No Retrospective Effect Of Notification Imposing Custom Duty On Grant Of Conversion Of Vessels From 'Foreign Going' To 'Coastal Run': Orissa High Court Allows Customs Duty Exemption

The division bench headed by Chief Justice Dr. S. Muralidhar and Justice B.P. Routray has observed that exemption notification dated 17th March, 2012 is only prospective in its application and that in respect of the import of the three vessels i.e. 'Jag Arnav', 'Jag Ratan' and 'Jag Rani' which were imported into India first on 30th April 2003, 13th November, 2007 and 26th August, 2011 respectively, Entry 462 read with Condition No.82 of the notification dated 17th March, 2012 will not apply.

The petitioner/ assessee is a private sector shipping service provider involved in transportation of crude oil, petroleum products, gas and dry bulk commodities. It is stated to be a member of the Indian National Ship Owners Association (INSA).

On 3rd July, 2001, the petitioner acquired from Panama, a motor ship, 'Jag Arnav'. In terms of Section 406 of the Merchant Shipping Act, 1958 (MS Act), a general licence for 'Jag Arnav' to undertake worldwide trade and coastal trade in Indian waters was obtained by petitioner. 'Jag Arnav' arrived at Paradeep Port, Orissa on 30th April, 2003 for the first time. At that relevant time the import of a foreign going vessel was exempt from customs duty in terms of Serial No.352 of Notification No.21/2002-Cus, dated 1st March, 2002 as amended, read with the relevant tariff heading under the Central Excise Tax. The said Entry 352 read as "Heading 8901: All goods (excluding vessels and other floating structures as are imported for breaking up)."

The counsel appearing for petitioner submitted that the petitioner is eligible to avail exemption from payment of BCD subject to fulfilment of the condition that CVD will be paid at the time of conversion of the foreign going vessel into a 'coastal run' vessel. The contention is that every 'entry' of such a vessel into India from outside India, even after the date of its first arrival in Indian waters, is an import. According to the Opposite Parties, the contention of petitioner that the first time when 'Jag Arnav' came into India is the point at which customs duty can be levied is not supported by the Act and CBES's Circular No.16/2012, dated 13th June, 2012.

The court observed that a distinction has to be made between levy and customs duty on the value of ship stores that are carried on the vessel and are by themselves 'goods'.

In the present case since vessel 'Jag Arnav' called in Indian port for the first time at Paradeep on 30th April, 2003, and at that relevant date it was exempt from payment of customs duty it cannot be made amenable to such duty nine years later by virtue of a condition in another exemption notification of March 2012.

Case Title: Great Eastern Shipping Company Ltd. and another Versus Union of India and others

Citation: 2022 LiveLaw (Ori) 19

Case No.: Writ Petition (Civil) No.4 Of 2013

Counsel For The Petitioner: Senior Advocate Mr. Rohan Shah along with Advocate S. Mohanty

Counsel For The Respondent: Assistant Solicitor General of India P.K.Pari and Advocate S.C. Mohanty

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