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Collector of Customs Vs. Shipping Corporation of India - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC1788Tri(Delhi)
AppellantCollector of Customs
RespondentShipping Corporation of India
.....a.v.bhanoji rao, garoda pattabhiramayya & co. shipping agents of the shipping corporation of india, visakhapatnam to show cause why order in appeal no. 33/79 cus., dated 18-2-1979 passed by the appellate collector of customs and central excise, hyderabad should not be set aside and the order of the asstt. collector no. s. 3/1/78-s.s./s.3a/1/78-s.s., dated september, 1978 (the order has no date) should not be restored, etc., etc.2. m.t. netaji subhas bose arrived on 16-1-1978 at madras from kharg island and unloaded foreign, cargo there before sailing for visakhapatnam on 19-1-1978. at visakhapatnam, she discharged foreign cargo, after which, she reached haldia on 22-1-1978 to discharge crude oil taken by her from another tanker m.t. zakir hussain at visakhapatnam. after discharging.....
1. A notice F. No. 380/151/80-Cus. II, dated 4-2-1981 was issued by the Government of India tinder Section 131(3) of the Customs Act, 1962 calling upon the Shipping Corporation of India, Bombay, and M/s. A.V.Bhanoji Rao, Garoda Pattabhiramayya & Co. Shipping Agents of The Shipping Corporation of India, Visakhapatnam to show cause why order in appeal No. 33/79 Cus., dated 18-2-1979 passed by the Appellate Collector of Customs and Central Excise, Hyderabad should not be set aside and the order of the Asstt. Collector No. S. 3/1/78-S.S./S.3A/1/78-S.S., dated September, 1978 (the order has no date) should not be restored, etc., etc.

2. M.T. Netaji Subhas Bose arrived on 16-1-1978 at Madras from Kharg Island and unloaded foreign, cargo there before sailing for Visakhapatnam on 19-1-1978. At Visakhapatnam, she discharged foreign cargo, after which, she reached Haldia on 22-1-1978 to discharge crude oil taken by her from another tanker M.T. Zakir Hussain at Visakhapatnam. After discharging the crude oil at Haldia, she again left for the Persian Gulf in ballast, touching Visakhapatnam on the way. The Asstt. Collector required that duty should be paid on stores on board the vessel as he had been used for lightering because he held that vessels which are used for lightering operations of goods imported by larger vessels are deemed to be on coastal run.

3. The Appellate Collector overruled the Asstt. Collector. He said that he was of the view that the vessel M.T. Netaji Subhas Bose in carrying the cargo received from the vessel M.T. Zakir Hussain to the Indian port, had not diverted from the foreign run. She had to be treated as a foreign going vessal even during the period when she remained in Indian waters and undertook voyages between the ports in India for purposes of discharging of crude oil from the vessel Zakir Hussain to places such as Visakhapatnam and Haldia. He concluded that she was entitled to consume stores without payment of duty. He appears to have relied on a judgment of the Calcutta High Court in the case of Turner Morrison and Co. Limited v. The Asstt. Collector of Customs for Exports (II) and Anr. (Appeal No. 314 of 1971) delivered in My, 1976, but he does not explicitly say if this judgment supported his decision.

4. During to argument the earned counsel for the department Mr.

surender ranan argued that the M/s.Turner Morrison judgment of the calcutta highcourt quoted by the Appellate collector was under appeal before the Supreme Court He said that a your age of this nature cannot be treated as a foreign run-the vessel Netaji Suvhas Bose carried cargo between two Indian ports It was not the kind of journey that was made by the lighter 'NancyDee' in the case decided by the calcutta High coutr in M/s. Turner Morrison & Company Limited's case In that case the Nancu Dee worked as a lighter to ferry goods to Calcutta from a vessel outside Calcutta in. January, 1997 and February, 1970. The 'Nancy Dee' was specifically brought to the port of Calcutta in January., 1970, with the specific mission of acting as a lighter to carry wheat from super tankers. The super tankers .were waiting beyond the port for the purpose of unloading goods at Calcutta. The situations are different because 'Netaji Subhas Bose' was not a lighter but was itself a foreign going vessel and had carried foreign cargo up to Visakhapatnam. Its trip between Visakhapatnam and Calcutta was made solely to carry the crude that she obtain from the super tanker 'M.T. Zakir Hussain'. This proved that that part of the journey was made in a coastal trade.

5. The learned counsel for the Shipping Corporation said that the judgment by the Calcutta High Court in the Turner Morrison & Co.

Limited's case applied fully to their case. Here also, the 'Netaji Subhas Bose' acted as a lighter between Visakhapatnam and Calcutta, and therefore, operated for this voyage under the same conditions. Their ship did not have a licence from the Director General of Shipping to engage any coastal trade. The Customs Act, 1962 under Section 87 permits foreign stores on board a ship to be consumed as stores without payment of duty during the period that the vessel is a foreign going vessel. A foreign going vessel has been defined under Section 2(21) of the Customs Act, 1962, as a 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 or airport in India or not. M.T. Netaji Subhas Bose was carrying foreign goods which she brought from a foreign port to an Indian port. The carriage of goods by super tankers even when supplemented by other ship is one operation and in continuation of the same operation since the super tanker by reason of their sizes are physically incapable of entering any port in India. There can be no doubt that M.T. Netaji Subhas Bose was engaged in carrying goods between a foreign port and an Indian port, and therefore, was a foreign going vessel. She was not carrying cargo between two ports in India and had not been disentitled to the exemption to duty free consumption of foreign stores. He ended by proposing dismissal of the Government of India's notice.

6. The case of M.T. Netaji Subhas Bose and the case of Nancy Dee are different. Nancy Dee was specially chartered and brought to India for the purpose of lightering work of wheat carrying from super tankers.

This is not the case with M.T. Netaji Bose. The vessel was itself a foreign cargo carrying ship which arrived from Kharg Island in the Persian Gulf with foreign cargo for Madras and Visakhapatnam. There is no evidence that it was destined to go to Calcutta. When she went to Calcutta she did so only to carry crude oil taken from M.T. Zakir Hussain at Visakhapatnam. Nor is there any evidence that M.T. Zakir Hussain was destined to discharge foreign crude at Calcutta and that M.T. Netaji Subhas Bose merely helped to carry the cargo to its intended destination. M.T. Netaji Subhas Bose diverted at Visakhapatnam, an Indian ports in order to carry cargo to Haldia another Indian port. It makes no difference that the cargo was a foreign cargo. The fact was that cargo was carried between one Indian port and another by a ship that was not meant to undertake that voyage.

Nor was it meant to lift Indian cargo at Calcutta for any foreign port as is proved by the fact that she left that port in ballast, touching Vizag again which she left on 24-1-1978 also in ballast. The run from Vizag to Calcutta between 19 and 22-1-1978 was clearly a coastal run to carry cargo between two Indian ports, and no other. We are, therefore, unable to agree with the Shipping Corporation of India that the demand for duty made by the Vizag customs was incorrect.

7. We set aside the order of the Appellate Collector dated 18-2-1978 and direct that duty shall be paid on the stores as demanded by Visakhapatnam Custom House.

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