coastal vessels and the fuel consumed during transshipment could not be considered dutiable. The Tribunal also referenced Sections 86 and 87 of the Customs Act regarding transit and consumption of stores on foreign-going vessels to support their findings.

Conclusion:
The Tribunal set aside the impugned orders, ruling in favor of the appellant. The appeals were allowed with consequential relief, as per the law. The judgment was pronounced in open court on 09.04.2024 by the Appellate Tribunal CESTAT AHMEDABAD.