9911796707
TMI Blog2001 (4) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ks for and on behalf of Oil and Natural Gas Commission ("ONGC" for short). 3.The petitioner carries on operation with its oil rig Pride Pensylvania (hereinafter referred to as the "Rig") in the exclusive economic zone as defined under the Maritime Zones Act, 1976. The Oil Rig has a drilling machinery for drilling on the ocean floor. It is towed to the required locations outside the territorial waters of India and anchored and jacked up for drilling operations on the high seas. The drilling operations are carried on by the Oil Rig on the continental shelf. 4.The petitioner company imports goods including stores, spares, consumables and other articles required for the use on the Oil Rig. As the said imported goods/stores cannot land directly on the Oil Rig, the same land at Mumbai Seaport/Airport and the same are then transhipped to the Oil Rig. 5.The cause of action for filing this petition is the refusal by the respondents to permit the petitioner to tranship stores and equipments to the Oil Rig without payment of customs duty. The petitioner contends that the goods imported for Oil Rig are liable to be transhipped to the Oil Rig without levy of duty of customs. The petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(2) and 87 of the Customs Act, which provides that any stores imported in a vessel or aircraft may be transferred to any vessel or aircraft as stores for consumption therein as provided in Section 87. Section 87 inter alia provides that imported stores may, without payment of duty, be consumed thereon as stores during the period such vessel is a foreign going vessel. In his submission, even where operations are carried on in the designated area, the Rig continues to operate outside the territorial waters of India. The learned Counsel for the petitioner, in support of his above submissions, placed reliance on decision of this Court in Amership judgment case (supra) wherein this Court observed as under : ".... 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 learned Counsel, based on the above observations, contends that the Rigs are stationed beyond the Indian territorial waters, hence, they should be considered as foreign going vessels engaged in any other operations outside the Indian territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act inter alia provides that any goods imported in a conveyance and mentioned in the import manifest or the import report, as the case may be, as for transit in the same conveyance to any place outside India may be allowed to be so transited without payment of duty. The Rig carries on operations outside the territorial waters of India. When the Rig is carrying on operations, it is jacked up on four legs on the sea bed. During the time when it carries on operations, supply vessels from the shore sail to the Rig and unload their cargo onto the Rig. Helicopters also land on the Rig. All these operations are carried out outside India. India is defined by Section 2(27) of the Customs Act, as including the territorial waters of India. The Rig, being outside the territorial waters of India, is a place outside India, within the meaning of Section 53 of the Customs Act and hence, the goods of the petitioner are entitled to be transited to the Rig without payment of duty under Section 53 of the Customs Act. He relied upon the judgment of Apex Court in Collector of Customs v. Sun Industries - 1988 (35) E.L.T. 241 (S.C.) wherein the words 'place outside India' were interpreted to mean a plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bills of entry for home consumption is filed." 16.In the alternative, the petitioner submits that Section 6 of Maritime Zones Act, 1976 defines the Continental Shelf of India. Section 7 defines the Exclusive Economic Zone of India means the areas specified therein beyond the territorial waters of India. The said sections inter alia empower the Central Government to declare any area within the Continental Shelf and the Exclusive Economic Zone to be designated area and make such provisions in respect thereof relating inter alia to custom matters. The notification issued by the Central Government under Section 5(6) of the Maritime Zones Act, 1976 does not, in any way, change the definition of the territorial waters. Consequently, even if a Rig operated within the said designated areas such a Rig continues to be a vessel operating outside the territorial water and is, thus, a foreign going vessel entitled to the benefit of non-payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id installations, structures and platforms as designated areas for the purposes of said section." On the text of the submission, the contention is that the Oil Rigs are located in the designated areas only and that the Government, Ministry of Finance, Department of Revenue, New Delhi had published the Gazette of India, Extraordinary, dated 1st December, 1997 notifying that the extensions of the Customs Act, 1962 and the Customs Tariff Act, 1975 to the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notification of the Government of India in the Ministry of External Affairs No. SO 643(E), dated 19th September, 1996. He, therefore, submits that in terms of the said notification, the petitioner is legally liable to pay customs duty including what they call stores brought to and utilised on the Oil Rig. In other words, the submission is that the notification referred to clearly lays down in unambiguous and unmistakable terms that the provisions of the Customs Act and Customs Tariffs Act are applicable to the designated areas i.e. wherein the Oil Rig has been deployed and whereupon the stores are brought in after landing in Mumbai and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drilling rig is brought from a foreign country to a place in the EEZ for exploration/exploitation of oil, it would not constitute import for the purpose of the Customs Act, 1962 and no duties can be levied for such cargo/equipments if such rigs operate in the zone outside the designated areas and beyond the territorial waters of India. It would also follow therefrom that if any oil is generated at such drilling sites (non-designated and beyond the territorial waters) and such oil is brought to the Indian shores while no excise duty will be leviable on the production of this oil, such oil would be liable to pay the customs duty as if it has been imported into India." He also pressed into service another Circular No. 28/95, F. No. 450/76/93-Cus. IV, dated 27th March, 1995 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise Customs, New Delhi, which reads as under : "Sub. :- Declaration of ONGC installations in Bombay High as Designated Area - regarding. The undersigned is directed to refer to Ministry's instructions F. No. 450/65/92-Cus. IV, dated 28-9-1994 wherein the legal position regarding levy of Customs duty on rigs bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory of India and could never become an actual territory of India or part of India. In any view of the matter, the designated areas are outside the territorial waters of India and, hence, petitioner's Oil Rig continues to be a foreign going vessel because even when the Oil Rig is engaged in operations in the designated areas, it is engaged in operations outside the territorial waters of India. 23.The learned Counsel for the petitioner further contends that the Continental Shelf of India comprises the sea-bed beyond the territorial waters up to a distance of 200 nautical miles. Based on Sections 6 and 7 of the Maritime Zones Act, 1976, he submits that in respect of Continental Shelf and Exclusive Economic Zone, India has only certain limited sovereign rights and do not make the Continental Shelf and Exclusive Economic Zone a part of India and cannot be equated to extending the sovereignty of India over the Continental Shelf and Exclusive Economic Zone as in the case of territorial waters. He sought to place reliance on the ratio of the judgment in Commissioner of Income-tax v. Ronalad William Tickard - 1995 Tax LR 143. In the aforesaid premises, the petitioner prayed that rule be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r transit in the same vessel or aircraft to any port or airport outside India or any customs port or customs airport may be allowed to be so transited without payment of duty. (vi) Section 54. Transhipment of goods without payment duty. Where(1) any goods imported into a customs port or customs airport are intended for transhipment, a bill of transhipment shall be presented to the proper officer in the prescribed form. (vii) Section 86. Transit and transhipment of stores Any(1) stores imported in a vessel or aircraft may, without payment of duty, remain on board such vessel or aircraft while it is in India. Any(2) stores imported in a vessel or aircraft may, with the permission of the proper officer, be transferred to any vessel or aircraft as stores for consumption therein as provided in section 87 or section 90. (viii) Section 87. Imported stores may be consumed on board a foreign-going vessel or aircraft Any imported stores on board a vessel or aircraft (other than stores to which section 90 applies) may, without payment of duty be consumed thereon as stores during the period such vessel or aircraft is a foreign-going vessel or aircraft. (ix) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic zone as "designated area". The Central Government has further, by notifications to be issued under section 6(6) of the Maritime Zones Act, 1976 to extend any enactment for the time being in force in India to the continental shelf or any designated area on the continental shelf. Similarly pursuant to section 7(7) of the Maritime Zones Act, 1976 Central Government has to extend any enactment for the time being in force in India to the exclusive economic zone or any part thereof. 26.The relevant notifications issued under the Maritime Zones Act, 1976 are M.E.A. : SO 429(E), dt. 18-7-1986 (effective since Jan. 15th, 1987) and SO No. 643(E), dt. 19-9-1996 which took immediate effect. Jurisdiction of Customs Act - As per Notification No. 11/87-Cus., dated 14-1-1987 the Customs Act extended to areas in the Continental Shelf and the Exclusive Economic Zone of India. The text of the notification is as under : "In exercise of the powers conferred by Clause (a) of sub-section 6, Clause (a) of sub-section (7) of section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (80 of 1976), the Central Government hereby extends the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Article 33. Contiguous zone. 1. In a zone contiguous to its territorial sea, described as the contiguous zone, the coastal State may exercise the control necessary to : (a) present infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea; (b) punish infringement of the above laws and regulations committed within its territory or territorial sea. 2. The contiguous zone may not extend beyond 24 nautical miles from the baselines from which the breadth of the territorial sea is measured. Article 55. Specific legal regime of the exclusive economic zone. The exclusive economic zone is an area beyond and adjacent to the territorial sea, subject to the specific legal regime established in this Part, under which the rights and jurisdiction of the coastal State and the rights and freedoms of other States are governed by the relevant provisions of this Convention. Article 56. Rights, jurisdiction and duties of the coastal State in the exclusive economic zone. 1. In the exclusive economic zone, the coastal State has: (a) sovereign rights for the purpose of exploring and exploiting, conserving and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the goods imported into India. The goods imported are required to be valued under Section 14 and duty payable is required to be determined according to the rates specified under Section 15 of the Customs Act or any other law for the time being in force. 29.The other sections falling in Chapter-V dealing with levy and exemption from customs duty need no detailed reference for the decision of this petition. Suffice it to say that the chargeability of the goods to the customs duty arises when the goods are imported into India. 30.In this case, it is not in dispute that the spares and ship stores are goods imported into India by the petitioner. The petitioner submits that in normal circumstances, such goods shall attract custom duty, but for the benefit of Section 53 read with Section 57 of the Customs Act, which the petitioner-company is claiming, on the contention that, the goods imported by them are spares meant for consumption on the Oil Rig, carrying on operations in the designated area, defined under the Maritime Zones Act, and 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 transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise. The expression "unless the context otherwise requires" excludes all situations except those for compelling reasons the intended definition has to be abandoned. Section 2 directs that in this Act, "unless the context otherwise requires", words occurring in the Act shall be understood as defined therein unless for compelling reasons the intended definitions need to be abandoned. In this backdrop, let us examine the length and breadth of the word "India" in the light of the provisions of law i.e., keeping in view the provisions of Customs Act read with Maritime Zones Act as the provisions thereof are applicable to the facts of the present case. Under Section 2(27), 'India' includes the territorial waters of India. Under the General Clauses Act, India is defined to mean all the territories for the time being comprised in the territory of India as defined in the Constitution of India. Article 1(3) of the Constitution of India states that the territory of India shall comprise of States and Union territories and such other territories as may be acquired. There is no reference to territorial waters in Article 1(3) of the Constitution. In other words, "India" commonly understood is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtend, with such restrictions and modifications as it thinks fit, any enactment for the time being in force in India or any part thereof to the exclusive economic zone or any part thereof. A careful reading of Sections 3, 6 and 7 of the Maritime Zones Act shows that territorial waters, the sea bed and subsoil underlying therein and the air space over such territorial waters from part of the territory of India and that the sovereignty of India extends over such areas. However, the position is different in the case of the continental shelf and exclusive economic zone of India. The continental shelf of India comprises the sea bed beyond the territorial waters to a distance of 200 nautical miles. The exclusive economic zone represents the sea or waters over the continental shelf. It is also clear from sections 6 and 7 of the Maritime Zones Act, 1976 that in respect of the continental shelf and exclusive economic zone, India has been given only certain limited sovereign rights and such limited sovereign rights conferred on India in respect of continental shelf and exclusive economic zone do not make the continental shelf and exclusive economic zone part of India and the limited sovereig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this zone, but it exercises sovereign rights for the purpose of exploring (continental shelf) and exploiting its natural resources. It has jurisdiction to enforce its fiscal, revenue and penal laws in this zone which it may exercise by intercepting vessels engaged in suspected smuggling or the other illegal activities attributable to a violation of the above laws of the coastal State. 39.The waters which extend beyond the contiguous zone are traditionally the domain of the high seas or open sea which have, juristically speaking, the status of international waters where all States enjoy the traditional high seas freedoms including freedom of navigation. While in the contiguous zone the coastal State can exercise its right of search, seizure or confiscation of vessel for violation of its customs or fiscal or penal laws, it cannot exercise these rights once the delinquent vessel enters the high seas for no right of hot pursuit is recognised in this area under the traditional law of the sea. Only vessel engaged in piratical acts are liable for capture, arrest and condemnation within area for the jurisdiction over piracy since historical times has been recognised as universal in inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are extended to notified areas comprised in the exclusive economic zone or continental shelf have effect as if the exclusive economic zone area/or the continental shelf area is a part of the territory of India. In this sense, India, for the purposes of the Customs Act, 1962 includes not only the territorial waters, but the areas of the exclusive economic zone over which the operation of the Act has been extended by reason of the notification adverted to above. The Territorial Waters legislation is a Special Maritime Zones Act and it prevails in the event of conflict with the provisions of or where the Customs Act, 1962 is silent in regard to a particular matter. In any case, Section 2(27) of the Customs Act does not explicitly exclude waters beyond the territorial waters from being part of India and therefore, the said sub-section will have to be interpreted taking into account the above factors including the aforesaid notifications issued by the Central Government. 43.We have discussed the scope and ambit of Maritime Zones Act, 1976. However, at the cost of repetition, we may once again state that by virtue of Section 7 of the said Maritime Zones Act, 1976 Customs Act has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customs duty is not to levy tax on goods in transit to any place outside India. For the purposes of this case, the words "to any place outside India" are very important. The word "transit", therefore, presupposes that the goods can pass through territorial waters to any place outside India. Now, in the present case, if one reads the Customs Act without reading the Maritime Zones Act, 1976 then the Oil Rigs located in the notified areas/designated areas constitute "place outside India" thereby transit of goods to Oil Rigs would fall within Section 53 of the Customs Act. On the other hand, the very purpose of Sections 5, 6 and 7 of the Maritime Zones Act, 1976 is to declare an area of the contiguous zone/continental shelf/economic zone as a designated area so that exploration, exploitation and protection of resources belonging to India could be carried out. Under the said Act, the Central Government can create Artificial Island, Offshore Terminals, etc. By the said Act, customs and other fiscal enactments have been extended. Therefore, the object is very clear that the revenue generated from exploration and exploitation should accrue to the coastal State viz. India. It is for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since the oil rigs are stationed beyond the territorial waters of India, they would be considered as foreign going vessels engaged in other operations outside the territorial waters of India [see Sec. 2(21)(ii)]. Consequently, the Division Bench held that supply of imported "stores" to the oil rigs stationed outside the territorial waters would qualify for exemption from duty under Section 86 without being required to be warehoused. No question was raised before the Division Bench with respect to bearing of explanation to Sections 6 and 7 of the Maritime Zones Act together with notifications issued pursuant thereto on the meaning and interpretation of Section 2(27) of the Customs Act while interpreting the meaning of expression "foreign going vessel" in the context of Section 2(21) or the word "import" under Section 2(22) read with Section 2(23) of the Customs Act. However, the said question is squarely raised in this petition. 46.In our opinion, if the area of the exclusive economic zone or Continental Shelf, where the rigs are stationed (of course outside territorial waters) is deemed to be apart of the territory of India under the Central Government notifications issued purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made similar provisions under Article 33. As per the said convention the exclusive economic zone and the contiguous zone are no longer described as being a part of the high seas. 49.Article 127 UNCLOS of 1982 deals with Customs duties, taxes and other charges. Clause (1) thereof provides that traffic in transit shall not be subject to any customs duties, taxes or other charges except charges levied for specific services rendered in connection with such traffic; whereas clause (2) provides that means of transport in transit and other facilities provided for and used by the land locked States shall not be subject to taxes or charges higher than those levied for the use of means of transport of the transit State. 50.This article provides that where the goods are in transit to other country shall not be subject to any customs duties, taxes or other charges except for the charges levied for the specific services in connection with such traffic. In other words, there is no prohibition for levying customs duties on the goods which are not in transit for onward transmission to any other country. If the goods are brought in only while proceeding to other country, then no customs duty ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National Courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid confrontation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield." 52.In the case of Vishaka and Others v. State of Rajasthan Others - AIR 1987 SC 3011, the question before the Apex Court was as to what would be the position in law if there was no law for effective enforcement. The Apex Court observed as under :- "International convention and norms are to be read into them in the absence of enacted domestic law complying the field when there is no inconsistency between them. It is now an accepted rule of judicial construction that regard must be had to the international conventions and norms for constructing domestic law when there is no inconsistency between them." Thus ke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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