COMMISSIONER OF CUSTOMS, MUMBAIversusM/S ABAN LOYD CHILES OFFSHORE LTD. & ORS.

                               [2017] 5 S.C.R. 314



 A              COMMISSIONER OF CUSTOMS, MUMBAI
                                        v.
            MIS ABAN LOYD CHILES OFFSHORE LTD. & ORS.
                      (Civil Appeal Nos. 1784-1787 of2004)
 B                            FEBRUARY 02, 2017
             [DIPAK MISRA AND PRAFULLA C. PANT, JJ.J
              Customs Act, 1962-'- s.111 (a), (b), (/), {g), (h), OJ and (o),
      s.112, s.113 (a), s.115, 46, s.28A, 32 - Violations of- Demand for
 C    duty - Confiscation of rig brought into India for repairs - The
      Commissioner ofcustoms recorded the finding that the rig in question
       was not declared uls. 46 and other formalities were also not
       undertaken, therefore, ordered confiscation of rig under provisions
       of s. 111 and also held that as rig was imported for home
       consumption, hence, assessees were liable to pay duty - Tribunal
 D     held that the rig had not entered the territorial waters for purposes
       of oil exploration but for repairs and it cannot be said that rig was
      goods imported for home consumption and covered uls.46 and
      further, that in the given circumstances payme11t of duty 011 rig did
       not arise - However, it opined that provisions of s.111 (f),(g).(h),OJ
 E     would be attracted and rig was liable for confiscation - On appeal,
       held: The finding that the rig when repaired in India, it was imported
      for home consumption is unacceptable and faulty - Carrying out
       of repairs on the rig/vessel, would not amount to utilization or
       operation of the vessel/rig in India - Thus, it would be i11correct to
       hold that mere repair of vessel/rig would constitute taxable import
· F   - But, it ca11not be said that owner had not violated the provisions
       of the Act, which are much wider in scope - The Act regulates and
       mandates compliance by foreign going vessels when they enter the
       territorial waters - Provisions of the Act are required to be met and
       complied with, even when vessel/rig is not a 'good' meant for home
 G     consumption - Thus, violations recorded by the Tribunal cannot be
      found fault with.
            Dismissing the appeals, the Court
            HELD: 1. The adjudication order refers to and is predicated
      on the rig being brought to the port for repairs in February, 1996
 H
                                       314
   COMMISSIONER OF CUSTOMS, MUMBAI v. M/S ABAN                      315
        LOYD CHILES OFFSHORE LTD. & ORS.

for which permission was sought from the Commissioner of A
Customs under the provisions of notification. The rig
subsequently moved out of the port after repairs. The rig was
brought for the second time to the Mumbai port for repair on 91h
November, 1996 and had remained there till 2•d December, 1996.
The rig thereafter was taken out and removed from the territorial
                                                                     8
waters of India as is evincible from the adjudication order. The
rig was for the third time brought to the outer anchorage in
Mumbai/Mumbai port on 9'h December, 1998 and removed from
the customs area. On this occasion, for the first time, the
authorities felt that the rig had been imported into India when
the rig was brought within the territorial waters for repairs. The C
adjudication order does not record that the rig was in operation
within the territorial waters of India. On the other hand, the
adjudication order does not spell out that the rig did not operate .
outside the territorial waters of India. The contention raised by
the owner in this regard was neither specifically rejected not a
                                                                     0
different finding was recorded. The finding was that the rig when
it is repaired in India, it is imported into India for home
consumption. The adjudication order holds that the repairs
undertaken would complete the act of import, for the requirement
of home consumption was satisfied. The said finding is
unacceptable and faulty. Mere repair of a vessel is not putting E
the vessel to use in India and would not result in home
consumption as the vessel was not utilized within the territory of
India. Repairs are carried on the vessel and not to utilize the
vessel. It would not amount to utilization or operation of the
vessel/rig in India. Thus, it cannot be said that the vessel, i.e.,
the rig, was imported into India when it had anchored twice in F
1996 and once in 1998 for the purpose of repair, for the element
of home consumption is missing even when the vessel, i.e., the
rig, had entered the territorial waters. Thus, it would be incorrect
to hold that mere repair of the vessel in 1996 or in 1998 would
constitute taxable import. [Para 29) [334-D-H; 335-A-B]              G
       2. The authorities have laid emphasis on the factum that
the rig was purchased for being used in the oil field of ONGC and
for this purpose the owner had made an application and
permission/licence for import was granted by the Ministry of
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A   Industry. The rig was purchased from foreign exchange released
  · by the Government on the basis of the import licence for the rig.
     Release of foreign exchange, approval and licence, etc. are prior
  · to the import. Import may not take place in spite of this aforesaid
     clearances/licence and release of foreign exchange. There may
B have been violation of another enactment/provision as the rig
    was not imported, albeit for deciding the question whether the
     rig was imported into India, the requirement of home consumption
     has to be satisfied. Then alone, the 'good', i.e., the vessel/rig
     would be taxable and customs duty payable under the Act.
     Pertinently, the adjudication order does not hold that the import
c had taken place in 1987 when the rig first put into operation in
     the high seas. This was not treated as the date of import or home
     consumption. The import as per the authorities had taken place
    .when the rig was brought for repairs. The evaluation of the rig
     has been done on the basis of the last visit of the rig for repair in
     1998. [Para 30) (335-C-F)
D
           3. Though there was no import, but on the said finding it
     cannot be said that the owner had not violated the provisions of
     the Act, which are much broader and wider in scope. The Act
     regulates and mandates compliance by the foreign going vessels
     when they enter the territorial waters. Provisions of the Act are
E required to be met and complied with even when no goods are to
     be unloaded for import into India or the vessel is not a 'good'
     meant for home consumption. Thus, violations recorded by the
     tribunal cannot be found fault with. [Para 31] (335-G-H; 336-A)
          UOiv. V.M Salgaonkar & Bros. Pvt. Ltd. (1998) 4 SCC
 F        263 : [1998) 2 SCR 293; Amership Management Pvt.
          Ltd. v. UOI 1996 (86) ELT 15; Scindia Steamship Co.
          Ltd. v. CC 1988 (36) ELT 581; Sedco Forex
          International Drilling Inc. v. CC 2001 (135) ELT 625
          (Tri-Mumbai); Pride Foranier v. UOI and Ors. AIR 2001
 G        Born 332; Salgaonkar Engineering v. OJF Games 1984
          (86) Born LR 127; UOI v. Mustafa and Najibhai
          Trading Co. 1998 (101) ELT 529; SC Chowgule & Co.
          v. UOJ (1987) 1 sec 730 : (1987) 2 SCR 351; Aban
          Lyod Chiles Offshore Limited and another v. Union of
          h1dia and Others (2008) 11 SCC 439 : (2008) 6 SCR
 H        468 - referred to.
   COMMISSIONER OF CUSTOMS, MUMBAI v. Mis ABAN                               317
        LOYD CHILES OFFSHORE LTD. & ORS.

                        Case Law Reference                                   A
1996 (86) ELT 15                          referred to           Para 4
1988 (36) ELT 581                         referred to           Para 4
2001 (135) ELT 625 (Tri-Mumbai)           referred to           Para4
AIR 2001 Born 332                         referred to           Para 5
                                                                             B
1984 (86) Born LR 127                     referred to           Para 6
1998 (101) ELT 529                        referred to           Para 8
[1987] 2 SCR 351                          referred to           Para 8
(1998] 2 SCR 293                          referred to           Para 9
(2008] 6 SCR 468                          referred to           Para 27      c
      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1784-
1787 of2004.
      From the Judgment and Order No. C-11/1617103-WZB dated
30.06.2003 of the c;.~stoms, Excise and Service Tax Appellate Tribunal,
WZB, Jai Center 3 Floor, 34 P.D' Mello Road, Poona Street, Masjid            D
Bunder, (E) Mumbai-400009, in Application No. CIMA (ORS) 945101-
MUM in Appeals C-716, 781, 814101-Mum
                                 WITH
      C. A. No. 4342-4345 of2004.
                                                                             E
      A. K. Panda, Sr. (\dv., Tarachandra Sharma, Ms.Nisha Bagchi,
Ms. Sujeeta Srivastava, B. Krishna Prasad, Ramesh Singh, Ms. Bina
Gupta, A. T. Patra, Nipun Malhotra, Ruchika D. (For Mis. 0. P. Khaitan
& Co.), Vivek Jain, Mahesh Agarwal, Ms. Devika Mohan,
E. C. Agrawala, Advs. for the appearing parties.
                                                                             F
      The Judgment of the Court was delivered by
      DIPAK MISRA, J. 1. The present appeals have been preferred
against the judgment and order dated 30'h June, 2003 passed by the
Customs, Excise and Service Tax Appellate Tribunal (for short, "the
tribunal") in Application Nos. CIMA(Ors.) 945101-Mum in C/716, 781,          G
782, 814101-Mum by the revenue as well as the assessee as both are
aggrieved in respect of certain conclusions arrived at by the tribunal. As
the principal controversy pertains to the appeals preferred by the
department, we will take the facts from the appeals preferred by it and,
accordingly, we shall describe the parties.
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318             SUPREME COURT REPORTS                           [2017] 5 S.C.R.



A             2. The first respondent, Mis Aban Loyd Chiles Offshore Ltd.,
      engaged in business of offshore oil and gas exploratory drilling and related
      activities on contract basis, inter alia, for the Oil and Natural Gas
      Corporation Limited (ONGC) had obtained the approval of the
      Government oflndia on 25.03.1987 for the import ofa Rig for such oil
      field services. It was granted a Special Import Licence bearing number
B
      P/CG/2103211 dated 24.04.1987 for the import of the said Rig along
      with certain drilling equipments. A confirmed irrevocable Letter of Credit
      amounting to US $ 1,521,000/- for the shipment of Capital goods covered
      under L/C No. ICICI/RF/87/2 dated 08.05.1987 was given by ICICI
      Bombay against the said Import Licence. As per the special instructions
C     annexed to the said Letter of Credit, the transport documents were
      required to fulfil six conditions including the one, that is, the shipping
      document should indicate the place of final destination and should not be
      different from the port of discharge. As the factual matrix has been
      uncurtained, the assessee purchased in July 1987 a rig, Griffin Alexander
D     III, from Griffin Alexander Drilling Co. for a price of US$ 5.39 million.
      The rig was towed directly to the drilling site at Bombay High in October
      1987. In February 1996, the importer wrote to the Commissioner of
      Customs, Mumbai, seeking permission to import the rig into Mumbai for
      carrying out repairs and re-export in terms of the provisions ofNotification
      No. 153/94-Cus.
 E           3. It is not in dispute that the rig was towed into the waters
      comprising Mumbai Port on 12.11.1996 and after it was repaired, taken
      out of the territorial waters oflndia. It was once again imported to India
      on 9th December, 1998, being towed into Indian t"rritorial waters by two
      tugs of the ONGC, Malaviya IV and SCI-05. After repairs, the rig was
 F    again towed out of the Indian territorial waters. Investigations by the
      Customs authorities into these two cases of importation led them to
      conclude that there had been contravention of certain provisions by the
      assessee and others with regard to these two acts of bringing the rig into
      India. The rig was formally placed under seizure on 27th March, 1999
      but subsequently was released following the order passed in writ petitions
 G    filed by the assessee before the Bombay High Court, permitting the rig
      to be used on payment of an amount of Rs. 1.0 crore and execution of a
      bond for its value. Thereafter, a notice was issued on 23'd September,
      1999 to the assessee alleging that the import that took place in 1996 and
      1998 were contrary to the provisions oflaw, and proposing confiscation
 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. M/S ABAN                                   319
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

of the rig under clauses (a), (b ), (g), (h ), (j) and ( o) of Section 111 of the A
Customs Act, 1962 (for brevity, "the Act") and clause (a) of Section 113
of the Act, demanding duty amounting to Rs. 27.91 crores, proposing
interest under Section 28A on the duty amount and penalty on the importer
under Section 112 of the Act. Penalty was also sought to be levied upon
ONGC under Section 112 and confiscation under Section 115 of the
                                                                                  B
three vessels, and Malaviya IV owned by Great Eastern Shipping Co.
Ltd. which was utilized for towing the rig in 1996 and 1998. After
considering the explanation offered by the assessee, the Commissioner
passed an order wherein he recorded a finding that the rig was carried
and brought to Mumbai on three occasions; in February, 1996, on 9th
November, 1996 and on 9th December, 1998. It was not declared in the C
Import General Manifest of the towing rigs, as was required under Section
46 of the Act. Such formalities as filing the bill of entry were not
undertaken and, therefore, the rig was ordered for confiscation under
clauses (t), (g), (j), (h) and (j) of Section 111. The Commissioner also
held that the rig was imported for home consumption and hence, the
                                                                                  0
assesses were liable to pay duty on the value of Rs. 44,40,28,320/-,
determined after depreciating the value by 70% from the built cost of
the rig. Being of this view, the said authority confirmed the demand for
duty amounting to Rs. 27 .91 crores, confiscation of the rig and had given
the option of redeeming it by payment of fine of Rs. 2.0 crores. The
authority exonerated P.A. Abraham, Managing Director of the Company, E
imposed penalties of Rs. 50,000/- each on P. Venkateswaran, ViCe
President and A.P.S. Sandhu, General Manager, ordered confiscation of
three towing vessels but permitted them to be redeemed on payment of
fine of Rs. 1.0 lakh each and imposed penalties on ONGC, and Benny
Ltd., the importer's agent.
                                                                                 F
       4. Aggrieved by the said order, assessee preferred appeal before
the tribunal. On the foundation of the judgments, namely, mersltip
Management Pvt. Ltd. v. UOI' rendered by the High Court of Bombay,
Scindia Steams/tip Co. Ltd. v. CC2 delivered by the High Court of
Calcutta and an earlier judgment of the tribunal in Sedco Forex
International Drilling Inc. v. CC3, it was contended by the assessee             G
before the tribunal that neither any duty was payable nor any penalty
was imposable. It was also urged that foreign going vessels do not cease

'1996(86)ELT 15
' 1988 (36) ELT 581
3
  2001 (135) ELT625 (Tri-Mumbai)                                                 H
320             SUPREME COURT REPORTS                           (2017] 5 S.C.R.



A     to be so when they enter into Indian territorial waters only for repairs.
      Alternatively, it was contended that method adopted by thy Commissioner
      by starting with the originally built cost in 1982 and determining
      depreciation was totally incorrect. According to the assessee, there
      was no contravention of any aspect contained in Section 111 and hence,
      no penalty could be imposed.
B
             5. On behalf of the department, it was propounded that the decision
      of the Bombay High Court was not relevant inasmuch the Court had not
      considered whether a rig was a foreign going vessel when it operated in
      the territorial waters of India. Reference was made to the subsequent
      decision of Bombay High Court in Pride Foramer v. UOI and Ors. 4
 c    wherein it has been held that the rigs operating in designated areas are
      not foreign going vessels as such areas are deemed to be Indian territory;
      and once it is brought into Indian territory, it ceases to be a foreign going
      vessel. The argument with regard to valuation was seriously opposed.
          6. The tribunal took note of the undisputed fact that when the rig
 D was engaged in drilling and such activities outside Indian territorial waters
   and while not being in areas under the Territorial Waters, Continental
   Shelf, Exclusive Economic Zone and other maritime Zones Act, 1976
   (for short, "the 1976 Act"), it was a foreign going vessel. The question
   that was posed by the tribunal was whether the vessel ceases to be a
 E foreign going vessel when it enters into Indian territorial waters for
   purposes of repairs. It referred to the Bombay High Court decision in
   Amership Management Pvt. Ltd. (supra) and opined that the said
   decision is the authority forthe proposition that a drilling rig, when engaged
   in drilling operations outside the territorial waters oflndia, is a foreign
   going vessel. It also referred to Calcutta High Court judgment in Scinditl
 F Steamship Co. Ltd. (supra) which had accepted the contention that
   even while the vessel was undergoing repairs and preparations were
   made to carry the cargo to foreign ports, it did not cease to be a foreign
   going vessel. The tribunal referred to the authority in Pride Foramer
   (supra) wherein the Bombay High Court taking note of the judgment in
 G Amership Management Pvt. Ltd. (supra) had opined that the imported
   stores supplied to a rig located in an area designated under the Act 80 of
    1976 would not fall within Section 86 of the Act. The tribunal appreciated
   the fact that in the said decision reliance was placed on the judgment of

      'AIR 2001 Born 332
 H
     COMMISSIONER OF CUSTOMS, MUMBAI v. M/S ABAN                                  321
    LOYD CHILES OFFSHORE LTD. & ORS.' [DIPAK MISRA, J.]

the Division Bench of that Court in Salgaonkar Engineering v. OJF A
Games5 to hold that it is only that vessel which is actually carrying at a
given point of time the goods or passengers between a port in India and
a port outside India is a foreign going vessel. Analysing the provisions of
the Act and the authorities in the field, the tribunal held that a ship that is
engaged in carriage of cargo or passengers between Mumbai and Abu
                                                                                B
Dhabi is a foreign going vessel covered by the first part of the definition
and would be as such a foreign going vessel throughout the length of its
voyage, if, during its voyage between these two ports, it touches other
Indian Ports. It further opined that a rig had been held in Amership
Management Pvt Ltd. (supra) as a foreign going vessel because it was
engaged in the operations outside Indian territorial waters in view of C
clause (2) of the extended definition, but it would not be appropriate to
apply the first part of the definition while considering the second. The
tribunal on that basis held that each of the three clauses of the extended
definition applied to different fact situations, and each of these situations
requires to be considered on its own merits. Being of this view, it ruled:-
                                                                                  D
         "It would therefore not be possible to say that a craft which is
         anchored without undertaking any operation whatsoever for long
         periods outside the territorial waters is a foreign going vessel. So
         also, when a rig enters Indian territorial waters for purposes of
         repairs, it is obviously.not engaged in any operation outside India
         and loss its character of foreign going vessel. It may no doubt          E
         resume its character as a foreign going vessel when it leaves
         Indian territorial waters and resumes its operation. This is in fact
         that the view taken in Salgaonkar Engineering v. OJF Games.
         We, therefore, do not find it possible to say that the rig, on the
         occasion when it entered Indian territorial waters, was a foreign        F
         going vessel."
       7. Dwelling upon the contention that the rig had not been imported,
itopined:-
          "It was not meant for home consumption and therefore a bill of
          entry was not required to be filed. A related contention is also        G
          raised, that the act of importation in regard to the rig had not been
          completed. The judgment of the Supreme Court in A par Pvt. Ltd.
        · 1999 (112) ELT 3 is relied upon to say that while the act of

5
    1984 (86) Born LR 127
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322             SUPREME COURT REPORTS                             (2017] 5 S.C.R.



A             importation commences, when the goods entered the territorial
              waters of India, it continues and theses completed only when the
              goods merge wi!h the mass of the goods in the country."
             8. After stating so, the tribunal dealt with the contention of the
      department that when the rig came into India, it lost its character as rig
B     and became goods and its importation is complete. The revenue had
      placed reliance on UO/ v. Mustafa and Najibhai Trading Co. 6 The
      tribunal found that the said decision had been distinguished by the tribunal
      since the import as understood by this Court in the facts of the case had
      not taken place. The tribunal referred to the decision in C/1owgule &
      Co. v. UOI' wherein the Court was considering whether. two
 c    transshippers, which entered India, were goods intended for home
      consumption and a bill of entry was required to be filed with regard to it.
      It was held that there was no justification for holding the vessels were
      not goods for the purposes of Section 46(1) of the Act and, therefore,
      addressed the question as to whether the vessels which were to be used
D     in Indian territorial waters for topping of bulk carriers could be said to be
      vessels for home consumption merely on that account. It said that for
      the purposes of levy of customs duty, it is necessary to determine whether
      imported goods are "goods for home consumption". The Court in that
      case after analysing the statutory provisions held thus:-
              " 15. In our view, for the purpose of the levy of customs duty, in
 E            order to determine whether any imported goods are "goods for
              home consumption", we have to find out the primary intended use
              of the goods when the goods are brought into Indian Territorial
              Waters. If the goods are intended to be primarily used in India,
              they are goods for home consumption notwithstanding that.they
 F            may also be used for the same or other purposes outside India.
              We guard ourselves against saying that the converse may be true.
              The question whether goods not intended to be primarily used in
              India but used occasionally for short periods in India also fall within
              the meaning of the expression "goods for home consumption"
              has not been examined by us. We have only considered the
 G            question whether goods brought into India for use primarily in
              India' are goods for home consumption notwithstanding that they
              are occasionally or incidentally used outside India. We are of the
              view that they are."
      6
          l998(IOl)ELT529SC
 H    1
          (1987) 1sec730
       COMMISSIONER OF CUSTOMS, MUMBAI v. MIS ABAN                                 323
      LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]
I
"'         9. After referring to the dictum laid down in the said authority, the   A
     tribunal further referred to the authority in UOI v. V. M. Salgaonkar &
     Bros. Pvt. Ltd 8 wherein it has been opined by this Court that expression
     "home consumption" as used in Section 46, does not warrant the
     construction that the commodity should have been completely used up
     and even putting the commodity to any kind of utility would amount to
                                                                                   B
     home consumption. Analysing the ratio of the judgments, the tribunal
     eventually concluded that according to these judgments, ifthe goods are
     imported with the intention of putting them to any kind of use in India,
     they are goods for home consumption and even if the vessel is used
     occasionally for short periods in India it would be goods for home
     consumption; that the rig under consideration was not intended to be          C
     used in India as it was only brought into India for the purposes of repair;
     and that it cannot be said that a rig brought into India for repairs and
     taken out after the repairs was intended to be used in India because it
     could not be properly put to use as repairs became necessary.
             10. The tribunal further observed that in Sedco Forex (supra), it D
     was only concerned with a drilling rig which had been imported into
     India in pursuance of a contract signed with the ONGC for oil exploration
     and exploitation wherein it noted that rigs are capable of use for offshore
     oil exploration or exploitation in the Indian waters and, therefore, concluded
     that it could not be said that the rig was not .intended for use in India, and
     thus, it would not follow that it had not merged with the mass of the E
     goods in the country. It further opined that that the rig under consideration
     in Sedco Forex (supra) was brought into India in the course offulfilment
     of a contract with the ONGC and later on with Enron Power and Gas
     Co. and in the present case, the rig under consideration had not entered
     the territorial waters for purposes of oil exploration or exploitation but F
     only had entered the territorial waters for purposes of repair. The tribunal
     also observed that the rig was not in the process of transit through Indian
     waters for the purpose of going from one point to another for drilling and
     this being the case, it cannot be said that the rig was goods imported for
     home consumption and covered under Section 46(1) of the Act. It further
     held that the principles laid down by this Court that while the act of G
     import commences when the goods enter the territorial waters, it continues
     and is completed only when it merged with the mass of the goods in the
     country, will l\pply to the facts before. it and hence, it is deducible that

     '(1998) 4 sec 263
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324            SUPREME COURT REPORTS                           [2017) S S.C.R.



A     import had not been completed. On the aforesaid basis, it concluded
      that in the circumstances payment of duty on the rig did not arise and
      even ifthe rig was liable to duty.
             11. After so holding the tribunal addressed to the contravention of
      the provisions of clauses (f), (g) and (j) of Section 111 of the Act.
B     Analysing various aspects, it opined that the provisions of Section 111
      would be attracted and, therefore, contravention of clause (f) had been
      established. It was also held that clause (g) would also be attracted as
      the goods were unloaded without the permission ofthe competent authority
      as required under Section 32 of the Act. It was also held that clauses
      (h) and (j) would be applicable. Being of this view, the tribunal opined
 c    that the rig was liable for confiscation. However, it opined that as there
      was no deliberate intention on the part of the importer to contravene the
      said regulations although there had been clear negligence and rules had
      not been followed. Having regard to the facts, it reduced the fin·e for
      redemption of the rig. That has compelled the revenue to prefer Civil
 D    Appeal Nos. 1784-1787 of 2004 and M/s Aban Loyd Chiles Offshore
      Ltd. to file Civil Appeal Nos. 4342-4345 of2004.
            12. We have heard Mr. A.K. Panda, learned senior counsel along
      with Mr. B. Krishna Prasad, learned counsel for the appellant-department
      and Mr. Ramesh Singh, learned counsel appearing for respondent No. I
 E    assessee in all the appeals.
             13. To appreciate the controversy, it is necessary to understand
      certain concepts as envisaged under the Act. 'Goods' for the purpose
      of the Act includes vessels, aircrafts and vehicles as defined in sub-
      section (22) to Section 2, yet the distinction has to be recognized between
 p    a vessel or an aircraft as a mere good and when the vessel or an aircraft
      comes to India as a conveyance carrying imported goods. When a
      vessel or an aircraft is imported into India as a good, customs duty is
      payable thereon. However, when a vessel is used as a conveyance of
      an imported good, the position would be different. In this context,
      reference to Section 43 of the Act would be profitable. It reads as under:-
 G
            "43. Exemption of certain classes of conveyances from certain
            provisions of this Chapter.'-(!) The provisions of sections' 30,
            41 and 42 shall not apply to a vehicle which.. carries no goods
            other than the luggage of its occupants.

 H_
  COMMISSIONER OF CUSTOMS, MUMBAI v. M/S ABAN                                    325
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

       (2) The Central Government may, by notification in the Official           A
       Gazette, exempt the following classes of conveyances from all or
       any of the provisions of this Chapter-
       (a) conveyances belonging to the Government or any foreign
       Government;
       (b) vessels and aircrafts which temporarily enter India by reason         B
       of any emergency."
       14. As per the said provision, Sections 30, 41 and 42 shall not
apply to a vehicle, which carries no goods other than the luggage of the
occupants. The term 'vehicle' as defined in sub-section (42) to Section
2 means conveyance of any type used on land. As a logical corollary, it          c
would not include a ship or vessel. Sub-section (2) to Section 43 states
that the Central Government may by notification in the Official Gazette
exempt the different classes of conveyances from all or any other
provisions of the Act. However, we do find some difficulty as taxation
ortaxability of the 'foreign going vessels' when they enter Indian territorial   D
waters is not directly addressed in the fasciculus of the Sections from 29
to 43 of the Act. These provisions do make a distinction between goods
imported to be unloaded at the port for India and those which are not to
be unloaded and in transit. The said aspect shall be elucidated at a
subsequent stage.
                                                                                 E
       15. Atthis stage, we would like to first adumbrate on the definition
of the term "foreign going vessel or aircraft" as defined in sub-section
(21) of Section 2 which reads as under:-
       "(21) "foreign-going vessel or aircraft" means any vessel or
       aircraft for the time being engaged in the carriage of goods or
                                                                                 F
       passengers between any port or airport in India and any port or
       airport outside India, whether touching any intermediate port or
       airport in India or not, and includes -
       (i) any naval vessel of a foreign Government taking part in any
       naval exercises;
                                                                                 G
       (ii) any vessel engaged in fishing or any other operations outside
       the territorial waters oflndia;
       (iii) any vessel or aircraft proceeding to a place outside India for
       any purpose whatsoever;"
                                                                                 H
326             SUPREME COURT REPORTS                            [2017] 5 S.C.R.



A             16. The aforesaid expansive definition by way of deeming fiction
      includes any vessel engaged in fishing or any other operations outside
      the territorial waters of India. By legal fiction, a vessel engaged in fishing
      outside the territorial waters oflndia or any other operations outside the
      territorial waters oflndia is to be treated for the purpose of the said Act
      as a foreign going vessel. When the said conditions are satisfied, whether
B
      the said vessel for the time being is engaged in carriage of goods or
      passengers between a port in India and a port outside India, is not of
      any relevance. Consequently, a rig which is engaged in operations outside
      the territorial waters oflndia would be a foreign going vessel. However,
      a rig carrying on operations within the territorial waters oflndia would
c     not be a foreign going vessel. Be it clarified, it is not necessary to dilate
      and examine the issue whether rigs are vessels, for it is an accepted and
      admitted position settled beyond doubt.
             17. Coming to the core issue, we have to refer to the word 'import'
      as defined in sub-section (23) to Section 2 and the expression "dutiable
D     goods" as defined in sub-section (14) to Section 2, sub-section (27) to
      Section 2 which defines "India" and then refer to Section I 2 of the Act.
      The said provisions read as under:-
             "Section 2. Definitions. - In this Act, unless the context otherwise
             requires.
 E
             (23) "import", with its grammatical variations and cognate
             expressions, means bringing into India from a place outside India;
                                 x        x        x        x
             (14) "dutiable goods" means any goods which are chargeable to
 F           duty and on which duty has not been paid;

                                 x        x        x        x
             (27) "India" includes the territorial waters oflndia;

                                 x        x        x        x
 G
             12. Dutiable goods. - (!)Except as otherwise provided in this
             Act, or any other law for the' time being in force, duties of customs
             shall be levied at such rates as may be specified under the Customs
             Tariff Act, 1975 (51 of 1975), or any other law for the time being
             in force, on goods imported into, or exported from, India.
 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. M/S ABAN                                  327
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

      (2) The provisions of sub-section (1) shall apply in respect of all      A
      goods belonging to Government as they apply in respect of goods
      not belonging to Government."
        18. The expression "import" is a wide expression, which would
include cognate expressions and means bringing into India from a place
outside India. The word "India" for the purpose of the Act includes the        B
land mass as well as territorial waters. The term "dutiable goods" are
goods which are chargeable to duty and on which duty has not been
paid. Once duty has been paid, the goods cease to be dutiable goods.
Section 12 of the Act begins with the words "Except as otherwise provided
in this Act or any other law for the time being in force". Thus, it gives
primacy to any other law being in force, and records that the said provision   C
would apply when otherwise not provided in the said Act. Therefore,
when any other provision of the Act or other law for the time being
provides differently, that would not attract customs duty under Section
12. Duty of custom, subject to the above, is levied atthe rates specified
under the Customs Tariff Act, 1975 or any other law for the time being         D
in force on the goods imported into or exported from India.
       19. In Chowgule and Co. Pvt. Ltd. (supra) on the question of
chargeability of customs duty on a vessel which was being used to ship
iron ore from Mormugao Harbour to ocean going carriers, it was held as
oo~-                                                                           E
       "6. We may now refer to the relevant provisions of the Customs
       Act. Section 2(22) of the Customs Act defines that unless the
       context otherwise requires, "goods" includes - "(a) vessels,
       aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and
       negotiable instruments; and (e) any other kind of moveable F
       property". "Import" is defined as meaning "bringing into India
       from a place outside India". "India" is defined as including "the
       territorial waters oflndia". "Imported goods" are defined to mean
       "any goods brought into India from a place outside India but not
       including goods which have been cleared for home consumption".
       "Importer" is defined, "in relation to any goods at any time between G
       their importation and the time when they are cleared for home
       consumption" as "including the owner or any person holding himself
       out to be the importer". "Conveyance"'.is defined to include "a
       vessel, an aircraft and a vehicle". "Bill of entry" is defined to
                                                                               H
328      SUPREME COURT REPORTS                            [2017] 5 S.C.R.



A     mean a "bill of entry referred to in Section 46".A "bill of export"
      is defined to mean a "bill of export referred to in Section 50". An
      "import manifest or import report" is defined to mean "the manifest
      or report required to be delivered under Section 30". "Stores" are
      defined to mean "goods for use in a vessel or aircraft and includes
      fuel and spare parts and other articles of equipment whether or
B
      not for immediate fitting".
      Andagain:-
      "8. Chapter VI of the Customs Act is concerned with "provisions
      relating to conveyances carrying imported or export goods",
 c    Chapter VII deals with "clearance of imported goods and export
      goods". Chapter VIII deals with "goods in transit" and Chapter
      IX deals with "warehousing". Sections 29 to 43 occur in Chapter
      VI and Sections 44 to 51 occur in Chapter VII. Sections 45 to 49
      are dealt with under the heading "clearance of imported goods"
      while Sections 50 and 51 occur under the heading of"clearance
 D    of export goods". Section 29 requires the person in charge of a
      vessel or an aircraft entering India from any place outside India
      not to cause or permit the vessel or aircraft to call or land (a) for
      the first time after arrival in India; or (b) at any time while carrying
      passengers or cargo brought in that vessel or aircraft, at any place
 E    other than a customs port or a customs airport, as the case may
      be. Section 30 imposes. a duty on a person in charge of the
      conveyance carrying imported goods to deliver to the proper officer,
      within twenty-four hours after arrival, an import manifest in the
      case of a vessel or aircraft or an import report, in the case of a
      vehicle, in the prescribed form. Section 31 prohibits the master of
 F    a vessel from permitting the unloading of any imported goods until
      an order has been given by the proper officer granting "entry
       inwards" to such vessel. An "entry inwards" order is not to be
       given until an import manifest has been delivered or unless the
      proper officer is satisfied that there was sufficient cause for not
 G    delivering it. Section 39 prohibits the master of a vessel from
       permitting the loading of any export goods other than the baggage
       and mail bags, until an order has been given by the proper officer
       granting "entry outwards" to such vessel. Section 4 I prescribes
       that an export manifest in the case of a vessel or an aircraft and
       an export report in the case of a vehicle should be filed by the
 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. MIS ABAN                                   329
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

      person in charge of a conveyance before the departure of the A
      conveyance from a customs station. Section 42 prohibits the
      departure of a conveyance which has brought any imported goods
      or has loaded any export goods to depart from that customs station
      without a written order of the proper officer. Section 43 provides
      that the provisions of Sections 30, 41 and 42 sha II not apply to a
                                                                          B
      vehicle which carries no goods other than the luggage of its
      occupants. Chapter VII, as we said, deals with clearance of
      imported goods and export goods."
       20. Thereafter, the Court adverting to Section 46, as it was of
primary concern, referred to Sections 53 and 54 ef the Act. Section 53
makes provision for permitting goods to be transmitted without payment
                                                                                c
of duty if they are mentioned in the import manifest or import report as
to be for transit in the same conveyance, to a place outside India. Section
54 of the Act deals with transshipment of goods and the requirement to
furnish bill of transshipment or declaration of transshipment.
       21. Subsequently, dealing with the question oflevy ofcustom duty,        D
the Court scanning the anatomy of Section 46 of the Act held that under
the scheme of the Act the goods which are imported into India from a
place outside India or enter India, can be classified as (i) goods entering
for home consumption; (ii) goods entering for warehousing; (iii) goods in
transit; and (iv) goods for transshipment. In case of goods in transit and      E
goods for transshipment, no duty is required to be paid, subject to course
to fulfilling the conditions mentioned in Sections 53 and 54 referred to
above and Sections 55 and 56 of the Act. In such cases, there is no
need to present bill of entry. Bill of entry is necessary and has to be
presented in case of goods for home consumption. Goods for home
consumption are required to be cleared on payment of duty. Elucidating          F
on the issue of charge to tax, i.e., the liability to pay customs duty, the
Court held as under:-
       "12. Section 46(1) which we have extracted earlier requires the
       importer of any goods for home consumption or warehousing to
       present to the proper officer a bil I of entry in the prescribed form.   G
       The question, which arises for consideration, therefore, is whether
       the vessels in the two cases before us are goods brought into
       India for home consumption? Mixed up with this question is the
       question whether a trans-shipper is an oceangoing vessel? We
                                                                                H
330      SUPREME COURT REPORTS                            [2017] 5 S.C.R.



A     will first consider the questi<m whether a vessel is goods so as to
      attract Section 46(1) of the Customs Act. By definition a vessel,
      aircraft or vehicle is included among goods, vide Section 2(22).
      But, according to Shri Setalvad, notwithstanding the definition,
      the scheme of Chapters VI and VII of the Customs Act and the
      context in which the expression "goods" is used in Section 46 of
B
      the Act requires the expression to be interpreted for the purpose
      of Section 46( I) as excluding a vessel, aircraft or vehicle. In answer
      to a direct question by us, Shri Setalvad confessed that if a vessel,
      aircraft and vehicle are required to be excluded from the meaning
      of the expression "goods" in Section 46( I) of the Act, he was
 c    unable to suggest what other purpose was to be served by the
      inclusive definition of the expression which expressly brought within
      its shadow "vessel, aircraft and vehicle". He frankly stated that
      he was unable to point out any provision in the Act into which the
      inclusive definition could be read. We cannot attribute redundance
      to the legislature particularly in the case of a definition in a taxing
 D
      statute. We must proceed on the basis that such a definition is
      designed to achieve a result. Under Section I 2 of the Customs
      Act what are dutiable are goods imported into or exported from
      India and if goods are defined to include vessels, aircrafts and
      vehicles, we must take it that the object of the inclusive definition
 E    was to bring within the net of taxation vessels, aircrafts and vehicles
      which are imported into India. It is undisputed and indeed it is
       indisputable that Section 46( I) is a prelude to the levy of duty or a
      first step in that direction. It must, therefore, follow as a necessary
      sequitur that vessels, aircrafts and vehicles are goods for the
      purpose of Section 46(1 ). Any other interpretation may lead to
 F
      most anomalous results. Under Section 15 of the Customs Act,
      the rate of duty and tariff valuation in the case of goods entered
      for home consumption under Section 46 shall be as on the date
      when the bill of entry is presented, in the case of goods cleared
      from a warehouse under Section 68 as on the date on which the
 G     goods are actually removed from the warehouse and in the case
       of any other goods as on the date of payment of duty. Goods
      which are entered for home consumption under Section 46 and
       goods which are warehoused are naturally goods which are openly
       imported into India without concealment. The expression "other
       goods" mentioned in Section IS(c) is obviously meant to cover
 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. MIS ABAN                                   331
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

      other imported goods such as goods imported clandestinely and             A
      goods which have otherwise escaped duty."
       22. Explicating on whether there was a difference between carriers
which carry the goods and the goods, it was observed that Section 46(2)
and elsewhere the word 'goods' may be used in a way that it does not
include and in a contradiction to conveyances in which the goods are            B
carried, albeit the significance of this difference depends upon the context.
It would be wrong to understand that the vessels or conveyances would
never be goods for the purpose of charging of duty as dutiable goods.
On the question of chargeability of duty on the vessel in question, it was
held:-
                                                                                c
       "14. The further question is whether the vessels which have been
      ·converted into trans-shippers to be used in Indian territorial waters
       for topping-up bulk carriers, can be said to be vessels for home
       consumption merely on that account, even though when they
       entered Indian territorial waters they came under their own power
       as oceangoing vessels and notwithstanding that they are still D
       capable of being used as oceangoing vessels and are in fact so
       used during the off-season when it is not practicable to do topping-
       up operations and, for that matter, even during the fair season
       when they have necessarily to go into the open sea to go alongside
       the bulk carriers in open anchorages. In both the cases before us E
       there can be no doubt that the vessels are not only capable of
       being used but are used as cargo ships to carry cargo from orie
       Indian port to another or sometimes to foreign ports, necessarily
       going out on the high seas. They are structurally and technically
       competent to go on the high seas and they have been certified to
        be so competent by appropriate maritime authorities. Instead of F
       remaining idle and getting rusty, during off-season, that is when
       because of inclement monsoon weather topping-up operations
        cannot be done in Mormugao Harbour, the vessels do go out into
       the open sea sometimes from one Indian port to another and at
        other times to foreign ports. Of course, even in the course of G
        topping-up operations during the fair season, it is necessary for
        the trans-shippers to go into the open sea to reach the bulk carriers.
        But, in our view these operations do not make these vessels
        oceangoing vessels when their primary purpose and the purpose
        for which they were permitted to be purchased and brought to
                                                                               H
332            SUPREME COURT REPORTS                           [2017] S S.C.R.


A           Indian waters, the primary purpose for which they were licensed
            and the primary purpose for which they are used is to conduct
            topping-up operations in Indian territorial waters and not to serve
            as oceangoing vessels."
            Thereafter, the Court ruled what we have already reproduced
 B    hereinbefore.

             23. As is noticeable, in the said case, the vessel was in operation
      and pri!11arily used within the territorial waters oflndia and was not used
      as an ocean going vessel. As a sequitur, it was held that the vessel were
      "goods" imported into India for home consumption for they were
 C    primarily to be used as a vessel in India, i.e., in the territorial waters.
      However, the Court was conscious and expressly guarded the said
      proposition clarifying that it was not pronouncing any dictum as to what
      would be the position if these goods (the vessel) were not intended to be
      primarily used in India or used occasionally for short period in India and
D     whether in such situation, the vessel should be treated as a good for
      home consumption. As the vessel in the said case was brought in India
      and was primarily used as a transshipper and occasionally in the open
      seas, it was held to be a good imported for home consumption.
            24. This aforesaid authority, in our opinion, answers the contention
 E    raised by the owner that rig in question was not meant for home
      consumption as the rig never entered the land mass. As long as the rig
      was used for operations within the territorial waters of India, the rig
      would meet the requirement and satisfy the condition that it was an
      imported good meant for home consumption. There would be no doubt
      on the said legal position in view of the subsequent pronouncement in
 F    V.M. Salgaoncar (supra), wherein dwelling on the question of home
      consumption it was held thatthe expression 'consumption' does not involve
      complete using up of the commodity and would include putting the
      commodity to use to any type ofutility within the territory oflndia. Even
      when this condition is satisfied, it would amount to home consumption.
 G    The question raised in V.M. Salgaoncar (supra) was whether the vessels
      used as transshippers can be treated as ocean going vessels and reference
      was made to the larger Bench of three Judges to consider the ratio in
      Cltowgule and Co. Pvt Ltd (supra). While deciding the said issue, it
      has been held as under:-

 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. MIS ABAN                                 333
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

      "25. There is no dispute for the department that by design and          A
      equipment, transhippers are intended to be used mostly to carry
      the cargo from harbours to the high seas and vice versa. That
      such transhippers often move into the open sea is also not disputed
      by the department. Thus considering the question from all the
      different angles, it is reasonable to take the view that merely
                                                                              B
      because transhippers are used for carrying cargo for loading into
      the bulk carriers (those being unable to touch the port) they cannot
      be excluded from the category of ocean-going vessels. At any
      rate it has been demonstrated by the Government that it was not
      very much interested in segregating transhippers from the category
      of ocean-going vessels as the Government brought out a new              c
      notification enveloping all vessels including transhippers within the
      ambit of ocean-going vessels, almost immediately after
      pronouncement of the decision in Chowgule & Co. (P) Ltd. That
      subsequent development on account of its close proximity to time
      cannot be overlooked as of no impact.
                                                                              D
      26. In the result we accept the contention of the owners of the
      trans-shippers that such vessels are entitled to the benefit of the
      notification dated 11-10-195 8. The appeals are disposed of in the
      above terms."
       25. The aforesaid passage refers to the Government's decision          E
that had brought out a new notification to envelop all vessels including a
transshippers within the ambit of ocean going vessels immediately after
the pronouncement in Chowgule and Co. Pvt Ltd (supra).
       26. The decision in V.M. Salgaoncar (supra) refers to the limits
of territorial waters fixed under Section 3(2) of the 1976 Act, which is      F
distance of 12 nautical miles from the nearest point of the appropriate
baseline.
      27. In Aban Lyod Chiles Offshore Limited and another v. Union
ofIndia and Others9, the view of Division Bench of the Bombay High
Court in Pride Fommer (supra) was upheld. In this case the rig was            G
operational and used outside the territorial waters limits, but in the
designated areas of the continental self and exclusive economic zones,
which have been declared by the notification to be a part of the territory
of India for limited purpose. The natural consequence of the said
• c2oos) 11 sec 439
                                                                              H
334            SUPREME COURT REPORTS                            [2017) 5 S.C.R.


A     notification was to extend the Customs Act and the Customs Tariff Act
      to the designated areas outside the territorial waters to introduce the
      custom regime in such areas resulting in levy and collection of custom
      duty. The issue raised in the said case related to consumption of goods
      or stores imported by the drilling contractor and supplied to the rig. The
      stores used for consumption on board the oil rigs, when stationed in the
B
      notified or designated areas, which were deemed to be territorial waters,
      was chargeable and customs duty was payable.
             28. In the case at hand, neither the adjudication order nor the
      order passed by the tribunal has elucidated or held that the rig in question
      was in operation in the territorial waters or the designated/deemed
 c    territorial waters pursuant to the notification. The issue of chargeability
      and liability to pay customs duty has been on different precepts and
      grounds.
          29. The adjudication order refers to and is predicated on the rig
   being broughtto the port for repairs in February, 1996 for which permission
 D was sought from the Commissioner of Customs vide letter dated 12'h
   February, 1996 underthe provisions of notification No. 153/94 Cus. The
   rig subsequently moved out of the port after repairs. The rig was brought
   for the second time to the Mumbai port for repair on 9th November, 1996
   and had remained there till 2"tl December, 1996. The rig thereafter was
 E taken  out and removed from the territorial waters oflndia as is evincible
   from the adjudication order. The rig was for the third time brought to the
   outer anchorage in Mumbai/Mumbai port on 9'h December, 1998 and
   removed from the customs area. On this occasion, for the first time, the
   authorities felt that the rig had been imported into India when the rig was
   brought within the territorial waters for repairs. The adjudication order
 F does not record that the rig was in operation within the territorial waters
   offndia. On the other hand, the adjudication order does not spel I out that
   the rig did not operate outside the territorial waters of India. The
   contention raised by the owner in this regard was neither specifically
   rejected not a different finding was recorded. The finding was that the
 G rig when it is repaired in India, it is imported into India for home
   consumption. The adjudication order holds that the repairs undertaken
   would complete the act of import, for the requirement of home
   consumption was satisfied. The said finding, in our opinion, is
   unacceptable and faulty. Mere repair of a vessel is not putting the vessel

 H
  COMMISSIONER OF CUSTOMS, MUMBAI v. MIS ABAN                                 335
 LOYD CHILES OFFSHORE LTD. & ORS. [DIPAK MISRA, J.]

to use in India and would not result in home consumption as the vessel        A
was not utilized within the territory oflndia. Repairs are carried on the
vessel and not to utilize the vessel. It would not amount to utilization or
operation of the vessel/rig in India. Thus, it cannot be said that the
vessel, i.e., the rig, was imported into India when it had anchored twice
in 1996 and once in 1998 for the purpose of repair, for the element of
                                                                              8
home consumption is missing even when the vessel, i.e., the rig, had
entered the territorial waters. Thus, it would be incorrect to hold that
mere repair of the vessel in 1996 or in 1998 would constitute taxable
import.
       30. The authorities have laid emphasis on the factum that the rig
was purchased for being used in the oil field of ONGC and for this
                                                                              c
purpose the owner had made an application and permission/licence for
import was granted by the Ministry oflndustry. The rig was purchased
from foreign exchange released by the Government on the basis of the
import licence for the rig. If the rig was not to be used in India, foreign
exchange would not have been released and import licence would not            D
have been granted. This argument on behalf of the department does not
further the stand. It cannot be regarded as conclusive. Release of foreign
exchange, approval and licence, etc. are prior to the import. Import may
not take place in spite of this aforesaid clearances/licence and release
of foreign exchange. There may have been violation of another
enactment/provision as the rig was not imported, albeit for deciding the      E
question whether the rig was imported into India, the requirement of
home consumption has to be satisfied. Then alone, the 'good', i.e., the
vessel/rig would be taxable and customs d_uty payable under the Act.
Pertinently, the adjudication order does not hold that the import had taken
place in 1987 when the rig first put into operation in the high seas. This    F
was not treated as the date of import or home consumption. The import
as per the authorities had taken place when the rig was brought for
repairs. The evaluation of the rig has been done on the basis of the last
visit of the rig for repair in 1998.
      31. While we are disposed to accept that there was no import, we        G
would not on the said finding hold that the owner had not violated the
provisions of the Act, which are much broader and wider in scope. The
Act regulates and mandates compliance by the foreign going vessels
when they enter the territorial waters. Provisions of the Act are required

                                                                              H
336                SUPREME COURT REPORTS                       [2017] 5 S.C.R.



A     to be met and complied with even when no goods are to be unloaded for
      import into India or the vessel is not a 'good' meant for home consumption.
      Thus, violations recorded by the tribunal cannot be found fault with.
             32. Thus analysed, we are of the indubitable opinion, that the
      decision rendered by the tribunal deserves our concurrence and we so
B     do. Consequently, all the appeals are dismissed without any order as to
      costs.


      Ankit Gyan                                                 Appeals dismissed.