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TMI Blog2013 (6) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumption after the status of the vessel was converted to a vessel intended for breaking up. In the aforesaid premises, the respondent assessee squarely falls within the definition of “importer” as envisaged under sub-section (26) of section 2 of the Act. Even if notification No.163/65 did not expressly provide for filing of a fresh bill of entry, such requirement has to be read into it, inasmuch as a condition precedent for importing any goods is filing of a bill of entry. Therefore, the subsequent Notification No.16/2000-Cus only makes explicit what was otherwise implicit in the earlier notification. The Tribunal has misread the decision of the Supreme Court in the case of Union of India v. Jalyan Udyog (1993 (9) TMI 108 - SUPREME COURT OF INDIA) in holding that the date on which the vessel is broken up would be the date on which it is taken for breaking i.e. the date of transfer from the Shipping Corporation of India to the respondent and not the date of beaching at Alang and on that date the importer would be Shipping Corporation of India. Decision of tribunal set aside - decided in favor of revenue. - TAX APPEAL No. 537 of 2004 - - - Dated:- 26-7-2012 - MR. AKIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was required to pay central excise duty after breaking up. The assessee, accordingly, requested for grant of beaching permission after arrival of the vessel at Alang anchorage point and completion of customs formalities. In response thereto, the assessee was informed by the customs authorities that exemption from payment of customs duty at the time of import of Indian built vessel for breaking was conditional and that it was required to be ascertained as to whether at the time when the vessel was cleared for home consumption, the duty in respect thereof had been paid. It was further stated that though the vessel was built in India, the assessee was required to follow all the procedures under the Customs Act and that permission for breaking could not be granted and if the vessel is beached without permission, action would be initiated under the provisions of the Act. Subsequently, in connection therewith, there was correspondence between the assessee and the Customs Department and ultimately the assessee presented a Bill of Entry for assessment alongwith documents with a request to assess its Bill of entry. The Bill of Entry was taken up for final assessment and after hearing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1965, even then no duty could be recovered from the assessee since it was the Shipping Corporation of India Ltd. who was the importer of the ship and who had cleared the ship for breaking. Therefore, the duty liability, if any, would be that of Shipping Corporation of India. In support thereof, the assessee had placed reliance upon a decision of the Tribunal in the case of Collector of Customs, Cochin vs. Steel Industries Kerala Ltd., 2002 (5) RLT 574. 4. The Commissioner (Appeals) after considering the record of the case and the submissions made at the time of personal hearing, held that insofar as the contention regarding applicability of Notification No.118/59-Cus. dated 18th June, 1959 is concerned, nothing has been produced to show the notification under which the vessel was cleared by Hindustan Shipyard. He further held that the adjudicating authority had rightly applied Notification No.163/65 dated 16th October, 1965 for charging customs duty on the vessel in question. However, as regards the alternative contention of the assessee that even if Notification No.163/65 is applied, necessary duty has to be paid by the importer and not by the assessee, the Commissioner (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breaking it, where after it reached Alang for breaking. According to the Tribunal, once the vessel was sold for breaking, it was no longer ocean going or sea worthy. Therefore, the voyage from Cochin to Porbandar would be a voyage as an ocean going vessel and that the voyage from Porbandar to Alang for breaking, even if on its own steam, would not be a voyage of an ocean going vessel. The Tribunal was of the view that under the Notification No.163/65, what was exempted was an ocean going vessel. Under the circumstances, once the vessel was not an ocean going vessel and was used in internal waters, it would not be eligible for duty exemption and would be liable to duty as applicable to a vessel. However, if the vessel was to be broken up, the rate of duty, by a fiction of law, on conversion from ocean going status to intended for breaking up, would be leviable to customs duty under the heading vessel for breaking up, viz., sub-heading 8908.00. The Tribunal observed that the duty liability on the subject goods has to be decided on the basis of the stage at which the duty has to be levied namely, as to whether at Cochin when the vessel came on foreign run from Aqaba or thereafter onwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. It, accordingly, held that the duty demand made on the assessee and further orders of home clearance made at Bhavnagar were not under any provision of the Customs Act and hence could not be upheld. The Tribunal further held that the date on which the vessel was to be broken up in terms of the decision of the Supreme Court in the case of Union of India v. Jalyan Udyog, 1993 (68) E.L.T. 9 (S.C.) would be the date on which the vessel is taken up for breaking, that is, the date of transfer from the Shipping Corporation of India to the respondent and not the date of beaching at Alang and was of the view that on that date, the importer would be Shipping Corporation of India. The Tribunal, accordingly, held that the assessee was not liable to pay the duty assessed by the adjudicating authority and dismissed the appeal which has given rise to the present appeal by the department. 6. Initially, by a judgment and order dated 6th December, 2004, a Division Bench of this court had dismissed the appeal on the ground that the same does not give rise to any substantial question of law. The department carried the matter in appeal before the Supreme Court. By a judgment and order dated 26th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the vessel and that the respondent has not cleared the goods for home consumption. It was submitted that in terms of the proviso to the Notification No.163/65 as well as the definition of importer under subsection (26) of section 2, the respondent was the importer of the vessel for the purpose of breaking the same and as such, the Tribunal was not justified in holding that the respondent was not an importer. Referring to Notification No.163/65-Cus., it was pointed out that under the said notification, an ocean going vessel was exempted from payment of duty at the time when it was cleared for home consumption subject to the condition that duty of customs would be levied at the time when the vessel was broken up as if it had been imported at that time. It was submitted that at the stage when the Bill of Entry came to be filed, M/s. Shipping Corporation was no longer the owner of the vessel and that the respondent was the owner and as such, the adjudicating authority had rightly held that the respondent was liable to pay the customs duty in respect of the vessel in question. It was argued that it is well-settled that import of goods into India would commence when the same cross the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, even if the vessel is liable to customs duty, on an applicability of the provisions of Notification No.163/65, it was M/s. Shipping Corporation of India which was liable to discharge the same as it was the importer of the said vessel. Much stress was laid upon the invoice issued by M/s. Shipping Corporation which reflects payment of sales tax by the assessee, to submit that the question of payment of sales tax would only arise when a sale is made within the country. Under the circumstances, by charging sales tax, it is apparent that Shipping Corporation of India has held itself out to be the importer and as such, the Commissioner (Appeals) was justified in holding that it was M/s. Shipping Corporation of India which was liable to pay the customs duty on the vessel in question and the Tribunal was justified in upholding the same. It was submitted that the Supreme Court in the case of Jalyan Udyog (supra) has held that the date of breaking up would be the date on which the Director General of Shipping accords permission for scrapping/breaking the vessel. Such permission having been obtained by M/s. Shipping Corporation of India prior to the sale of vessel to the assessee, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now sold for the purpose of breaking up, in view of the proviso to Notification No.163/65, liability to pay the duty of customs arose. The question that, therefore, arises for consideration is as to who would be liable to pay the customs duty, viz., M/s. Shipping Corporation of India as held by the Commissioner (Appeals) and the Tribunal or by the respondent-assessee as is contended by the appellant. 10. Before adverting to the merits of the case, reference may be made to the following provisions of the Customs Act, 1962: 2. Definitions.- In this Act, unless the context otherwise requires (22) goods includes - (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property; (23) import , with its grammatical variations and cognate expressions, means bringing into India from a place outside India; (26) importer , in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer; 11. Section 12 of the Act provides for levy of duties of customs at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A bill of entry under sub-section (1) may be presented at any time after the delivery of the import manifest or import report as the case may be: Provided that the Commissioner of Customs may in any special circumstances permit a bill of entry to be presented before the delivery of such report: Provided further that a bill of entry may be presented even before the delivery of such manifest if the vessel or the aircraft by which the goods have been shipped for importation into India is expected to arrive within thirty days from the date of such presentation. (4) The importer while presenting a bill of entry shall at the foot thereof make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, relating to the imported goods. (5) If the proper officer is satisfied that the interests of revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a bill of entry for home consumption for a bill of entry for warehousing or vice versa. 13. As noted hereinabove, in view of the proviso to the Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Silk Mills Ltd. vs. Union of India, 1999 (113) E.L.T. 358 (S.C.). In the said case it was contended on behalf of the assessee that under section 12 of the Act the duty was leviable on goods imported into India and the value of the goods must be fixed at the time and place of importation. A submission was sought to be raised that reading section 12 of the Act with sections 2(23) and 2(27), the import of goods into India would be completed when they enter the territorial waters of India and it is the value at that point of time which alone can be taken into consideration for the purposes of assessing the customs duty. The court held thus: 12.All imported goods unloaded in a customs area are required to remain under the customs authorities until they are cleared for home consumption or are warehoused or are transshipped (Section 45). The goods can be cleared by the importer only after, as provided by Section 46, the importer files a bill of entry for home consumption or warehousing pursuant to which clearance of goods is granted under Section 47 by the Customs Officer. This clearance is given after the officer is, inter alia, satisfied that the importer has paid the import duty as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12 and this can only mean that the moment goods have entered the territorial waters, the import is complete. We do not agree with the submission. This Court in its opinion in Re. The Bill to Amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944, 1964 (3) SCR 787 at page 823 observed as follows: Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers i.e. before they form part of the mass of goods within the country. It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. 15. In Kiran Spinning Mills v. Collector of Customs, 1999 (113) E.L.T. 753 (S.C.), the Supreme Court following its earlier decision in the case of Union of India v. Apar Industries Limited (supra) held that the import would be completed only wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re exempted from payment of tax under Notification No.163/65. Subsequently, the vessels came to be sold to one Vijaya Lines Private Limited which after operating the same for some time sold the same to West Asia Shipping Company Pvt. Ltd. In August, 1993, Asia Shipping Company Pvt. Ltd. decided to scrap the ships for which it sought permission from the Director General of Shipping. Such permission was accorded on 1st October, 1993. Thereafter, the said ships were sold to M/s. Jalyan Udyog on 12th September, 1984. The question that arose was as to what would be the rate at which the duty of customs would be levied on the vessel in question in the light of the proviso to the above notification. It was contended on behalf of the ship owners that the date would be the date of clearance for home consumption, that is, the year 1968 when the vessels were cleared for home consumption and were exempted from payment of customs duty. The Supreme Court held that the power given by section 25 to the Central Government to specify conditions which may even relate to a stage subsequent to the clearance of goods clearly shows that the power of exemption can be used even for altering the relevant da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by any other considerations. Fiction must be given its due play; there is to be no half-way stop. According to this notification, therefore, the date relevant for determining the value and rate of the customs duty chargeable in the case of two ships concerned in Jalyan Udyog' is the date on which they were broken-up. 20. We are, however, of the opinion that since the date of breaking-up is an uncertain event and may require an enquiry in each case and also because no ship can be broken-up or scrapped except under the prior permission granted by the Director General of Shipping, the date of breaking-up contemplated by the said proviso should be deemed to be the date on which the permission for scrapping/breaking is accorded by the Director General of Shipping. This clarification is made in the interest of certainty and to obviate avoidable controversy. It is with reference to such date that the value and the rate have to be determined. If on such date, any other procedural formalities prescribed by law are to be complied with, they too have to be complied with. 19. Thus, what is held in the said decision is that the proviso to Notification No.163/65-Cus. creates a fiction whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially imported for the purpose of home consumption cannot be again said to have been imported and as such, be leviable to customs duty does not merit acceptance. 22. On the question as to who would be liable to pay customs duty, viz., whether M/s. Shipping Corporation of India or the respondent-assessee, section 15 of the Act provides that the rate of duty and tariff valuation applicable to any imported goods shall be the rate and valuation in force in the case of goods entered for home consumption under section 46 on the date on which the bill of entry in respect of such goods is presented under that section. Section 46 of the Act as it stood at the relevant time provided that the importer of any goods other than goods intended for transit or transshipment shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehouse in the prescribed form. Section 47 of the Act makes provision for clearance of goods for home consumption. Sub-section (1) thereof lays down that where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. While examining the question as to who is the importer in the facts of the present case, the approach adopted should be to examine the issue in the light of the provisions of the Customs Act and the rules, notifications made thereunder. The mere fact that sales tax had been charged by Shipping Corporation of India from the respondent at the time of sale of the subject vessel cannot be given undue weightage. The fact that the Shipping Corporation has charged sales tax from the buyer is between the buyer and the Corporation. Insofar as the customs authorities are concerned, they are concerned with determination of the liability under the provisions of the Act. Thus, what was required to be examined is as to whether or not the vessel had been cleared for home consumption for the purpose of breaking up prior to it being sold to the respondent assessee. If it was cleared for home consumption prior to its sale, the Shipping Corporation of India would be the importer. If, however, the assessee has purchased the subject vessel before the same was cleared for home consumption as a vessel for breaking up, it would fall within the ambit of the definition of importer as envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme as noted hereinabove, the importer is required to file a bill of entry as contemplated under section 46 of the Act and it is only upon payment of the necessary customs duty, that the same would be cleared for home consumption under section 47 of the Act. Section 15 of the Act provides for the date for determination of rate of duty and tariff valuation of imported goods. The said provision also provides that the rate of duty shall be the rate in force in the case of goods entered for home consumption under section 46 on the date on which the bill of entry in respect of such goods is presented under that section. Thus, the import of goods relates to the date of presentation of the bill of entry. In the case of Jalyan Udyog (supra), with a view to mitigate a situation whereby there was no certain date on which the ship could be said to have been broken up, the Supreme Court has held that the date of breaking up would be the date on which the permission for scrapping/breaking is granted by the Director General of Shipping. The said date, however, would be relevant for the purpose of determining the rate for valuation for the purpose of payment of customs duty. But the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in the case of Union of India v. Jalyan Udyog (supra) in holding that the date on which the vessel is broken up would be the date on which it is taken for breaking i.e. the date of transfer from the Shipping Corporation of India to the respondent and not the date of beaching at Alang and on that date the importer would be Shipping Corporation of India. The Tribunal has failed to appreciate that the above decision of the Supreme Court had been rendered in the context of the provisions of section 15 of the Act, viz., the point of time with reference to which the rate of duty and tariff valuation of the imported goods is to be determined. This was because according to the notification the date relevant for determining the value and rate of the customs duty chargeable is the date on which the vessel was broken up. Since such date was uncertain, with a view to obviate avoidable controversy the Supreme Court clarified that the date of breaking-up contemplated by the said proviso should be deemed to be the date on which the permission for scrapping/breaking is accorded by the Director General of Shipping. The said decision does not lay down any proposition of law that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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