Holding

Goods taken to the high seas constitute a "place outside India" and therefore the export was complete, making the claimant entitled to drawback under Section 75.

Summary

Sun Industries shipped plywood panels from Calcutta to Colombo and claimed drawback under Section 75 of the Customs Act. The vessel developed engine trouble, returned, and ran aground in Indian territorial waters, after which the cargo was salvaged. The Assistant Collector and Appellate Collector rejected the drawback claim, holding that the goods had not been exported because the ship entered Indian waters. The Customs Excise and Gold (Control) Appellate Tribunal allowed the claim, reasoning that the ship had passed beyond India's territorial waters and the goods had reached the high seas, which constitutes a "place outside India" under Section 2(18) and Rule 28(c). On appeal, the Supreme Court affirmed the Tribunal’s view, interpreting "place" to include the high seas and concluding that export was complete when the ship left territorial waters, thus entitling Sun Industries to the drawback. The appeal was dismissed.

Issues considered

Whether goods taken onto a vessel that later returns to Indian territorial waters can be considered exported under Section 75 of the Customs Act.
Interpretation of the term "place" in Section 2(18) of the Customs Act and Rule 28(c) of the Drawback Rules.
Whether proof of delivery to a place outside India is required for drawback eligibility.

Legislation cited

Customs Act, 1962s. 130-E(b), s. 131, s. 2(18), s. 2(8), s. 75
Customs and Central Excise Duties Drawback Rules, 1971s. 28(c), s. 2(c)

Subjects

drawbackexportCustoms Actsection 75place outside Indiahigh seasstatutory interpretationterritorial waterstitle transfer

Judgment

COLLECTOR OF CUSTOMS, CALCUTTA
A
v.
SUN INDUSTRIES

APRIL 11, 1988

B [SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.]

Customs Act, 1962/Customs and Central Excise Duties Drawback
Rules, 1971. Sections 2(8) and 75/Rule 2(c)-Drawback on imported
material used in manufacture of goods exported-Goods reached a
"place outside India· if goods reached a place beyond the territorial
J
C waters. _.

Words and Phrases. 'Place'-Meaning of

The Respondent had, shipped plywood panels for tea chests to be
delivered at Colombo under claim for drawback under Section 75 of the
D Customs Act, 1962, against shipping bill. The ship developed engine
trouble on the way and returned back and· ran aground in Indian ter-
ritorial waters at the port of Paradeep. The titting, stores and cargo
vessel had beeu salvaged into India under the supervision of Port Trust
Paradeep.
~'
E Respondent claimed drawback on the said g~ods. The claim was
rejected by the Assistant Collector under Section 7!; of the Customs Act
read with Section 2(18) and rule 2(c) of the Custorls and Central Excise
Duties Drawback Rules, 1971. On appeal, the Appellate Collector also
rejected the claim on the ground that the ship ran a ground in territorial
waters of India, and so the said goods could not be deemed to have been
F exported.

A Revision Petition preferred under Section 131 by the Respon-
dent was transferred to the Customs Excise and Gold (Control) Appel-
late Tribunal. The Tribunal found that the ship had passed beyond the
territorial waters of India and the engine trouble developed while the
G Ship was in the high seas and, thus, by reason of the ship having passed
beyond territorial waters with the goods on board, the export of the
goods out of India had been completed; that subsequently the ship
decided to sail into the territorial waters was of no relevance, and held
that under the scheme of Section 75 of the Act, export having been
completed, Respondent was entitled to the benefit of the drawback
H scheme.

500
COLLECTOR OF CUSTOMS v. SUN INDUSTRIES 501

In the appeal by Revenue, under section 130-E(B) it was con- A
tended that proof must be given that the goods had reached a place
outside India in view of section 2(18) and that taking out to a place
outside India mealjt delivery of goods to a place outside India.

Rejecting the appeal, this Court, 8

HELD: 1.1. The Tribunal was right in the view it . took that the
Respond~ was entitled to the benefit Of section 75 of the Customs Act. [506B I

- .\ .l.2 When the ship got Clearance and moved out of the territorial
waters the export was complete. The title to the goods passed to the
exporters. The goods reached a place in the high seas which is outside C
India and the title of the goods also passed to the purchasers. It is true
that the goods did not land, in any place because of the defect in the ship.
But the expression "taking out to a place outside India" would also
mean a place in high seas. It is beyond the territorial waters of India.
High seas would also mean a place outside India, if it is beyond the D
territorial waters of India. Indubitably the goods has been taken out of
India. [SOSB-C, D]

Lucas TVS v. Assistant Collector, [1987] vol. 28 E.L.T. 266,
referred to.
E
2.1 The word "place" is generally fonnd in· conjunction with
other words which give it a colour, and is usually contr()lled by its

- context. [SOSH]

2.2 In the clause of charter party requiring charterer to procure
safe "place" for discharge of cargo, it meant spot selected to drop F
anchor plus area over which tanker might swing on tide and charter's
duty was not fulfilled· merely by selecting area containing both safe and
unsafe berths. [SOSF-G]

2.3 The word "place" as used in a statute relaiing to searching
for stolen goods in any store, shop, wherehouse; or other building or G
place in a town, includes a steam-boat or vessel moored at the wharf. [SOSG I

Webster Comprehensive Dictionary, International Edition page
964,. Words and Phrases, Permanent Edition, Volume 32-A page 128,
Stroud's Judicial Dictionary, 3rd Edition, Vol. 3, pp 2199, 2208, refer-
~ to . .
H
502 SUPREME COURT REPORTS {1988) 3 S.C.R.

A CIVIL APPELLA1E JURISDICTION: Civil Appeal No. 761
of 1988.

From the Order dated 14. 7.1987 of the Customs Excise and Gold
(Control) Appellate Tribunal, New Delhi in Appeal No. 2139/81-D.

B A.K. Ganguli, Ms. Indu Malhotra and Mrs. Sushma Suri for the )._
Appellant.

The Judgment of the Court was delivered by
-
SABY ASA CHI MUKHARJI, J. This appeal under section 130-
C E(b) of the Customs Act, 1962 (hereafter called 'the Act') directed
against the order dated 14th of July, 1987 of the Customs Excise and
Gold (Control) Appellate Tribunal (hereinafter called 'CEGAT'). By
the impugned order the Tribunal allowed the appeal of the res-
pondent.

D On 7th June, 1980 the respondent M/s. Sun Industries of
Calcutta had shipped 6000 bundles containing 1,00,000 sets of plywood
panels for tea chests on the M. V. Mohur Gang. The shipment of the
said goods was intended for delivery at Colombo under claim for
drawback on the said goods under section 75 of the Act against ship-
ping bill. On 20th June, !980 on proceeding to the vogage after ship-
E ment of the goods, the ship developed engine trouble on the way and
returned back and ran aground in Indian territorial waters at the port
of Paradeep. The fitting stores and cargo vessel had been salvaged into
India under the supervision of Port Trust Paradeep. The respondent
thereafter applied for drawback under section 75 of the Act. By an
order dated 25th October, 1986, the Assistant C<lllector of Customs
F rejected the claim for drawback on the said goods under section 75 of
the Act read with section 2( 18) and rule 2(c) of the Customs and
Central Excise Duties Drawback Rules, 1971. Being dissatisfied the
respondent appealed to the Appellate Collector of Customs, Calcutta.
By the order dated 12th February, 198! the Appellate Collector
rejected the appeal holding that the ship ran aground in territorial
G waters of India, therefore, the said goods could not be deemed to have
been exported. Dissatisfied with the said order the respondent prefer-
red a revision under section 131 of the Act. The revision petition was
thereafter transferred to the Customs Excise and Gold (Control)
Appellate Tribunal, New Delhi.

H Section 75 of the Act provides drawback on imported materials
COLLECTOR OF CUSTOMS v. SUN INDUSTRIES \MUKHARJI, J.] 503

used in the manufacture of goods which are exported. The said section
A
reads as follows:

"75(1) Where it appears to the Central Government that in
respect of goods of any class or description manufactured
in India, being goods which have been entered for export
and in respect of which an order permitting the clearance B
and loading thereof for exportation has been made under
section 51 by the proper officer, or being goods entered for

- export by post under section 82 and in respect of which an
order permitting clearance for exportation has been made
by the proper officer a drawback should be allowed of
duties of customs chargeable under this Act on any
imported materials of a class or description used in the
c
manufacture of such goods, the Central Government may,
by notification in the Official Gazette, direct that drawback
shall be allowed in respect of such goods in accordance
with, and subject to, the rules made under sub-section (2).
D
(IA) Where it appears to the Central Government that the
quantity of a particular material imported into India is
more than the total quantity of like material that has been
used in the goods manufactured in India and exported out-
side India, then, the Central Government may, by notifica-
tion in the Official Gazette, declare that so much of the E
material as is contained in the goods exported shall, for the
purpose of sub-section (1), be deemed to be imported
material.

(2) The Central Government may make rules for the
purpose of carrying out the provisions of sub-section (1) F
and, in particular, such rules may provide:

(a) for the payment of drawback equal to the amount
of duty actually paid on the imported materials used
in the manufacture of the goods or as is specified in
the mies as the average amount of duty paid on the G
materials of that class or description used in the man-
ufacture of export goods of that class or description
either by manufacturers generally or by any particu-
lar ·manufacturer;

(b) for the production of such certificates, docu- H
504 SUPREME COURT REPORTS [1988) 3 S.C.R.

ments and other evidence in support of each claim of
A
drawback as may be necessary;

(c) for requiring the manufacturer to give access to
every part of his manufactory to any officer of
customs specially authorised in this behalf by the
B Assistant Collector of Customs to enable such
authorised officer to inspect the processes of manu-
facture and to verify by actual check or otherwise the
statements made in support of the claim for draw-
back." -
Section 2( 18) states "export" with its grammatical variations and
c cognate expressions, means taking out of India to a place outside
India. The Customs and Central Excise Duties Drawback Rules, 1971
+-
framed under the Act by section 2(c) also provides as follows:

"28(c) 'export' with its grammatical variations and cognate
D expre.ssions, means taking out of India to a place outside
India and includes loading of provisions or store or equip-
ment for use on board vessel or aircraft proceeding to
foreign port."
•.
E tract
The Tribunal found that the shipment was under a C.I.F. con-
and that on the loading of the goods on board the title passed to the *
purchaser. The Tribunal found that the ship left Calcutta and in fact it
had passed beyond the territorial waters of India and the engine trou-
ble developed while the ship was in the High seas and, thus, by reason
of the ship having passed beyond territorial waters with the goods on
-
~-/
board, the export of the goods out of India had been completed. It
F appears that subsequently the ship decided to sail into the territorial
waters was of no relevance. The Tribunal accepted that where the ship
developed engine trouble, it was beyond the territorial waters.

In that view of the matter, the Tribunal was of the view that
under the scheme of section 75, export having been completed, the
G respondent was entitled to the benefit of the drawback scheme.

On behalf of the revenue it had been contended before the Tri- >----.
bunal and it was reiterated before us by Shri Ganguly that proof must
be given that the goods had reached 'a place outside India' in view of
section 2( 18) of the Act. It was emphasised that in order to be export
H under section 2(18) of the Act the goods must be taken out to a place
). COLLECTOR OF CUSTOMS v. SUN INDUSTRIES [MUKHARII, J.] 505

outside India. Shri Ganguly submitted that taking out to a place out-
A
side India meant and comprehended delivery of goods to a place out-
side India. Section 35 of the Act as it stood prior to the amendment in
1983 was relied on. The Madras High Court has occasion to consider
this question in the case of Lucas TVS v. Assistant Collector, [1987]
~. Vol. 28 E.L.T. 266. We are of the opinion that in view of the wording
of the section, the goods went out of the territorial waters. When the B
ship got clearance and moved out of the territorial waters the export

- was complete. The title to the same goods passed to the exporters. The
facts as they emerge are that the goods reached a place in the high seas
which is outside India and the title of the goods also passed to the
purchasers. It is true that the goods did not land in any place because
of the defect in the ship. But the expression "taking out to a place C
outside India" would also mean a place in high seas. It is beyond the
territorial waters of India. High Seas would also mean a place outside
India, if it is beyond the territorial waters of India. Therefore, the
goods were taken out to the high seas outside territorial waters of
India, they will come within the ambit of expression "taking out to a
place outside India". Indubitably the goods had been taken out of D
India. "Place" according to Webster Comprehensive Dictionary,
International Edition page 964 means a particular point or portion of
space, especially that part of space occupied by or belonging to a
... ~ thing under consideration; a definite locality or location. It also means
an open space or square in a city. Therefore, in international trade the
ship beyond the territorial waters of a country would he a place outside E

- the country, if the goods are taken to that place, that is to say, a
situation outside the territorial waters of a country and the title to the
goods passes to the purchasers. Then, in our opinion, the goods are

+
-, 1 taken to a place outside India.
The expression "place" will depend for its connotation on the F
context in which it is used. In clause of charter party requiring charterer
to procure safe "place" for discharge of cargo, quoted word meant
spot selected to drop anchor plus area over which tanker might swing
on tide and charter's duty was not fulfilled merely by selecting area
containing both safe and unsafe berths. The word "place" as used in a
statute relating to searching for stolen goods in any store, shop,
G
-~ warehouse, or other building or place in a town, includes a steam-boat
or vessel moored at the wharf. See Words and Phrases, Permanent
Edition, Vo. 32A, page 128. The word "place" is generally found in
conjunction with other words which give it a colour, and is usually
controlled by its context. For example, "place for water" includes a
well. See Stroud's Judicial Dictionary, third edition, volume 3 pages H
2199 and 2208.
506 SUPREME COURT REPORTS [1988) 3 S.C.R.

A In that view of the matter in our opinion, there was export of the
goods in terms of section 75 of the Act. The fact that the ship was
brought back to India because of the damages in the ship does not, in
our opinion, affect the position.

In the premises, we are of the opinion that the Tribunal was right
B
in the view it took and the respondent was entitled to the benefit of
section 75 of the Act. In the aforesaid view of the .matter, we decline to
admit the appeal and the same is accordingly rejected.

G.N. Appeal dismissed.

-+-