Dredger Accessories Rules, Vessel Still In Use, No Case Of Unjust Enrichment, Duty Not Leviable: Calcutta High Court

The Calcutta High Court has held that when the goods are still in use, the question of passing the burden of customs duty does not arise, and the question of unjust enrichment will not be applicable.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the appellate authority took note of the certificate issued by the Chartered Accountant in which the Chartered Accountant again certified that all the goods brought under the cover of the three bills of entries are still in use by the Dredging Corporation of India. The Director (Operations and Technical) of the assessee certified that the vessel is in operation and has not been sold.

The respondent assessee is a Government of India undertaking that entered into a contract with Kolkata Port Trust for dredging work at Balari Bar Reach at the Hooghly River and for transporting the material dredged and disposing of the same in the designated disposal area. For the purpose of the contract, the assessee purchased one cutter suction dredger with accessories and spares from a Dutch firm. The three bills of entries were filed on January 28, 1991, January 29, 1991, and February 1, 1991, which were assessed provisionally on payment of duty and against the execution of bond as the customs authorities entertained doubt as to whether spares, along with the dredger and two subsequent consignments and others were eligible for assessment at the rate applicable to the dredger under Accessories (Conditions) Rules, 1963, read with Notification No. 133/87-Cus.

During the course of the adjudication, the assessee contended that spares that have come along with the dredger covered under the Bills of Entry dated January 28, 1991, for which no separate invoice has been raised by the supplier should be assessed at the rate applicable to the dredger, and the extra duty paid by them during the provisional assessment should be refunded to them as the two conditions mentioned in the Accessories Rules and Notification No. 133 of 1987 have been fulfilled by them.

The adjudicating authority rejected the contention raised by the assessee and confirmed the demand of duty in respect of spares and accessories and denied the benefit of Notification No. 133/87-Cus. The appeal filed by the assessee against the said order of adjudication was dismissed by the Commissioner of Appeals. The assessee filed the appeal before the tribunal.

The tribunal accepted the case of the assessee and, in doing so, relied upon the decision of the Coordinate Bench of the tribunal in the case of Boskalis Dredging India Private Limited vs. Commissioner of Customs, Bhubaneshwar, holding that accessories and spares, pipelines, etc. form an indispensable part of the main vessel. The assessee filed a claim for a refund.

The claim for refund was sanctioned by the authority; however, the amount was credited to the Consumer Welfare Fund on the ground that the assessee has not established that the duty has not been passed on to any third person. The appellate authority, while allowing the appeal filed by the assessee, has elaborately considered the factual position and rightly noted that the admissibility of the refund to the assessee has been settled by the tribunal way back in 2001, and the only issue to be decided is whether there is any question of unjust enrichment in the matter.

The appellate authority also noted that the matter has been dragging on for close to 25 years at the relevant time. The appellate authority found that the sanctioning authority has belatedly attempted to include the generation and sale of scraps and the higher contract price in order to justify inclusion under the clause of unjust enrichment but has failed to produce any evidence.

The court held that no evidence has been adduced or discussed to hold that the scrap is being generated and sold because it has been produced directly from the imported goods. Furthermore, the vessel and its equipment are still in use.

Counsel For Appellant: K.K. Maiti

Counsel For Respondent: Samir Chakraborty

Case Title: Commissioner Of Customs (Port), Kolkata Versus M/S. Dredging Corporation Of India Limited

Case No.: Custa No. 29 Of 2023

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