The Mumbai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has held that penalty is not payable under Customs Act, 1962 when goods transshipped from aircrafts and vessels traversed after fastening duty. The CESTAT held that there is no cause for confiscation of the impugned goods under section 111(n) and section 111 (o) of Customs Act, 1962 in the light of all movements having been effected under the approval of customs authorities.
A container vessel, MSC Chitra, collided with MV Khalijia-II, a bulk carrier, while departing and entering Jawaharlal Nehru Port respectively on 7th August 2010, causing environmental distress of historical significance from a huge oil spill and potentially toxic chemical reaction from containers on the former that was grounded on the shoals about eight kilometres beyond the coast of Mumbai. It was the response to this calamity – stabilizing of the vessel and recovery of the containers – that turned out to be cause for controversy.
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Ship ‘stores’ for ‘foreign going vessel’, which is nothing but those not being ‘coastal vessel’, are ‘zero rated’ for duty liability, by special law of chapter XI ensconced in Customs Act, 1962 with specific substitutions of the normal under the authority of section 88 of Customs Act, 1962.
The contours of the controversy rest upon the proposition of Revenue that presumption of duty liability under Customs Act, 1962, subject to exemptions, inheres in goods landed in India and not exported therefrom. The appellants, per contra, suggest that the circumscribing effect of section 116 of Customs Act, 1962, along with section 21, section 22 and section 23 of Customs Act, 1962 invalidates the proposition to place the onus on customs authorities to evidence that goods were not taken out of India for duty liability to crystallise on goods originating from outside India. And it is between the thesis and antithesis that must look to placement of established facts on known law to resolve the dispute.
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Counsel for appellants submitted that transhipment was permitted against appropriate authorisations and that conditions stipulated had been conformed to as evident from cancellation of bonds. It was further submitted that the grounds marshalled in the impugned orders were mere speculation, assumption and presumption. Our attention was drawn to the certificate dated 1st March 2011 issued by the Salvage Master declaring receipt of goods in board MSC Chitra.
According to Authorized Representative, the impugned goods did not conform to ‘stores’ for not having been declared as ‘ship stores’ but as ‘salvage equipment’ which do not find use in a vessel and that the title to section 86 of Customs Act, 1962 is restricted to ‘transit and transhipment’ which, in the context of ‘stores’, is to be deemed as those on board only. He further contended that MSC Chitra was not ‘foreign going vessel’ but ‘wreck’ only which, in terms of section 21 of Customs Act, 1962, is to be accorded treatment as goods and not as vessels.
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On behalf of appellants, it was argued that neither were requisite inasmuch as the impugned goods, with appropriate permissions, had been moved beyond taxable jurisdiction by licit entry coupled with deployment on vessels whose entitlement to ‘duty less’ placement had neither been the subject of adjudicatory notice nor examined to place the confirmation of demand, on goods that had not been cleared for home consumption, beyond the pale of section 28 of Customs Act, 1962.
The arrival of the impugned goods by conveyance from outside India with declared intent of movement by vessel to the site of grounding of MSC Chitra from the nearest port and the sanction of customs authority for the delivery thereof under escort renders that as ‘transshipment’ which, in terms of section 54 of Customs Act, 1962, affords ‘zero rating’ of duties and, therefore, not required to be processed in accordance with chapter VII of Customs Act, 1962.
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Read More:Goods wrongly loaded could not be Exported without clearance by Customs: CESTAT
The shipment of the impugned goods from ‘customs station’ of arrival under escort, to the ‘accident site’ is not in dispute. Furthermore, by placement on board the transferring vessel, the acceptance thereof by the consignee, or by M/s JM Baxi & Co, for placement on board, and not as ‘export goods’, suffices, in the circumstances of salvage, for acknowledgement as ‘stores’ at that point in time.
A two member bench of C J Mathew, Member (Technical) and Ajay Sharma, Member (Judicial) viewed that in the absence of any evidence that the impugned goods have remained behind for domestic use, and without any reason to discard the transformation, by delivery and use thereof in salvage of ‘foreign going vessel’, of goods transshipped from aircrafts and vessels as ‘stores’ of MSC Chitra, as well as the authority under which the impugned goods traversed the national territory, the fastening of duty liability under section 28 of Customs Act, 1962 has no merit.
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The CESTAT held that there is no cause for confiscation of the impugned goods under section 111(n) and section 111 (o) of Customs Act, 1962 in the light of all movements having been effected under the approval of customs authorities. With lack of empowerment to invoke section 28 of Customs Act, 1962, penalties under section 114A and section 114AA of Customs Act, 1962 are without authority of law. Appeals are allowed by setting aside the impugned orders.
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