ORDER
K.S. Venkataramani, Member (T)
1. This appeal is directed against the Order dated 1-8-1983 passed by the Collector of Customs (Appeals), Calcutta by which he had allowed the appeal of the respondents herein by holding that the vessel ‘M.S. Jaladharma’ owned by the respondents was eligible for duty-free exemption on its clearance for ship breaking. The Collector of Customs, Calcutta is aggrieved by this order and has preferred the present appeal. The facts in brief are that the respondents herein in a letter dated 9-5-1983 requested the Custom House for issue of a No Objection for dismantling and duty-free clearance of the vessel M.V. Jaladharma on the ground that the vessel having been imported in 1957 would not fall under the purview of conditional exemption Notification 262/58, dated 11-10-1958. The department, on enquiry, found that the subject vessel arrived at Bombay on 4-5-1957 for which IGM was submitted on 6-5-1957 and the department thereupon informed the respondents by a letter dated 26-3-1983 that the vessel would not be exempted from payment of Customs duty but would be classifiable for duty under Heading 89.04 of Customs Tariff Act, 1975 for the reason that the vessel was originally imported on 6-5-1957 and started plying as an Ocean going vessel under the Indian Flag and that during such usage, the vessel went outside India and returned several times and that as per Section 2(23) of the Customs Act, 1962, this would constitute import and, therefore, the department informed the respondents that each time the said vessel came to India from abroad, there was a fresh import and the vessel became dutiable goods under Item 76 (1) of the Indian Customs Tariff prior to 2-8-1976 and under Heading 89.04 of Customs Tariff Act, 1975 thereafter. However, since the vessel remained an Ocean going vessel till her penultimate voyage into India, it was exempted under Notification 262-Cus., dated 11-10-1958 but that when the vessel came to India for the last time for subsequent breaking up, it became liable to duty in terms of that notification which provided that the Ocean going vessel on being subsequently imported for breaking up would be liable to duty. The respondents, being aggrieved by the above decision of the Assistant Collector, appealed to the Collector of Customs (Appeals) who held that the vessel was imported into India in 1957 and the rate of duty relevant at that material time would apply to the vessel and the Collector (Appeals) found that the Notification 262-Cus. was not issued/operative at that time and would not, therefore, be applicable to the vessel sought to be cleared by the respondents. On the other hand, at the relevant time of importation of the vessel, there was an un-conditional exemption for Customs duty on Ocean going vessels by virtue of Government’s direction dated 21-6-1923. The Collector (Appeals) therefore, allowed the appeal holding that the vessel was not liable to payment of Customs duty.
2. The learned SDR, Shri K.D. Tayal, appearing for the appellant Collector submitted that in this case, no doubt, when the vessel was first imported for the time at Bombay by M/s. Scindia Steam Navigation Co. in 1957, it was eligible for the exemption which was available un-conditionally to all Ocean going vessels by the Central Government direction dated 21-6-1923 but by the time the vessel was sought to be cleared for scrapping, Notification 262-Cus. was in force, according to which the Ocean going vessels subsequently cleared for breaking up would be liable to duty at the rate applicable on the date on which she returned from a foreign run. The learned SDR contended that the exemption as an Ocean going vessel ceased to apply when once the vessel was put up for sale for scrapping and in such circumstances, Notification 262/58 would apply and duty would be payable for such clearance. He placed reliance on the case law reported in 1987 (28) E.L.T. 39 (S.C.) Chowgule & Co. Pvt. Ltd. v. Union of India wherein the Supreme Court held that a vessel is goods for purposes of filing a Bill of Entry under Section 46(1) of the Customs Act, 1962 that in determining whether the vessel was an Ocean going vessel, regard should be had to the purpose of their purchase. In the present case, when the vessel was purchased for breaking up, it would be dutiable since it has ceased to be an Ocean going vessel. The Supreme Court in that case had confirmed the earlier Bombay High Court decision that the intention of the Import of the vessel is relevant. The learned SDR also placed reliance in the case of Union of India v. Sri Ramniwas Chaudhury – 1987 (30) E.L.T. 118 (Cal.) wherein the Court clearly held that if Ocean going vessel is broken up after its importation due to loss of seaworthiness or otherwise, duty is leviable thereon.
3. Shri S.P. Mittal, the learned counsel appearing for the respondents pointed out that the department’s case is that each time, the vessel undertook journeys outside India and returned, it constitute an act of import. This view has been rejected by the Hon’ble Bombay High Court in the case of M/s. Jalyan Udyog v. Union of India – 1987 (13) E.C.R. 1149, wherein the High Court held that Ocean going ships leaving the territorial waters of India do not become exports and that their original date of import would not be affected. The learned counsel further pointed out that Notification 262/58 was inapplicable because the vessel had been imported into India prior to the issue of that notification and at that time, there was an un-conditional exemption for Ocean going vessels which only will be applicable to the vessel in question. The learned counsel further relied upon the Bombay High Court judgment in the case of Apar (P) Ltd. v. Union of India – 1985 (22) E.L.T. 644 wherein the High Court held that the critical event was the entry of goods into the territorial waters of India and that if there is a total exemption at the time of import, duty cannot be imposed later on even if in the meanwhile, the exemption was withdrawn. The learned counsel also cited and relied upon the case of Ram Niwas Chaudhary v. Metal Scrap Trade Corporation Ltd. – 1986 (23) E.L.T. 321 (Cal.) that the duty to be levied on vessels for ship breaking, the rate prevalent on the date of first import of the vessel into India and in this case, since on the date of first import, there was total unconditional exemption, there cannot be any duty payable at the time of clearance for ship breaking in view of the case law cited above, according to the learned counsel.
4. We have given careful consideration to the submissions made by the learned SDR and the learned counsel. The admitted fact is that vessel M.V. Jaladharma was imported in 1957 for which final IGM was submitted on 6-5-1957 at Bombay when M/s. Scindia Steam Navigation Co. had imported it. It continued to be an Ocean going vessel thereafter. In 1980, it was sold by M/s. Scindia Steam Navigation Co. to M/s. Foulard Lines Calcutta, which went into liquidation shortly thereafter, resulting in the vessel being arrested by the Hon’ble High Court at Calcutta under admiralty jurisdiction on July, 1982. The Court granted leave to the Calcutta Port Trust for sale by tenders and the respondent was the highest bidder and thus became to be the purchaser of the vessel. Thereafter, he ought clearance of the vessel without duty from the Customs. The main ground for the Customs department’s case is that although the initial import of the vessel was as an Ocean going vessel subject to exemption, yet the vessel had performed many voyages in its career as an Ocean going vessel and each time it came to India from abroad, there was a fresh import and the vessel became dutiable goods and when it came to India for the last time for subsequent breaking up, it became liable to duty in terms of Notification 262-Cus., dated 11-10-1958. This notification says “Ocean going vessels other than vessels imported to be broken up, are exempt from the payment of Customs duty leviable thereon : Provided that any such vessel subsequently broken up shall be chargeable with the duty which would be payable on her if she were imported to be broken up”. However, according to the respondents, the vessel was imported for the first time in 1957 when there was an un-conditional exemption from duty on ocean going vessels. This exemption is re-produced in the Indian Customs Tariff Guide, Sixth Edition at Page 175, wherein against Item 76(1) of the Tariff Schedule it says “All Ocean going vessels are exempt from duty. Equipment to be permanently installed on such vessels will be assessed to duty on importation and a drawback of seven-eighths granted when the plant is installed”. The authority for this is cited as ‘India, Com. D.O.484 of 21st June 1923. On examination of the submissions made in this regard, with reference to the salient facts as above, we find that the basis for the department to. invoke Notification 262/58 in respect of the vessel in question is not well founded because the Hon’ble Bombay High Court in the case of M/s. Jalyan Udyog v. Union of India, cited supra has specifically dealt with this very point agitated before the Court in that case and have rejected it. As observed by the Court,
“The ships were imported in the year 1968 and merely because the ships thereafter left the territorial waters of India, the ships being ocean going vessels, it cannot lead to the conclusion that the ships were exported. The predominant intention of Shipping Corporation of India was to use the ships as ocean going vessels and not to export them. It is therefore, not possible to accept the contention that the vessels on every occasion when they left the territorial waters of India should be treated as having been exported”.
Therefore, the department’s contention that the provisions of Notification 262/58 would be applicable due to the frequent voyages of the vessel as an ocean going vessel is not sustainable. In this view of the matter, what remains is the liability to duty in terms of such liability occurring as at the time of the first import of the vessel in 1957. We have seen that at the time, by a Government of India direction of 1923, there was an un-conditional exemption to Ocean going vessels. The Hon’ble High Court of Calcutta in the aforesaid case as also the Hon’ble Bombay High Court in the Jalyan Udyog case, agreeing with the Calcutta High Court had laid down that duty on imports of ships purchased for screpping is to be related to the time when the ships enter the territorial waters of India and the duty is payable at the rate prevalent at that time. When we examined the facts of the present case in the light of the above judicial announcement, we find that the vessel was originally imported at Bombay for which IGM was also filed on 6-5-1957 on arriving of the vessel on 4-5-1957. Follwing the ratio of the Calcutta and Bombay High Court above cited, the rate of duty should be that which was prevalent in 1957. We find that at that time, there was a total un-conditional exemption available to all Ocean going vessels in terms of India, Com. D.O. 484 of 21st June, 1923. This being the case, it will not be correct in law to seek to apply the provisions of Notification 262-Cus. which was issued on 11-10-1958, subsequent to the date of arrival of the vessel in question at Bombay Customs. In the circumstances, we see no reason to interfere with the finding of the Collector (Appeals) in the impugned order and in this view of the matter, the appeal is rejected. The Cross Objection filed by the respondents is misconceived since they are not aggrieved by any part of the order of Collector (Appeals) and as such, is dismissed.