CESTAT Allows Import Duty Exemption For Repair Of The Vessel Sagar Sampada

The Banglore Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the vessel Sagar Sampada is an Ocean-Going Vessel that is eligible for import duty exemption in respect of spares, parts, and other specific items for the vessel's repair.

The bench of P. A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) has observed that ocean-going vessels include scientific research vessels. FORV Sagar Sampada is a Scientific Research vessel, and hence, the question of not treating the appellant as an Ocean-Going Vessel does not arise. It is an Ocean-Going Vessel registered with the Director General of Shipping. Since the Notification allows spares for repairs of ocean-going vessels by a ship repair unit registered with the Director General of Shipping, Government of India, the question of denying this benefit does not arise.

The assessee/appellant, the Centre for Marine Living Resources and Ecology (CMLRE), is an organization established by the Government of India under the Ministry of Earth Sciences for organizing, coordinating, and promoting development activities.

The assessee was issued a show-cause notice demanding customs duty amounting to Rs. 91,05,880. The Master of the Fishery Oceanographic Research Vessel (FORV) Sagar Sampada, owned by the assessee, had imported ship spares in large quantities onboard the vessel after filing a reshipment application instead of a bill of Entry and without paying any customs duty.

The assessee contended that FORV Sagar Sampada was a research vessel owned by the Ministry of Earth Science. The letter issued by CBEC declared them a foreign-going vessel and permitted duty-free supply of diesel oil and lubricating oil, subject to the condition that other items of store in the nature of liquor, cigarettes, and food stuffs would not be permitted free of duty. In the permission given by CBEC, nowhere has the word ‘spares been categorically mentioned; hence, it was not for the Commissioner to interpret stores as per Section 2(38) to include the item spares, which had been permitted by CBEC.

The assessee submitted that even if the benefit for the foreign-going vessel was rejected, they were eligible for the exemption under Notification No. 21/2002, which is meant for ocean-going vessels. Hence, either way, whether the vessel is a foreign-going vessel or an ocean-going vessel, the benefit of the exemption Notification for spares had to be extended. Therefore, the demand needs to be set aside.

The department argued that the Commissioner was right in denying the benefit of the exemption Notification as per CBEC, vide letter D.O.F. No. 445/3/98-Cus. IV dated May 30, 1988. The Notification No. 21/2002-Cus. was eligible only for the Cochin Shipyard and not for the appellant. They also produced Notification No. 21/2011, which includes 351A, which clearly shows that the benefit was eligible for the appellant only as of 1.3.2011.

The CESTAT allowed the appeal and held that the letter categorically mentions that the vessel Sagar Sampada is an Ocean-Going Vessel that is eligible for import duty exemption in respect of spares, parts, and other specific items for the repair of the vessel under Notification No. 21/2002-Cus. dated 1.3.2002.

Case Title: Centre for Marine Living Resources & Ecology Versus The Commissioner of Customs

Case No.: Customs Appeal No.110 of 2010

Date: 20.07.2023

Counsel For Appellant: Hari Kumar G. Nair

Counsel For Respondent: K. Vishwanath

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