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TMI Blog1996 (1) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act and under Section 86(2) of the said Act, without payment of Customs duty it can be permitted to be transferred to oil rigs or under Section 54 it can be transhipped to oil rigs without payment of Customs duty. 3.For determining whether the Petitioners are required to pay the Customs duty on the said goods, the main questions which require consideration are : Whether the oil rigs are `vess(1) els' for the purpose of the Customs Act, 1962 as defined in Section 2(21) thereof? If yes, whether the Petitioners are entitled to get benefit(2) of Section 86(2) of the Customs Act of transferring the "stores" without payment of Customs duty to oil rigs? and/or Whether the Petitioners are entitled to get benefit of(3) Section 54 of the Customs Act, 1962, which provides transhipment of goods without payment of duty to any port outside India? 4.Before deciding the aforesaid questions, it would be necessary to state that under Section 12 of the Customs Act, Customs duty is leviable on goods imported into, or exported from India. However, the goods which enter Indian territory can be classified as (1) goods for home consumption, (2) goods for warehousing, (3) goods in transit, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other goods, presumably goods not disclosed but discovered to be imported or which have otherwise escaped duty, are to be subjected to duty at a rate and tariff valuation as on the date of payment of duty." 6.In the light of the aforesaid decision, for deciding whether `oil rigs' are vessels or not, we would first refer to the contention raised by the Customs Department in their affidavit in reply filed in Writ Petition No. 1814 of 1993. In the said affidavit, an extract of the minutes of the meeting of the Customs Collector held on 19th November, 1993 is annexed at Exhibit 3. In the said extract, it has been stated that though the drilling rigs have flight platform, they are not engaged in carriage of goods or passengers but are meant for drilling operations in connection with offshore oil exploration; that these are basically and essentially drilling machines complete with accessories and auxiliary equipment required for drilling operations and as such oil rigs would not qualify as foreign-going vessels as defined in Section 2(21) of the Customs Act. In that meeting, it was pointed out that various items like drilling pipes, tools etc., which are exclusive parts of drilling ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aircraft proceeding to a place outside India(iii) for any purposes whatsoever;" The aforesaid definition is an inclusive definition. It, inter alia, provides that any foreign-going vessel is vessel for the time being engaged in the carriage of goods or passengers between any port in India and any port outside India, whether touching any intermediate port in India or not. It also includes any naval vessel of a foreign Government taking part in any naval exercise; any vessel engaged in fishing; any vessel engaged in any other operations outside the territorial waters of India; and any vessel proceeding to a place outside India for any purposes whatsoever. Therefore, apart from vessels which are engaged in carrying goods or passengers, vessels engaged in fishing or any other operations outside the territorial waters of India are included in the definition of the words "foreign-going vessel". 9.The next definition which is important is of the word "goods" given in Section 2(22), which reads as under :- `goods' includes -" vessels, aircraft and vehicles; stores; baggage; currency and negotiable instruments; and any other kind of movable property." In this connection i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. 11.For this purpose, the learned Counsel for the Petitioners vehemently submitted that as the word "vessel" is not defined in the Customs Act, it should be understood in a commercial sense or in the sense in which people conversant therewith understand it. 12.For understanding the meaning of the word "vessel", we would first refer to the relevant provisions of the Merchant Shipping Act, 1958. Sections 3(13), 3(39), 3(45) and 3(55) of the Merchant Shipping Act, 1958 read as under :- In this Act, unless the context otherwise requires, -"3. `foreign-going ship' means a ship, not being a home-trade(13) ship, employed in trading between any port or place in India and any other port or place or between ports or places, outside India; `sailing vessel' means any description of vessel provided(39) with sufficient sail area for navigation under sails alone, whether or not fitted with mechanical means of propulsion, and includes a rowing boat or canoe but does not inlcude a pleasure craft; `ship' does not include a sailing vessel;(45) `vessel' includes any ship, boat, sailing vessel, or other(55) description of vessel used in navigation;" 13.The Respondents in their affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain other oil rigs. 16.In this context it would be necessary to refer to the provisions of the Merchant Shipping Act, 1958, which make it compulsory for ships to have an international load line certificate - Under Section 318 of the said Act, "No Indian ship shall proceed to sea unless there is in force in respect of the ship a load line certificate issued under the provisions of section 316". Similarly, special provisions are made in this regard in Chapter IX of the said Act. Section 321 provides that "the Central Government may, at the request of a country to which the Load Line Convention applies, issue an international load line certificate in respect of a ship registered or to be registered in that country if it is satisfied in like manner as in the case of an Indian ship that it can properly issue the certificate and where the certificate is issued at such a request, it shall contain a statement that it has been so issued." Section 322 further provides as follows :- "An international load line certificate or, as the case may be, an international load line exemption certificate issued in respect of any ship other than an Indian ship by the Government of the country to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the exploration or for the exploitation of resources beneath the sea bed such as liquid gas, hydro-carbon, sulphur or salt. Clause 1.3.3 defines a `Self-elevated Unit' as a unit with moveable legs capable of raising its hull above the surface of the sea. He, therefore, submitted that oil rigs are `vessels'. 21.The Petitioners have also produced on record documents showing that foreign Governments and their Departments which deal with shipping regard oil rigs as vessels. The said documents are produced on record along with the Written Submissions at page 11, 68, 98 and 100, which says that the barge in question has been surveyed in accordance with the rules of the concerned Bureau of Shipping. Similarly, there is a Certificate which mentions the name of the Foresight Driller III at page 10 of the Written Submissions. Various other Certificates are produced on record which indicate that oil rigs are considered to be ships. In our view, it is not necessary for us to consider all these Certificates, but all these Certificates do indicate that oil rigs are considered to be ships or vessels by all concerned. Further, the Customs Tariff, 1975 provides different heads for levy of tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case, the Court was dealing with Section 61(2) of the Customs Act which provided that where any warehoused goods remain in a warehouse beyond a period of one year, by reason of extension of the aforesaid period or otherwise, interest at such rate as specified in Section 47 shall be payable on the amount of duty on the warehoused goods for the period from the expiry of the period of one year till the date of clearance of the goods from the warehouse. Section 61(2) was held as not ultra vires of fundamental rights. In our view, this judgment has no bearing to the facts of the present case. The learned Counsel for the Respondents, however, submitted that in that judgment the Court has observed that what Section 85 of the Customs Act prescribes is that an importer will not be liable to pay duty and it confers a discretion upon the Customs Officer to permit the goods to be warehoused without the goods being assessed to duty. The Court further observed that "the foreign exchange is released because the petitioners import the goods for sale to vessels and thereby earned some additional foreign exchange to the country. The petitioners are given advantage of exemption from payment of im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive submission made by the learned Counsel on behalf of the Petitioners. It is first submitted that even presuming that oil rigs are not to be regarded as vessels, yet the Petitioners are entitled to get the benefit of Section 54 of the Customs Act. Before dealing with this submission, we would clarify that if the goods are held to be "stores" and that oil rigs are vessels, the provisions of Chapter VIII, which deal with "goods in transit", would not be applicable. However, if it is held that oil rigs are not vessels, then the alternative contention of the learned Counsel for the Petitioners requires to be considered. He submitted that in the present case, considering the scheme of the Customs Act, Customs duty is leviable on goods which are meant for home consumption. For this purpose he relied upon Paragraph 10 of the judgment in Chowgule's case (supra). He submitted that in cases where goods are to be exported from India and are not meant for home consumption, elaborate provisions are made in the Customs Act which give facilities to the importer for keeping them in warehouse and for further transhipment. For this purpose he relied upon Sections 53, 54 and 69 of the Customs Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted. 30.For considering this aspect, we would first refer to the definitions of the words "export" and "import". The word "export" is defined in Section 2(18) of the Customs Act to mean "taking out of India to a place outside India". Similarly, the word "import" is defined in Section 2(23) to mean "bringing into India from a place outside India". In both these definitions, the phrase used is "bringing from a place outside India" or "taking out of India to a place outside India". It is nowhere mentioned that it should be a Port outside India. The word "India" is defined in Section 2(27) to mean "India includes the territorial waters of India". Reading these definitions together, if the goods are exported out of India to a place outside the Indian territorial waters it would mean "export". So if the goods are brought within the Indian territorial waters from a place which is beyond the territorial waters of India, then it would be an "import". This aspect is also accepted by the Customs Department on the basis of the opinion expressed by the Law Ministry by issuing a clarification by the Central Board of Customs on 27th March, 1995. The question arose with regard to levy of Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of vessels, and the collection of duties or customs upon imports and exports. A place, on the seacoast, great lakes, or on a river, where ships stop for the purpose of loading and unloading cargo, or for purpose of taking on or letting off passengers, from whence they depart, and where they finish their voyage. A port is a place intended for loading or unloading goods; hence inlcudes the natural shelter surrounding water, as also sheltered water produced by artificial jetties, etc. The Baldhill, C.C.A.N.Y., 42 F.2d. 123, 125." The learned Counsel for the Petitioners for this purpose relied upon a foreign decision in the case of The Mowe, 1914 PD 1 (at page 15), wherein the Court has held that the word `port' must be construed in its usual and limited popular or commercial sense as a place where ships are in the habit of coming for the purpose of loading or unloading, embarking or disembarking. It does not mean the fiscal port. 32.Considering the aforesaid dictionary meaning of the word `port', it would be apparent that `Customs port' or `revenue port' is different from a `port' and that a `port' as a generic term would mean a place for loading and unloading of goods by a vesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia". The result is that if the contention of the Respondents is accepted that Section 54 provides for export at a `port' outside India and not to a place outside India then the Petitioners could easily get exemption from Customs duty by warehousing the said goods only for a few hours and thereafter exporting it to a place outside India. This would be an anomalous situation. Hence, the word "port" used in Section 54 is to be interpreted to mean any place outside India. There is no reason why the goods which are warehoused for a few hours should get the benefit of non-payment of import duty and the goods which are being transhipped to a place outside India with out being warehoused should not get the same benefit. 36.In view of the aforesaid discussion, even if it is held that oil rigs are not vessels and therefore the equipment brought by the Petitioners for the purpose of the said rigs cannot be considered as "stores", yet the Petitioners are entitled to get the benefit of Section 54 of the Customs Act if the conditions mentioned therein are satisfied. 37.In the result, each of these Petitions is allowed. It is declared that `oil rigs' are `vessels' for the purpose of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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