(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Rule. Mr.P.S. Champaneri waived Rule for Union of India and the learned advocate Ms.Amee Yajnik waived for rest of the respondents.
2. For considering the interim relief prayed by the petitioner, we deem it appropriate to record brief reasons.
3. The petitioner is a shipping company and has challenged the legality of a Notification dated 17th March 2012 No.12/2012 CUS and prayed for a direction that such notification should not be applied to vessels which were imported previously in Page 1 of 7 C/SCA/8103/2012 ORDER terms of the then prevailing exemption Notification No.21/2002-Cus dated 01st March 2002.
4. The petitioner, as a shipping company, uses a large fleet of ships. Many of them have been imported into India in the past. It is the case of the petitioner that the petitioner- Company had imported all such vessels by following necessary formalities as required at the relevant point of time prior to issuance of the impugned notification dated 17 th March 2012 when such imports were governed by Notification No.21/2002-Cus dated 01st March 2002. As per such notification, imports of such vessels into India were exempt from payment of any custom duty, however, on condition that :
"If the vessels and other floating structures are intended to be broken up after their importation, the importer shall present a fresh bill of entry to the Commissioner of Customs, and thereupon such goods shall be chargeable with the duty which would be payable on such goods as if they were entered for home consumption, under section 46 of the Customs Act, 1962 (52 of 1962), on the date of the presentation of such fresh bill of entry, for the purposes of break-up of such goods."
5. By virtue of this subsequent notification dated 17 th March 2012, the notification dated 01st March 2002 is superseded. It is now provided that a foreign vessel when imported into India shall be exempt from payment of custom duty, subject to Condition No.82 contained in such notification, which reads as under :
"If,-
the importer files a bill of entry under section 46 of the Customs Act, 1962 [No.52 of 1962] at the time of conversion of vessel for coastal run subsequent to import and pays the applicable duty of customs on :-
(b) 1/120th of the applicable duty, for each month or part thereof, of stay in India as coastal vessel. Explanation .- For the purposes of this entry, (1) "Foreign going vessel" shall have the same meaning as assigned to it under clause (21) of Section 2 of the Customs Act, 1962 [No.52 of 1962];
(2) "Conversion to coastal Vessel" shall include the vessel granted a license for coastal trade under Section 407 of the Merchant Shipping Act, 1958 (44) of 1958) by the Director General Shipping and the vessel granted permission for carrying coastal goods, under the provisions specified in Chapter XII, of the Customs Act, 1962, [No.52 of 1962] by the proper officer of the customs;
(3) "applicable duty" means the Additional duty of Customs under sub-section (1) of section 3 of the Customs tariff Act, 1975 (51 of 1975)."
6. What emerges is that prior to 17 th March 2012, whenever a person imported a foreign ship, at the time of import the Government of India levied no customs duty. In other words, such import was totally exempt from payment of custom duty. Such exemption was, however, conditional. The condition being that such exemption would continue till the ship is taken for breaking. At the time of breaking of the ship, the custom duty will have to be paid on the valuation of the ship on that date.
7. With introduction of the notification dated 17th March 2012 and supersession of the previous notification dated 01 st March 2002, such facility which was previously available to the importers was withdrawn. The new regime now provides that an importer shall have to pay graded custom duty on its coastal run depending on the valuation of the ship and duration of such coastal run.
8. Above implications of the two notifications are seriously not Page 3 of 7 C/SCA/8103/2012 ORDER in dispute. What is in dispute is whether the fresh notification dated 17th March 2012 which superseded the previous notification dated 01st March 2002 can be applied to the petitioner in connection with its ships which were imported prior to issuance of notification dated 17 th March 2012. The case of the petitioner is that such imports were governed by the exemption Notification dated 01 st March 2002. The ship as and when imported stood exempt from payment of custom duty, subject, of course, to above noted rider. However, each subsequent foreign run and return back to India would not give rise to a fresh event of import. On such basis, it was strongly urged before us that once the import was complete and was governed by the then prevailing notification dated 01st March 2002, no duty can be demanded by virtue of fresh notification dated 17th March 2012. In other words, such notification and the conditions contained therein can be applied only to fresh imports and not to the ships already imported by the petitioner prior to 17th March 2012.
9. On the other hand, the case of the respondents is that each time a ship, which was originally a foreign ship, undertakes a foreign journey and returns to Indian shore, a fresh event of importation would arise. Previously such imports were exempt from payment of custom duty under notification dated 01st March 2002. However, by virtue of subsequent notification dated 17th March 2012 the previous notification stood superseded and for all future events, the petitioner must fulfill the conditions of notification dated 17 th March 2012.
10. We are prima facie of the opinion that the answer to the rival contentions would lie in the question whether the initial import of a foreign vessel would be complete when for the Page 4 of 7 C/SCA/8103/2012 ORDER first time such ship is brought within the Indian territories and in case of which ship necessary formalities have been completed. If under the conditions prevailing at the relevant time, such import was exempt from payment of duty immediately, we are doubtful whether subsequent change in the notification would authorise the respondents to collect the custom duty on subsequent events of such a ship undertaking a foreign trip and returning to Indian shore. We have noticed that notification dated 17th March 2012 specifically provides that the same shall not disturb as respects things done or omitted to be done before the supersession of notification dated 01st March 2002.
11. We may also notice that the entire scheme of notification dated 01st March 2002 came to be considered by the Supreme Court in the case of Union of India v. Jalyan Udyog, reported in 1993 (68) ELT 9 . The Supreme Court held that the notification provides that when a ship owner decides to break the ship, in such a situation, it would be deemed as if the ship is imported for breaking up and on that basis the custom duty is charged. The notification creates a fiction, namely, the vessel must be deemed to be imported for being broken up when it is being broken up. It was observed that ordinarily the custom duty is levied with respect to the date of actual import, but the exemption notification says that if the vessel imported is an ocean-going vessel, it shall be exempt from custom duty on the date of its import, but in case it is subsequently broken up, the duty shall be paid as if it were then imported for being broken up, which necessarily means that the duty will be levied on the value and at the rate prevailing on the date of breaking up.
12. It would, thus, prima facie emerge that under the notification dated 01st March 2002 though the import of the vessel would Page 5 of 7 C/SCA/8103/2012 ORDER be complete when it was first time brought into India, by virtue of exemption granted under the notification, no custom duty would be collected. The deeming fiction would arise for the purpose of valuation of the ship and collecting customs duty on the date of breaking when it is taken up for such purpose.
13. Considering such issues, we are inclined to grant interim protection to the petitioner. However, such protection cannot be unconditional.
14. In the result, by way of interim relief, it is directed that till final disposal of the petition, no customs duty shall be collected from the petitioner under impugned notification dated 17th March 2012 in respect of ships imported before issuance of the said Notification.
15. The petitioner shall, however, comply with all other requirements of such notification.
16. The petitioner shall file periodically full details of movements of the ships to the extent they make coastal run before the customs authority.
17. The petitioner shall also provide security for the unpaid duty under notification dated 17th March 2012 to the satisfaction of the customs authority.
18. It is clarified that such interim protection shall not be available to any of the vessels of the petitioner which have not been imported prior to 17th March 2012. The petition be placed for hearing on 30th January 2013.
(AKIL KURESHI, J.) Page 6 of 7 C/SCA/8103/2012 ORDER (MS SONIA GOKANI, J.) Aakar Page 7 of 7