Full Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 11TH DAY OF NOVEMBER 2022 / 20TH KARTHIKA, 1944 CUS.APPEAL NO. 11 OF 2021 AGAINST THE ORDER APPEAL NO 21593/2014 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE
APPELLANT/S: COMMISSIONER OF CUSTOMS, C.R. BUILDING, I.S. PRESS ROAD, ERNAKULAM, COCHIN-682 018. BY ADV P.G.JAYASHANKAR RESPONDENT/S: M/S UNIVERSAL DREDGERS LTD., NILHAT HOUSE, BRISTOW ROAD, COCHIN-682 003 REPRESENTED BY ITS DIRECTOR. BY ADVS. T.VISWANATHAN; PRABHAKARAN P.M. KARTHIK S. NAIR; THIS CUSTOMS APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2022, ALONG WITH Cus.Appeal.12/2021, 13/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 11TH DAY OF NOVEMBER 2022 / 20TH KARTHIKA, 1944 CUS.APPEAL NO. 12 OF 2021 AGAINST THE ORDER APPEAL NO 21591/2014 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE
APPELLANT/S: COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, WILLINGDON ISLAND, KOCHI - 682 009. BY ADV P.G.JAYASHANKAR RESPONDENT/S: M/S.SAMUDRA DREDGERS (UK) LTD., NILHAT HOUSE, BRISTOW ROAD, COCHIN - 682 003 REPRESENTED BY ITS DIRECTOR. BY ADVS. T.VISWANATHAN PRABHAKARAN P.M.; KARTHIK S. NAIR THIS CUSTOMS APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2022, ALONG WITH Cus.Appeal.11/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -3-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI FRIDAY, THE 11TH DAY OF NOVEMBER 2022 / 20TH KARTHIKA, 1944 CUS.APPEAL NO. 13 OF 2021 AGAINST THE ORDER APPEAL NO 21594/2014 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE APPELLANT/S: COMMISSIONER OF CUSTOMS C.R. BUILDING, I.S. PRESS ROAD, ERNAKULAM, COCHIN 682 018. BY ADV P.G.JAYASHANKAR RESPONDENT/S: 1 M/S. MANTHAN DREDGING LTD 1801, DINA HOUSE, RUTTONJEE CENTRE II DUDDELL STREET, CENTRAL HONGKONG REP BY ITS MANAGING DIRECTOR. 2 M/S. MANTHAN DREDGING LTD., C/O. PAREKH MARINE AGENCIES PVT. LTD., NILHAT HOUSE, BRISTOW ROAD, COCHIN 682 003, REP. BY ITS MANGING DIRECTOR. BY ADVS. T.VISWANATHAN; PRABHAKARAN P.M.; KARTHIK S. NAIR; THIS CUSTOMS APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2022, ALONG WITH Cus.Appeal.11/2021 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -4-
JUDGMENT
[Cus.Appeal Nos.11/2021, 12/2021, 13/2021]
S.V. Bhatti, J.
We have heard Mr P G Jayashankar, learned counsel for the appellant and Mr T Viswanathan, learned counsel for the respondents.
2. The Commissioner of Customs/Revenue is the appellant. (i) M/s. Universal Dredgers Ltd, (ii) M/s. Samudra Dredgers (UK) Ltd, and (iii) M/s. Manthan Dredging Ltd are the
respondents in the appeals. The appeals arise from the common order dated 17.08.2020. The details of the appeals, from which the second appeals are filed in this Court, are stated thus:
Show cause Show cause Order in Order of the Party Customs
notice notice Original CESTAT Appeal
F.No.SIIB/23/ No.SIIB/23/20 COC- Customs Appeal M/s.Universal 11/2021
2012-Cus 12(pt)-Cus CUSTM-000- No.21593/2014 Dredgers Ltd
dt.30.01.2013 dt.07.05.2013 COM-072- Customs Appeal M/s.Samudra 12/2021
12-13 dt No.21591/2014 Dredgers (UK)
25.02.2014 Ltd
Customs Appeal M/s.Manthan 12/2021
No.21594/2014 Dredging Ltd-5-
3. The appellant issued show cause notice under Section
124 read with Section 28 of the Customs Act, 1962 (for short ‘the Act’) to the respondents herein. The show cause notice dated 30.01.2013 refers to the import of Dredger registered as ‘MV Darya Manthan’ (for short ‘Dredger’) into Indian waters without discharging the duty obligation attracted to the import of subject Dredger. A few dates relevant for appreciating the circumstances stated in the show cause notice are that M/s. Manthan Dredging Ltd, registered in Hong Kong, is the owner of the Dredger; for the period 25.12.2007 to 16.10.2012 onwards, the disponent owners of the Dredger were stated as M/s. Chellchart (UK) Ltd, UK, Samudra Dredgers (UK) Ltd, UK, and Universal Dredgers Ltd., UK. On 26.11.2007, the Dredger was on a Time-Charter arrangement with Chellchart (UK) Ltd and was bearing a foreign flag. On 14.12.2007, registered a Bill of Entry
-6- for home consumption of consumables on board of the Dredger alone. On 20.12.2007, the Dredger was converted from Foreign Run to Coastal Run. 3.1 Between 10.10.2009 and 13.11.2009, the Dredger was dry-docked in Singapore. On 20.11.2009, the Dredger sailed back to Paradeep Port and alleges to have obtained a certificate
as Coastal Run Dredger. On 18.11.2009, the Dredger, upon reporting at Paradeep Port, filed Bill of Entry for home consumption. Again on 01.08.2010, the Dredger claimed to have converted its status from Coastal Run to Foreign Run. The Dredger sailed back to Singapore and was docked till 04.05.2011. The Dredger again entered Indian waters at Nagapattinam on 12.05.2011 and remained at Nagapattinam till 08.06.2011. The Dredger filed Bill of Entry for consumables at on the board of Dredger. On 11.06.2011, the Dredger sailed from Nagapattinam Port to Paradeep Port. The Dredger, on 12.06.2011, obtained a
-7- Conversion Certificate from Foreign Run Dredger to Coastal Run Dredger while stationed at Paradeep Port. 3.2 The Dredger, it is alleged, filed IGM of consumables
on board in the latest instance while reporting at Paradeep Port. The boarding procedure of the Dredger, on 15.06.2011, was completed by the Officer of Customs at Dhamra Port. Thereafter, on 28.01.2012, the Dredger was given on a Time- Charter basis to Samudra Dredgers (UK) Ltd, respondent no.1 in Customs Appeal No.12/2021. On 24.08.2012, the Commissioner
of Customs issued a Restraint Order on the Dredger. The Disponent Owner, by furnishing Bank Guarantee and Security Bond on 30.08.2012, secured the release of the Dredger. The Dredger was again on a Time-Charter to Universal Dredgers Ltd with effect from 20.10.2012. In the above chronological dates and events, the Commissioner, by referring to entry into Cochin Port area and not paying the customs duty, has issued the show-
-8- cause notice dated 30.01.2013. The duty is leviable on a Dredger in terms of Notification No.19/2012.
4. The respondents filed reply explaining that the
Dredger, as and when reporting at a Port, has been filing IGM. The Dredger has been treated as a Foreign-going vessel, and whenever the need has arisen for Coastal-Run standing of the Dredger, the same has been accorded by the Officers of the Customs Department. The show-cause notice refers to alleged entry to Indian territorial waters through various ports, but duty demand is made by the Commissioner, Cochin.
5. On 28.01.2012 and a few dates in 2011, the show-
cause notice accuses Dredger of entering Indian waters as amounting to import and not paying the customs duty payable. The reply of the owner and the disponent owner of the Dredger contest vehemently each one of the circumstances set out in the show-cause notice dated 30.01.2013. The reply is not adverted -9- to in this judgment for more than one valid reason and also for the order we are proposing to make while disposing of the appeals.
6. The Revenue confirmed the show-cause notice, and the concluding portion reads as follows:
“(i). I confirm the duty of Rs.3,28,42,609/- (Rupees three crore twenty eight lakh forty two thousand six hundred and nine only), demanded vide show cause notice SIIB/23/2012-Cus dated 30.01.2013, on the lease value of the dredger, together with interest thereon, jointly on the owner of the dredger 'Darya Manthan', M/s. Manthan Dredging Ltd, 1801, Dina House, Ruttonjee Centre, 11 Duddll Street, Central, Hong Kong, and the disponent owners M/s.Samudra Dredgers (UK) Limited, Bridge House, 4 Borough High street, London, SE1 9QR, UK and M/s. Universal Dredgers Ltd, London, UK, under Section 28(4) of the Customs Act, 1962 and quantified under Section 28 (8) read with Section 28 (10) ibid;
(ii) I impose a penalty of Rs.3,28,42,609/- (Rupees three crore
twenty eight lakh forty two thousand six hundred and nine only) jointly on the owner of the dredger 'Darya Manthan' M/s. Manthan Dredging Ltd, Dina House, Ruttonjee Centre, 11 Duddll -10- Street, Central, Hong Kong, and the disponent owners M/s.Samudra Dredgers (UK) Limited, Bridge
(iii) I confirm the duty of Rs.46,73,440/- (Forty Six Lakh Seventy
Three Thousand Four Hundred And Forty Only), demanded vide show cause notice SIIB/23/2012-(pt)Cus dated 07.05.2013, on the lease value of the dredger, together with interest thereon, jointly on the owner of the dredger 'Darya Manthan', M/s. Manthan Dredging Ltd, 1801, Dina House, Ruttonjee Centre, 11 Duddll Street, Central, Hong Kong, and the disponent owners M/s.Samudra Dredgers (UK) Limited, Bridge House, 4 Borough High street, London, SE1 9QR, UK and M/s. Universal Dredgers Ltd, London, UK under Section 28(4) of the Customs Act, 1962 and quantified under Section 28 (8) read with Section 28 (10) ibid;
(iv) I impose a penalty of Rs.46,73,440/- (Forty Six Lakh Seventy
Three Thousand Four Hundred And Forty Only) jointly on the owner of the dredger 'Darya Manthan' M/s. Manthan Dredging Ltd, Dina House, Ruttonjee Centre, 11 Duddll Street, Central, Hong Kong, and the disponent owners M/s.Samudra Dredgers
(UK) Limited, Bridge House, 4 Borough High street, London, SE1 9QR, UK and M/s. Universal Dredgers Ltd, London, UK under Section 114A of the Customs Act, 1962;
(v) The cash deposits/bank guarantees shall stand appropriated against the above dues.” -11-
7. The owners and the disponent owners filed
C/21591/2014; C/21593/2014; and C/21594/2014 before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Bangalore. The respondents have raised several contentions touching on the jurisdiction, competence, rate, quantification, and fixing the liability on the Dredgers simultaneously. The Tribunal framed the following issues, and the answers on the respective points are stated (against each one of the issues):
“(1) Whether the impugned vessel MV Darya Manthan is foreign going vessel in terms of Section 2(21) of Customs Act, 1962; (No)
(ii) Whether the appellants are entitled to the benefit of Notification No.94/96; (No)
(iii) Whether Commissioner of Customs, Cochin has jurisdiction over the import which initially occurred at the port of Paradeep on 11.6.2011; (No)
(iv) Whether the vessel MV Darya Manthan is liable to pay duty -12- on being used for coastal run at Cochin for the period 28.1.2012 to 28.2.2013; (No)
(v) Whether the Commissioner of Customs was right in holding that separate proceedings for demand of duty and seizure of the vessel MV Darya Manthan can be initiated; and (No)
(vi) Whether Commissioner of Customs was correct in confirming the duty liability jointly on different parties. (No)” The Tribunal, through the impugned common order, allowed the appeals filed by the respondents herein. Hence, the instant appeals.
8. Mr P G Jayashankar challenges the findings, or the
view taken by the Tribunal, on issue no. (iii) and argued with considerable force that the framing of an erroneous issue conclusions thereon recorded by the Tribunal on the said issue cover jurisdictional facts. The duty demanded under Section 28 is more in the nature of an action in rem. The issuance of show- cause notice by the Commissioner of Customs, Cochin, is
-13- maintainable, and the Tribunal formulated an issue in a preposterous way, namely by noting that the import initially occurred at the Port of Paradeep on 11.06.2011. The question assumes and accepts that the Port of Paradeep is the place of import. The Tribunal has not taken note of the contemporaneous circumstances, such as applying for the status of Coastal-Run vessel, timing of application, and whether the continued operation without discharging the duty liability fastens jurisdiction on the Commissioner of Customs, Cochin or not. 8.1 It is pointed out that the issue itself is pre-judging the consideration and above all, the findings recorded by the Tribunal are without reference to the applicable provisions of law in the Act or to the circumstances admitted by the parties to the case. Even on undisputed circumstances, erroneous findings are recorded by the Tribunal. As the Tribunal is a final -14- Court of finding of fact, it could have been, in the fitness of circumstances, that the Tribunal recorded findings on relevant
issues arising in the matter. The respondents since have not
filed an appeal on the issues answered in favour of the Revenue; the issue dealing with jurisdiction needs to be reconsidered along with other incidental issues arising in the matter. He argues for setting aside the common order and remit the matter for the limited purpose of reconsidering the jurisdictional and connected issues by the Tribunal. The learned Counsel placed before the Court a few draft points which, according to him, are germane to the case on hand for a decision.
9. Mr T Viswanathan argued by inviting the attention of
the Court to various annexures filed before this Court, and firstly, issue no.(iii) excerpted above though assumes a particular state of affairs, the conclusion recorded by the Tribunal is commensurate and available in the circumstances of -15- the case. He relied on several judgments in support of his argument on jurisdictional issues, Port of entry, and the competence of the Commissioner of Customs, Cochin, to initiate duty recovery proceedings. It cannot be gainsaid that the
conclusion recorded by the Tribunal can be sustained through
supplemental reasoning now given by the learned Counsel appearing for the respondent. The findings as recorded by the Tribunal are read out for our consideration and argued that the formulation of issues, whether correct or not or the Tribunal committed an error, are left to the discretion and jurisdiction of this Court. For a valid reason, the framing of issue no. (iii) and a finding recorded thereon do not convince the Court, it is argued that the matter could be remitted to the Tribunal for reconsideration afresh, and in such an event, a few issues, on which neither there is consideration nor findings recorded by the Tribunal, are also directed to be considered on remand by
-16- the Tribunal. The Counsel has submitted a few draft issues for consideration and comprehensive adjudication by the Tribunal in the facts and circumstances of the case.
10. We have taken note of the draft suggestions made by
both the learned Counsel appearing for the parties, and we set aside the findings of the Tribunal on issue no. (iii) and remit the matter to the Tribunal for reconsideration afresh on the following issues.
(i) Whether, in the facts and circumstances of the case, where and when the import of the Dredger has occasioned?
(ii) Whether, in the facts and circumstances of the case, on the
assumption that on 24.08.2012, the Dredger was within the jurisdiction of the Commissioner of Customs, Cochin, the Commissioner of Customs, Cochin, has jurisdiction to demand duty under Section 28 of the Act?
(iii) Whether, in the facts and circumstances of the case, the -17- application of an extended period of limitation is available and justifiable or not?
(iv) Whether, in the facts and circumstances of the case, the confirmation of duty liability on different parties is valid and legal?
(v) Whether, in the facts and circumstances of the case, in the
event of the duty liability is attracted on the import of Dredger, subject to a finding on the above issues, the further issue for consideration is what is the value and duty payable on the imported Dredger and by whom? The findings recorded on other issues are not disturbed, and these issues are re-examined by the Tribunal as expeditiously as possible after affording an opportunity to both parties. Questions are answered, for statistical purposes, in favour of the Revenue, and appeals are remitted to the Tribunal for consideration afresh, as indicated above. We make it clear -18- that findings recorded on issue no.3 are set aside, and other findings are not disturbed. At the same time, as a few other
issues would arise for consideration on the suggestion made by
the counsel appearing for the parties, additional issues, as indicated above, are framed for the decision of the Tribunal. Sd/- S.V.BHATTI JUDGE Sd/- BASANT BALAJI JUDGE jjj -19- APPENDIX OF CUS.APPEAL 12/2021 PETITIONER ANNEXURES
Annexure A1 TRUE COPY OF THE SHOW CAUSE NOTICE DATED Annexure A2 TRUE COPY OF THE SHOW CAUSE NOTICE DATED Annexure A3 TRUE COPY OF THE ORDER IN ORIGINAL DATED Annexure A4 A CERTIFIED COPY OF THE IMPUGNED ORDER DATED
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, BANGALORE. RESPONDENT ANNEXURES Annexure R1(a) TRUE COPY OF THE APPEAL NO. C/21591/2014. -20- APPENDIX OF CUS.APPEAL 13/2021 PETITIONER ANNEXURES Annexure A1 TRUE COPY OF THE SHOW CAUSE DATED 30.01.2013 ISSUED TO THE RESPONDENT. Annexure A2 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 07.05.2013 ISSUED TO THE RESPONDENT. Annexure A3 TRUE COPY OF THE ORDER IN ORIGINAL DATED 23.02.2014 ISSUED TO THE RESPONDENT. Annexure A4 A CERTIFIED COPY OF THE IMPUGNED ORDER DATED
17.08.2020 IN APPEAL NO. 2159 OF 2014 OF THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE, TRIBUNAL, BANGALORE. RESPONDENT ANNEXURES Annexure R1(a) TRUE COPY OF CHART SHOWING THE MOVEMENT OF THE DREDGER IN QUESTION SINCE THE INCEPTION.
Annexure R1(b) TRUE C0PY OF BILL OF ENTRY DATED 27.12.2007. Annexure R1(c) TRUE COPY OF BILL OF ENTRY DATED 18.11.2009. Annexure R1(d) TRUE COPY OF BILL OF ENTRY DATED 28.06.2011. Annexure R1(e) TRUE COPY OF APPLICATION DATED 10.06.2011 MADE
BEFORE THE ASSISTANT COMMISSIONER OF CUSTOMS, PARADIP REQUESTING FOR CONVERSION OF THE VESSEL 'M.V.DARYA MANTHAN', FROM FOREIGN RUN TO COASTAL RUN AT PARADIP PORT. -21- Annexure R1(f) TRUE COPY OF COASTAL PERMISSION DATED 08.06.2011 GRANTED TO M.V DARYA MANTHAN BY THE DG SHIPPING FOR UNDERTAKING DREDGING OPERATIONS IN DHARMA PORT ALONG WITH TRANSLATION.
Annexure R1(g) TRUE COPY OF CONVERSION CERTIFICATE ISSUED BY PARADIP CUSTOMS. Annexure R1(h) TRUE COPY OF VESSEL STORE LIST DATED 14.12.2007. Annexure R1(I) TRUE COPY OF BUNKER SURVEY CALCULATION SHEET DATED 20.11.2009. Annexure R1(j) TRUE COPY OF CERTIFICATE DATED 12.06.2011. Annexure R1(K) TRUE COPY OF EXPORT GENERAL MANIFEST DATED 12.10.2009. Annexure R1(l) TRUE COPY OF EXPORT GENERAL MANIFEST DATED 14.04.2010.
Annexure R1(m) TRUE COPY OF PORT CLEARANCE DATED 01.04.2011. Annexure R1(n) A COMPREHENSIVE LIST OF DATES AND EVENTS. Annexure R1(o) TRUE COPY OF THE REPLY TO SHOW CAUSE NOTICE
DATED 30.01.2013. Annexure R1(P) TRUE COPY OF THE REPLY TO SHOW CAUSE NOTICE DATED 07.05.2013. Annexure R1(q) TRUE COPY OF THE WRITTEN SUBMISSIONS FILED PURSUANT TO PERSONAL HEARING. Annexure R1(r) TRUE COPY OF THE APPEAL NO. C/21594/2014. Annexure R1(S) TRUE COPY OF THE COMMON SYNOPSIS FILED BEFORE THE TRIBUNAL. -22- Annexure R1(t) TRUE COPY OF THE ADDITIONAL COMMON SYNOPSIS FILED BEFORE THE TRIBUNAL. Annexure R1(u) TRUE COPY OF APPLICATION UNDER SECTION 149 DATED 22.05.2018. -23- APPENDIX OF CUS.APPEAL 11/2021 PETITIONER ANNEXURES Annexure A1 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 30.1.2013 ISSUED TO THE RESPONDENT. Annexure A2 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 7.5.2013 ISSUED TO THE RESPONDENT. Annexure A3 TRUE COPY OF THE ORDER IN ORIGINAL DATED 25.2.2014. Annexure A4 A CERTIFIED COPY OF THE IMPUGNED ORDER DATED
17.8.2020 IN APPEAL NO.21593 OF 2014 OF THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, BANGALORE.