Case: Aban Loyd Chiles Offshore Ltd.  Vs. U.O.I.

4. The Appellants are engaged in drilling operations for exploration of offshore oil, gas and other related activities under contracts awarded by the Oil and Natural Gas Commission (for short,The drilling operations are carried on at oil rigs/vessels, which are situated outsidethe territorial waters ofIndia. Until around November, 1993, the Appellants, and all other similarly situated companies which were engaged in oil and gas exploration and exploitation were permitted to transship stores to the oil rigs without levy of any customs duty regardless of the fact whether oil rigs were operating within a designated area or non-designated area.5. November, 1993 onwards, the Revenue Authorities (for short,refused to permit companies engaged in onward offshore operations, to transship stores to the oil rigs, without payment of customs duty.6. Appellants filed Writ Petition No. 610 of 1994 challenging the levy of customs duty on transshipment of goods/stores imported by drilling contractors and supplied to oil rigs, as stores for consumption on board on the oil rigs. The Bombay High Court by its interim order dated 07.02.1994 held that the Appellant shall be permitted to clear the consignments without payment of duty on execution of bond. The Bombay High Court by its Judgment dated 15.01.1996 in Amership Management Pvt. Ltd. v. Union of India [(1996) 86 ELT 12 (Bom)] allowed a group of Writ Petitions filed by similarly placed oilrig operators. The High Court in the aforesaid Judgment held that the oil rigs are foreign going vessels as defined in Section 2(21) of the Customs Act, 1962 (for short,). The spare parts or equipment for the oil rigs wereand the writ petitioners were entitled to clear the stores to the oil rigs, without payment of customs duty, by availing exemptions under Sections 86(2), 87 read with Section 2(21) of the Customs Act, 1962.7. TheWrit Petition No. 610 of 1994 was allowed on 24.04.1998 following the Judgment in Amership Management case (supra). The Respondents were directed to allow clearance of the ship stores and spares for use on the oil rigs without recovery of customs duty. The Civil Appeals preferred by the Revenue against the Judgment in thecase were dismissed by thisOrder dated 13.03.2001 which reads as under:counsel for the appellants draws our attention to the fact that by an order dated 19th April, 1999 the special leave petitions in this matter had been ordered to be linked with S.L.P.(C)...../1999 (D.No.6232/97). Subsequently, on 13th May, 1999, the number was corrected as S.L.P.(C) Nos...../99 (D.No.6292/97). Now, learned counsel for the Revenue submits that these appeals should be adjourned for two weeks and both matters listed together. Learned counsel for the respondents draws our attention to the office report dated 12th March, 2001 in this matter. The relevant portion of the office report reads thus:"Pursuant to Courts Order dated 13th May, 1999, it is submitted for the information of the Honble court that Special Leave Petition (Civil) No.... of 1999 (D.No.6292 of 1997) was returned to the Advocate for the Appellant on 22nd April, 1997 for curing the defects but till date the same has not been re-filed despite this Registrys letters dated 24th May, 1999, 7th July, 1999 and reminder dated 24th February, 2000."Having regard to the failure of the appellants to do what was required to be done till date, the application for adjournment is refused. The appeals will go on.Learned counsel for the appellants says that he is not in a position to argue the matter.The appeals are dismissed with costs.The Central Government issued Notification No. S.O. 429 (E) dated 18.07.1986 under Section 6(5)(a) and Section 7(6)(a) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (for short,Maritime Zones Act,by which certain areas were identified asare more than 12 nautical miles away from the shore and are outsideIndia.9. The Central Government by Notification No. 11/87-CUSTOMS dated 14.01.1987 issued under Section 6(6)(a) and Section 7(7)(a) of theMaritime Zones Act,1976 extended the Customs Act and the Customs Tariff Act, 1975 to the. The Central Government by Notification No. S.O. 643 (E) dated 19.09.1996, in exercise of its powers under Section 6(5)(a) and Section 7(6)(a) of theMaritime Zones Act,1976, further declared certain areas in the continental shelf and the exclusive economic zone where the installations, structures and platforms were located as. By a subsequent Notification No. S.O. 189 (E) dated 11.02.2002, the Central Government in exercise of its power under Section 6(5)(a) and Section 7(6)(a) of theMaritime Zones Act,1976, extended the Customs Act and Customs Tariff Act to theshelf of Indiaand the exclusive economic zone of India with effect from the date of publication of the Notification in the Official Gazette for the following purposes,the prospecting for extraction for production of mineral oils in the continentshelf of Indiaor the exclusive economic zone of India andb) the supply of any goods as defined in clause (22) of Section 2 of the Customs Act, 1962 in connection with any of the activities referred to in clause (a).The Pride Foramer, another oil rig operator, similarly placed to the rig operators covered in Amership Management case (supra) sought permission to clear the ship stores/spares for use on its rig without the payment of customs duty. The said permission was refused. Aggrieved against, Pride Foramer filed Writ Petition No. 1818 of 2000 before the Bombay High Court. The Bombay High Court by its Order dated 24.04.2001 dismissed the Writ Petition. Same is reported as - Pride Foramer v. Union of India - [(2002) 148 ELT 19 (Bom) ].13. The High Court after extensively referring to the relevant provisions of the Constitution of India, General Clauses Act, Customs Act,Maritime Zones Act,1976, the Notifications issued under theMaritime Zones Act,1976, i.e., No. S.O. 429 (E) dated 18.07.1986, No. 11/87-CUSTOMS dated 14.01.1987, No. S.O. 643 (E) dated 19.09.1996, Convention on Law of Sea known as Union Nations Convention on the Law of Sea, 1982 (for short,) concluded as under:all the reasons stated above, we are of the view that the respondents are perfectly justified in refusing to permit the petitioner to clear, ship stores and spares for use on the Oil Rig, on transshipment permit and without payment of customs duty while the Oil Rig is in a designated area. We also hold that the continental shelf land the exclusive economic zone are the parts of India in view of the provisions of sections 6(6) and 7(7) of the Maritime Zones Act and for the purposes thereof and pursuant to notifications referred to in para 26 (Supra) the provisions of the Customs Act, 1982 were extended to such areas, consequently, the Oil Rigs proceeding to such areas or operating therein are not foreign going vessels under section 2(21) of the Customs Act. If that is so, the petitioner is not entitled to the benefit of section 53 read with 54 and/or of section 86 r/w 87 of the Customs Act. In view of our view the petition must fail.In the present case, Appellants imported theby air which landed at Sahara Airport. When they sought clearance to shift stores without payment of duty, the same was declined by the Revenue Authorities on 24.12.2001, by passing the followingrefer your letter dated 14.12.2001 on the above subject.I am directed to inform you that your request on the above subject cannot be granted in view of judgment of theHigh Court of Bombay in W.P. No. 1818/2000 in case of M/s. Pride Foramer. It may be noted that theinterim order in the case of Aban Lloyd is only applicable to them and as such the benefit of the said order cannot be extended to you.The Appellants, thereafter, filed the Writ Petition in the High Court which has been dismissed by the impugned Order following the decision in Pridecase (supra).16. The Counsel appearing for the assessee in Pridecase (supra), had raised, broadly speaking, three submissions which were categorized by the High Court under the following broad heads:-(A) The Oil Rig is vessel.(B) The Oil Rig engaged in exploration/exploitation of offshore oil, gas and other related services outsidethe territorial waters ofIndia whilst operating in designated area is a foreign going vessel pursuant to section 2(21) (ii) of the Customs Act.(C) The goods sent to the Oil Rig are stores and are liable to be transshipped to the Rig without, payment of any custom duty or at any rate the petitioner is entitled to transship spares without payment of custom duty under sections 53 and 54 of the Customs Act.The High Court in Pridecase (supra) held that oil rig is a vessel, thus, submission categorized as (A) was decided in favour of the assessee. The two other submissions which had been categorized as (B) and (C) were decided in favour of the Revenue and against the assessee.18. Although, in the present case, the Petitioners before the High Court, had raised the plea that the Appellants were entitled to transship spares without payment of duty under Sections 53 and 54 of the Customs Act, the same was not pressed into service before us as Chapter VIII in which Sections 53 and 54 find their place does not apply to baggage, postal articles and stores (Section 52). Undoubtedly, the goods in question areand, therefore, the submission regarding applicability of Sections 53 and 54 of the Customs Act were not pressed into service before us.19. Before proceeding to take up the rival contentions raised by the parties in this Appeal, it would be appropriate to refer to the relevant provisions of the Constitution of India, Customs Act, 1962, Territorial Waters, Continental Shelf, Exclusive Economic Zone and OtherMaritime Zones Act,1976 existing at the relevant time and the International Conventions and provisions thereof: -

Reasoning: 69. In exercise of the powers vested in the Central Government under sub-section (6) of Section 6 and sub-section (7) of Section 7 of theMaritime Zones Act,1976, the Government extended the Customs Act, 1962 and the Customs Tariff Act, 1976 to the designated areas of the continental shelf and the exclusive economic zone by notification published in the Official Gazette referred to and reproduced in paragraphs 30 to 33.Pursuant to such recognition of the territorial limit in the Comity of Nations, the coastal State has the power to legislate or take such appropriate measures to exercise its sovereign power over that territorial limit.Maritime Zones Act,1976 was enacted pursuant to such recognition, declaring designated area in the continental shelf/exclusive economic zone and extending the Customs Act to such areas. The notifications referred to in the foregoing paragraphs were issued pursuant to such recognition and the Customs Act and the Customs Tariff Act were extended to the designated area of the continental shelf, exclusive economic zone. There is no challenge to theMaritime Zones Act,1976, the various notifications issued declaring designated area as well as extending the Customs Act as being ultra vires or that its provisions are contrary to the provisions of other enactments. The coastal State hasbut it has only sovereign rights over the continental shelf and the exclusive economic zone. The Customs Act extends to the whole of India and not simply tothe territorial waters ofIndia. Customs Act does not contain any provision permitting determination of the maritime limits. For this purpose, one has to revert to theMaritime Zones Act,1976. Hence, reference to theMaritime Zones Act,1976 is inevitable while considering any issue relating to maritime issues.We do not find any ambiguity in this situation. The interpretation given by the High Court in Pridecase (supra) would not result in any absurd situation as contended by the Counsel for the Appellant. The Appellants wants the Court to read Section 2(21) of the Customs Act in isolation, which would not be the correct approach. The Customs Act has to be read along with the provisions of theWe agree with the views expressed by the Bombay High Court in Pridecase (supra) that in Amership Management case (supra), the High Court of Bombay was concerned with the limited question as to whether the oil rigs are vessels and if so avessel in the light of the controversy raised in that Judgment. In Amership Management case (supra), the High Court after relying on the International Load Lines Convention, 1966 and Central Government Notifications and upon the load lines certificates, held for the purposes of the Customs Act, the expressionis of the widest amplitude and must be construed to include. It was held that since the oil rigs are stationed beyond the territorial waters, supply of importedto the oil rigs stationed outside the territorial waters would qualify for exemption from duty under Section 86 without being required to be warehoused. The question with respect to the applicability of Sections 6 and 7 of theMaritime Zones Act,1976 together with the notifications issued pursuant thereto were not considered at all.In the present case, as the goods were being taken to a territory which would be deemed to be a part of the territory of India though the goods have left the territorial waters, the same would be exigible to levy of duty when they are taken and consumed within the deemed territory of India. There would be no customs duty or any other duty levied while the goods are in transit to the deemed territory of India by any other country although they have gone out ofthe territorial waters of