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TMI Blog2013 (7) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... emand of duty on these seven vessels is clearly unsustainable in law. In all these cases, it is seen that the duty demands were made in the show cause notices under Section 28(4). However, since the show cause notices were issued beyond the normal period of limitation and duty demands could not have been confirmed under Section 28(8), the Commissioner resorted to confirmation of duty demand under Section 125(2) which does not prescribe any time limit. From the facts of the case, it is seen that these vessels on arrival, after completing all the formalities, were converted from foreign-run to coastal-run for undertaking salvage operations. After completing the salvage operations and obtaining the requisite permissions and clearances from Customs authorities, the vessels went back within a short period of 1 to 2 months. However, the show cause notices were issued one year after the vessels went back from India (beyond the period of 6 months, the normal period of limitation for duty demand). Therefore, the duty demands are clearly time-barred as there was no suppression on the part of the appellants. In the facts of the case before us, 7 out of the ten vessels are tugs which are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the Customs, no mens rea can be attributed to the appellants. This fact should be given due consideration while imposing redemption fine in lieu of confiscation and penalty on the appellants. Redemption fine on the 3 confiscated vessels and penalties on the importer/agent in respect of all the 10 vessels are reduced - However, Penalties on the co-appellants are set aside - Decided partly in favour of assessee. - C/1011-1012, 1035-1036, 1293, 1302, 1334, 1341-1342/2012, C/86212-86214/2013, 1294-1296, 1303, 1335, 1337 & 1336/2012 and C/86218, 86215 & 86216/2013 - Final Order Nos. A/1469-1490/2013-WZB/C-I(CSTB) - Dated:- 9-7-2013 - Shri P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J) Shri Vipin Kumar Jain with Vishal Agarwal and Krishna Kumar, Advocates, for the Appellant. Shri K.M. Mondal, Special Consultant, for the Respondent. ORDER There are 22 appeals and 6 stay applications arising from 10 orders-in-original passed by the Commissioner of Customs (Imports), New Custom House, Mumbai. The details of the orders and the connected appeals and stay applications are given below : S. No. Order-in-Original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jayan C. D Souza C/86216/2013 10. 85/2012/CAC/CC(I)/AB/Gr. VB, dated 21-12-2012 Mastas Star J.M. Baxi Co. C/86213/2013 Mr. Vijayan C. D Souza C/86218/2013 2. As the issue involved is common in all these appeals, they are taken up together for consideration. 3. This batch of appeals relates to 10 foreign flag vessels which were imported into India for the purpose of undertaking salvage and similar emergency towing operations. Of the 10 vessels, demand of duty in respect of nine vessels has been raised against J.M. Baxi Co. who are the shipping agents for the foreign vessel owners while demand of duty for the 10th vessel has been raised on Shipping Corporation of India. The remaining appeals are of M/s. J.M. Baxi Co., Mr. Vijayan C. D Souza, Vice President of M/s. J.M. Baxi Co. and Capt. K. Devdas, of the Shipping Corporation of India Ltd. who are aggrieved by the personal penalties imposed under various orders. The date of arrival for these vessels and the date of departure, the date on which the show cause notices w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gr. VB, dated 21-12-2012 Mastas Star 29-8-2008 3-10-2008 24-12-2012 Section 125(2) 3.1 From the above table it may be seen that, barring three vessels, namely, Sumit Lumba, Posh Giant - I and Salvaree which were seized by the Customs authorities, the demand for duty in respect of remaining seven vessels has been confirmed under Section 125(2) of the Customs Act, 1962. These seven vessels were never seized by the Customs and consequently no confiscation has been ordered by the Commissioner in the adjudication orders passed by him in respect of these vessels. However, duty demand has been confirmed invoking the provisions of Section 125(2) of the Customs Act, 1962. 3.2 As regards the three vessels, which were seized by the Customs authorities, the duty demands have been confirmed under Section 28(8) of the Customs Act, 1962. Of the three vessels, Posh Giant - I and Salvaree were seized by the Customs when they returned to India after completion of the first salvage job for which they had earlier come and gone and the third vessel, Smit Lumba, was seized almost immediately after its arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and procedures, the vessels were used in Indian waters for conducting salvage operations in 9 cases and in the case of Sumit Lumba the vessel was used a stand-bye for undertaking emergency towing operations in case of accident or mishap in accordance with the Disaster Management plan of the Ministry of Shipping. After completion of the assignments, the following formalities were completed, while sending the vessels back out of India. (a) filing of applications for re-conversion of the vessels from coastal-run to foreign-run; (b) obtaining permission from the Superintendent of Customs (Preventive) granting re-conversion from coastal-run to foreign-run; and (c) obtaining port clearance certificate under Section 42 of the Customs Act, 1962 from the Assistant/Deputy Commissioner of Customs confirming the compliance of all required procedures. 3.5 The above procedures were in conformity with the requirements/provisions relating to conveyances carrying imported or export goods as envisaged in Chapter IV of the Customs Act, 1962 (starting from Section 29 and ending with Section 43). 4. The appellants contention is that, in respect of foreign flag vessels, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that the requirement of filing of Bill of Entry by treating the vessels as goods also apply to vessels which were brought in India for the first time for registration as Indian flag ships and vessels which were brought into India for breaking up. In respect of vessels for conversion into coastal-run, it clarified that the requirement of filing Bill of Entry and paying duty on such vessels was made effective only from 17-3-2012. 4.2 The appellant further contends that in the present case all the 10 vessels were foreign flag vessels and had been converted from foreign-run to coastal-run by the Customs Officers prior to 17-3-2012 and, therefore, the entire matter is covered and resolved by the Board s Circular, dated 13-6-2012 (supra). In spite of the same, the learned Commissioner passed orders not only confirming the demands of duty but also imposing penalties and in three cases, ordering confiscation and imposing fine in lieu of confiscation. 4.3 The appellants contentions can be summarized as follows : (a) Customs duty liability arises in respect of goods cleared for home consumption; (b) Vessel is a conveyance and, therefore, they are not goods cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be any confiscation of the goods and if there cannot be any confiscation, the question of payment of redemption fine would not arise and consequently there cannot be any duty demand under Section 125(2) as the said provision envisages payment of fine consequent upon confiscation, along with payment of customs duty. Thus, only in the case of Smit Lumba, where the import has been made by the Shipping Corporation of India, the demand is within the normal period of limitation and the appellant was permitted to file a post-Bill of Entry wherein Shipping Corporation of India claimed benefit of Notification No. 27/2002-Cus., dated 1-3-2002. The same was not extended to the appellant. Therefore, at the time of re-export, Shipping Corporation of India filed a drawback shipping bill which has also not been sanctioned yet. The appellant also relies on the decision of the Hon ble Apex Court in the case of Share Medical Care v. Union of India [2007 (209) E.L.T. 321] wherein it was held that the exemption, even if not claimed at the initial stage can be claimed subsequently also. The appellant also submits that there was a well set and established practice with respect to conveyances coming i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a Bill of Entry No. 4468239, dated 26-8-2011 and paid the requisite Customs duty. The show cause notice dated 8-12-2011 issued to Shipping Corporation of India is well within the time limit from the relevant date i.e., from the date of filing of the Bill of Entry. In the remaining cases the relevant date would be the date of payment of the duty as prescribed under clause (d), Explanation (1) to sub-section (ii) to Section 28 and if the date of show cause notice is reckoned from the date of payment, it may be seen that the show cause notices have been issued well within the limitation of time. 5.3 As regards the benefit of exemption under Notification No. 27/2002-Cus., dated 1-3-2002 and the claim of drawback, the learned consultant leaves the decision to the Tribunal. 5.4 As regards the Board s Circular No. 16/2012-Cus., dated 13-6-2012 is concerned, the learned special consultant submits that the said circular applies to foreign-going vessels i.e., conveyances and not to goods imported for home consumption and, therefore, this circular has no application to the facts of the present case. 5.5 With regard to the imposition of penalties, he submits that M/s. J.M. Baxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In other words, provisions of Section 125(2) are attracted only when goods are confiscated and an option to redeem the goods on payment of fine in lieu of confiscation is given. In the case before us, in respect of the seven vessels mentioned above, there is no confiscation of the goods and consequently, there is also no order imposing any fine in lieu of confiscation. In view of the legal position as discussed above, the demand of duty on these seven vessels is clearly unsustainable in law. In all these cases, it is seen that the duty demands were made in the show cause notices under Section 28(4). However, since the show cause notices were issued beyond the normal period of limitation and duty demands could not have been confirmed under Section 28(8), the Commissioner resorted to confirmation of duty demand under Section 125(2) which does not prescribe any time limit. From the facts of the case, it is seen that these vessels on arrival, after completing all the formalities, were converted from foreign-run to coastal-run for undertaking salvage operations. After completing the salvage operations and obtaining the requisite permissions and clearances from Customs authorities, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen that the term goods is far wider in scope and coverage than conveyance and goods includes conveyance. While all conveyances are goods, the reverse is not true. Though the Customs Act does not define conveyance specifically, the ordinary dictionary meaning of the term conveyance as per Oxford English Dictionary is - the action or process of transporting or carrying someone or something from one place to another : a means of transport; a vehicle . As per the cargo declaration form filed at the time of the arrival of these vessels, cargo was declared as Nil . There was also no passenger manifest filed for carriage of persons. Thus the said vessels Smit Lumba, Posh Giant-I and Salvaree were neither carrying any cargo nor any passengers and therefore, they did not come into India as a conveyance. Further, two of these vessels were tugs and one a barge. As per HSN Explanatory Notes while barges are vessels for the transport of persons or goods falling under CTH 89.01, tugs fall under CTH 89.04 and are designed to assist ships in distress and are not designed for the transport of persons or goods. Thus the argument of the appellant that the vessels came as conveyances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the vessel, will be an ocean-going vessel, but if it is brought into India primarily for use in India, then such vessel will be goods for home consumption , notwithstanding that occasionally or incidentally they are used outside India. The same view was taken in the V.M. Salgaonkar Bros. (P) Ltd. case cited supra. 6.6 There are customs duty exemptions available on vessels imported for temporary use. For example, barges or pontoons imported along with ships for more speedy unloading of imported goods and loading of export goods are exempt from import duty if they are re-exported by the same ship which brought them or by any other ship under the same shipping agency within two months from the date of importation vide Sl. No. 350 of the Table annexed to Notification No. 21/2002-Cus., dated 1-3-2002 as amended. Similar exemptions are available in respect of vessels imported for temporary use under the said Notification under other entries. If the barges imported for temporary use were to be treated as conveyances and not as goods as contended by the appellants, there was no need for these exemptions at all. These exemptions provided in the statute clearly shows the hollown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty. The jurisdictional Commissioners were also instructed to review the situation, and take appropriate action for past cases, including adjudication, if warranted, in case of non-fulfillment of aforesaid filing of documents. 2. In this regard, certain difficulties have been brought to the notice of the Board by the trade and Indian Ship Owners Association stating that the Customs field formations are insisting on filing of IGM and Bill of Entry even in respect of those vessels that were imported in the past and which were exempt from payment of import duty. 3.1 In this regard, it is stated that as the provisions of Section 29 of the Customs Act, 1962 read with Section 2(22) and 2(25), the term imported goods , inter alia, includes vessels entering India from any place outside the country (India). These vessels may fall into any of the following category (i) Foreign flag vessels i.e., vessels that have been registered outside India and which carry imported/exported goods or passengers, during its foreign run (voyage from a port outside India to an Indian port, whether touching any intermediate port in India or not); (ii) Vessel entering India for the first time on arrival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, since the changes in the duty structure for levy of CVD on vessels which are being converted for coastal trade was initially imposed from 1-3-2011, and subsequently retrospective exemption has been provided for the period 1-3-2011 to 16-3-2011 vide clause 129 of the Finance Act, 2012, the requirement for filing IGM and Bill of Entry may be insisted in all such cases w.e.f. 17-3-2012, that is the date from which levy of CVD has come into force. 5. It is also clarified that all vessels including foreign going vessels for its entry into/exit from the country during its journey as foreign going vessel and the Indian flag vessel/Indian Ship for subsequent use as foreign going vessel would not require filing of IGM and Bill of Entry as conveyance, since the same are not imported goods to be cleared for home consumption. 6. Accordingly, the field formations may adjudicate the cases involving any violation where the IGM or Bill of Entry in respect of import of vessel were not filed at the time of import, on its first arrival in India or on its conversion into coastal trade and appropriate penal action be taken against the offenders. 6.9 From a reading of the above circular, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a wrong or incorrect provision of law, the demand is sustainable in law. A three judges Bench of the Hon ble Apex Court, in the case of J. K. Steel Limited (supra), while considering Central Excise duty demand under a wrong provision of the Central Excise Rules, held as follows :- If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled position of law. In this connection reference may be made to the decisions of this Court in P. Balakotaiah v. U.O.I. [1958 SCR 1052] and Afzal Ulah v. State of U.P. [1964 - 4 SCR 991] The same ratio was followed by this Tribunal in the Mihir Textiles case cited supra. 6.11 The Hon ble High Court of Kerala, in AIR 1966 Kerala 121 while considering the consequence of time-bar held as follows :- But, in so far as the particular remedial right to which it applies is concerned, limitation undoubtedly extinguishes the right. It is, however, important to remember that limitation extinguishes only the particular remedial right, which is its victim and that, since it le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of duty chargeable would be thirty per cent. of the aggregate of the duties of customs. To be eligible for the concession, the goods should be either machinery, equipment or tools. Tugs and barges can, by no stretch of imagination, be considered as falling in this category. They fall under Chapter 89 as Ships, boats and floating structures . Therefore, in our view, the appellant would not be eligible for any duty concession under the said Notification and the claim in this regard is not sustainable. 6.13 The appellants have alternatively argued that drawback of the duty would be available under Section 74 of the Customs Act inasmuch as the vessels have gone back after the salvage operations, within a period 3 months from the date of their importation. There is merit in this argument. The ld. consultant for the Revenue has not contested this point and has left the issue for appropriate decision by this Tribunal. We find that under Section 74(2) read with Notification No. 19/65-Cus., dated 16-2-1965 as amended, if the imported goods are re-exported as such within a period of 3 months from the date of importation, 95% of the import duty paid is eligible as drawback to the expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other 7 vessels, they have also been held liable to confiscation under the same provisions. Section 111(g) is attracted when any dutiable goods or prohibited goods are unloaded from a conveyance in contravention of the provisions of Section 32. Since the case of the Customs is that the impugned vessels are not conveyances , there cannot be any violation of Section 111(g) as no unloading has taken place from a conveyance . Similarly, violation of 111(h) can also not be alleged for the reason that the said section is attracted when dutiable or prohibited goods are unloaded or attempted to be unloaded in contravention of the provisions of Section 33 or 34. While Section 33 deals with unloading of goods at places other than approved places, Section 34 deals with unloading in the presence of Customs Officers. In the present case, there is no unloading of any goods at all from these vessels. The vessels themselves were inspected by the Customs Officers before grant of permission for conversion into coastal-run. For the ship stores, the appellants have obtained the requisite permissions. Therefore, the liability to confiscation under these two provisions does not arise. With rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouza 6.17 In the present case, we notice that the adjudicating authority has imposed a redemption fine of ₹ 3 crore, ₹ 5 crore and ₹ 2 crore in respect of the 3 seized vessels. While imposing fine, the consideration that is relevant is the profit margin on the goods. Since the imported vessels are not meant for sale, it may not be possible to make any estimate of the profit margin. Therefore, what is relevant is the duty amount sought to be saved by the appellant in respect of the transaction. Since all the three vessels have been re-exported within a period of 3 months from the date of importation, the appellant would have been eligible to claim drawback of the import duties paid. For re-exportation within a period of 3 months, eligible drawback amount is 95% of the duty paid. Thus, the appellant has sought to save only 5% of the duly involved. Therefore, this is the amount that could be considered for imposition of fine. On this basis, the reasonable fine amount would work out to ₹ 50 lakhs each on Smit Lumba and Posh Giant-I and ₹ 15 lakhs on Salvaree. Accordingly we reduce the redemption fine to ₹ 50 lakhs each on Smit Lumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are reduced to the extent indicated in the Table below : S. No. Name of the vessel Redemption fine in Rs. lakhs Penalty on the importer/agent in Rs. lakhs 1. Smit Lumba 50 50 2. Posh Giant-I 50 50 3. Salvaree 15 15 4. Smit Lynx - 5 5. Union Boxer - 5 6 Giant-2 - 5 7. Smit Borneo - 5 8. Seacor Valor - 5 9. Smit Cyclone - 5 10. Mastas Star - 5 (5) Penalties on the co-appellants are set aside. 8. The stay application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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