Legal principle

Salvage equipment consigned to the master of a 'foreign going vessel' under salvage and used in her refloating constitutes 'stores' under section 88 of the Customs Act, 1962, and an agent such as a shipping agent is not the 'person chargeable to duty' who can be proceeded against under section 28.

Court decision

The Tribunal allowed all the appeals and set aside both Orders-in-Original, holding the impugned goods to be 'stores' of a foreign-going vessel under section 88, the section 28 duty demands to have no merit, confiscation under sections 111(n) and 111(o) unsustainable, the penalties under sections 114A and 114AA (and, in the first order, section 112) without authority of law, and holding JM Baxi & Co was not the 'person chargeable to duty'.

Facts

The container vessel MSC Chitra collided with bulk carrier MV Khalijia-II at Jawaharlal Nehru Port on 7 August 2010 and grounded, triggering salvage operations by M/s Smit Salvage BV and Smit Singapore Pte Ltd. Salvage equipment in 27 consignments (via Air Cargo Complex, Mumbai) and 9 consignments (via JNCH, Nhava Sheva) between August 2010 and February 2011 was imported in the name of 'Master of MSC Chitra' c/o JM Baxi & Co and moved under customs escort to the salvage site. The Commissioners confirmed duty demands of ₹2,26,10,697 and ₹2,50,68,363 under section 28 with interest under section 28AA, confiscated goods (valued at ₹9,24,91,810.41 and ₹10,26,09,460) under sections 111(n) and 111(o) with redemption fines under section 125, and imposed penalty under section 114A on JM Baxi & Co plus penalties under sections 112 and 114AA on its employees Vijayan Chrysostom D'Souza and Anshu Sahay.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 21, Customs Act, 1962 — Goods derelict, wreck, etc
• Section 111(n), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 88, Customs Act, 1962 — Application of section 69 and Chapter X to stores
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 86, Customs Act, 1962 — Transit and transhipment of stores
• Section 2, Customs Act, 1962 — Definitions
• Section 47, Customs Act, 1962 — Clearance of goods for home consumption