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PETITIONER: UNION OF INDIA & ANOTHER

       Vs.

RESPONDENT: V.M. SALGAONCAR AND BROS. (P) LTD. ETC.

DATE OF JUDGMENT:       08/01/1998

BENCH: B.N. KIRPAL, V.N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                 (With C.A. No. 3409 of 1987)                       J U D G M E N T THOMAS, J.      Whether vessels which are used as transhippers can also be treated  as "ocean-going  vessels" is the short but hotly mooted issue  involved in these appeals. It was once decided by a  Bench of  two Judges  of this  court in Chowgule & Co. Pvt. Ltd.  Vs. union  India &  ors., [1987 (2) SCR 351] that such vessels  cannot be  termed  as  "ocean-going  vessels". Another Bench  has now  expressed the opinion that the ratio in the  above decision  requires reconsideration by a larger Bench. Thus, these matters have come up before us.      Some facts  necessary for  these appeals  can be seated thus:      Section 46  of  the  Customs  Act,  1962  requires  the importer of any goods, other than goods intended for transit or transhipment,  to  present  a  Bill  of  Entry  for  home consumption of  such goods  in the  prescribed  form.  By  a notification issued  by  the Ministry of Finance (Department of Revenue)  Government of India on 11.10.1958, "ocean-going vessels" have  been exempted  from payment  of customs duty. The said notification reads thus:      " Under  Govt. of India Ministry of      Finance   (Dept.    of    Revenue),      Notification No. 262- Customs dated      the 11th October, 1958, ocean-going      vessels other than vessels imported      to be  broken up,  are exempt  from      the   payment   of   customs   duty      leviable thereon. Provided that any      such vessel  if subsequently broken      up shall  be  chargeable  with  the      duty which  would be payable on her      if she  were imported  to be broken      up."      Some persons  who imported transhippers (vessels fitted with equipment  for  transhipping  and  topping  operations) claimed the benefit of the said notification on t he premise that those transhippers are also oceangoing vessels. But the Customs authorities  insisted on them to file Bills of Entry

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under Section  46 of the Act in respect of such vessels. The Assistant Collector  of Customs  ordered, in confirmation of the aforesaid  stand of  the  customs  officials,  that  the importers should  file Bills of Entry for payment of Customs duty. Then  those importers  challenged the  orders  of  the Assistant Collector.  Some of them went straight to the High Court under  Article 226  of the  Constitution while  others approached the  statutory  authorities  up  to  the  Customs excise &  Gold  (Control)  Appellate  Tribunal.  The  orders impugned before  us thus relate to the question whether such transhippers are  oceangoing vessels.  Importers have  filed the appeal  challenging the  decision which  negatived their contention  and   Union  of  India  has  filed  the  appeals challenging those  decisions which  upheld the contention of the importers.      The common  features in  all cases  are the  following: Transhippers are vessels used for carrying cargo loaded from the harbour  and they  proceed to outer sea for unloading it into large  vessels afloat  in high  seas. such transhippers have been  specially fitted with adequate equipment to carry out the  said task.  (That operation  is called  topping  up work.) Some  of the vessels were fitted with added holdes on both  sides,   cranes,  conveyors  and  other  ship  loading equipment designed for transfer operations.      In Chowgule  & Co.  Pvt. Ltd.  (Supra), learned  Judges have noted  that the  transhippers involved in that decision were capable  of being used as ocean going vessels and were, in fact,  so  used  during  off  seasons  when  it  was  not practicable to  do topping  up operations. those vessels are not only  capable of  being used  but were  actually used as cargo ships  during off-seasons.  They were structurally and technically competent  to go  on the high seas and they were certified  to   be  so  competent  by  appropriate  maritime authorities. Even  in the  course of  topping up  operations during off-seasons,  those transhippers  have to go into the open sea to reach the bulk carners.      Despite all  the aforesaid  features learned Judges did not agree  with the  contention of  the importers that those vessels were  ocean-going vessels. the following observation is the ratio of the decision:      " But in our view, these operations      do not  make  these  vessels  ocean      going vessels  when  their  primary      purpose and  the purpose  for which      they were permitted to be purchased      and brought to Indian waters, is to      conduct topping  up  operations  in      Indian territorial  waters and  not      to serve as ocean-going vessels."      Learned counsel  for the  importers, in  the course  of their  arguments   raised  an   incidental  contention  that transhippers were  not imported  for "home  consumption", as the commodity  remains intact,  without any alteration, even after it  is put  to use.  it was suggested that consumption would involve  complete using  up of  the article to such an extent that  identity of  the consumed  article becomes non- existent.      The word  "consumption" may involve in the narrow sense using the article to such an extent as to reach the stage of its non-existence.  But the word "consumption" in fiscal law need not  be confined  to such  a narrow  meaning. It  has a wider meaning  in which  any  sort  of  utilization  of  the commodity  would  as  well  amount  to  consumption  of  the article, albeit  that article  retaining its  identity  even after its use.

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    A Constitution  Bench of  this Court has considered the ambit of  the word  "consumption"  in  Article  286  of  the Constitution in  M/s. Anwarkhan  Mahboob co.  Vs.  State  of Bombay (now  Maharasthra) and  others [1961  (1)  SCR  709]. Their Lordships observed thus:      " Consumption  consists in  the act      of taking  such  advantage  of  the      commodities and  services  produced      as  constitutes  the  "utilization"      thereof. for  each commodity, there      is  ordinarily  what  is  generally      considered to  be the  final act of      consumption. for  some commodities,      there may  be even  more  than  one      kind    of     final    consumption      ......................      ...................................      .......................      In the  absence  of  any  words  to      limit the  connotation of  the word      "consumption" to  the final  act of      consumption, it  will be  proper to      think that  the Constitution-makers      used the  work to  connote any kind      of user  which is ordinarily spoken      of as consumption of the particular      commodity."      In another  decision a  two Judge  Bench of  this court considered the  scope of  the words  "consumption" vis-a-vis "use".  (vide   Kathiawar  Industries   ltd.  vs.  Jaffrabad Municipality: AIR  1979 SC 1721). There it was held that the precise meaning to be given to those words would depend upon the context in which they are used. it is in a primary sense that the  word "consumption"  is  understood  as  using  the article in  such a  manner as to destroy it identity. It has wider meaning  which does  not involve the complete using up of the commodity.      In  the   context  in   which  the   expression   "home consumption" is  used in  Section 46  of the  Customs Act it does not  warrant a  construction that  the commodity should have been  completely used up. Even putting the commodity to any type  of utility  within the  territory  of  India  will tantamount to "home consumption".      We would  now turn to the question whether transhippers are ocean-going vessels?      In the  order of  reference Bharucha  and Sen, JJ, have expressed  that   "there  is,  prime  facie,  merit  in  the submissions on  behalf of  the owners  that an  ocean  going vessel is  a vessel  equipped, crewed and licensed to go out into the  ocean, regardless  of whether  or not  it actually does, and  that the transhippers as shown by the record, are such vessels:  also, they  do, in fact go out into the ocean on their  day to  day business  to  load  ore  and,  in  the monsoon, to carry cargo to or seek refuge in other Indian or foreign ports."      It may  be contextually  useful to  mention  that  soon after the decision was rendered by a two Judge Bench of this Court in  Chowgule &  Co. Pvt.  Ltd. (Supra), a notification was issued  on 19.3.1997  (which has  been extracted  above) exempting all  the vessels  (other than floating structures) from the  whole of  the duty  of  customs  leviable  thereon except those which are imported for the purposes of breaking up.      The contention  was raised  on behalf  of the owners of the vessels  that the  close proximity  of the time at which

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Government issued  the subsequent  notification is a telling circumstance that  Government of  India did  not  intend  to exclude  transhippers   from  the  category  of  ocean-going vessels. However, Shri Gauri Shankar Murthi, learned counsel for the  Revenue forcefully  contended that the transhippers cannot get  the benefit  of the  first notification at least until the Government of India issued the second notification dated 19.3.1997.      The expression  "ocean-going  vessels",  unfortunately, has not  been defined  in the  notification dated 11.10.1958 and that  vacuum created  room for  this  dispute.  However, Customs Act contained definition for the term "foreign going vessel" in Section 2(21), as a vessel engaged in carriage of goods or  passengers between  any port in India and any port outside India and includes "any vessel engaged in fishing or any other  operations  outside  the  territorial  waters  of India."      The limit  of territorial waters is fixed under Section 3(2) of  the Territorial  Waters Continental Self, exclusive Economic Zone and other Maritime Zones Act, 1976 (Act No. 80 of 1976)  thus: "The limit of territorial waters is the line every point  of which  is at  a distance  of twelve nautical miles from the nearest point of the appropriate pasenne."      We find  much force  in the  contention of  the learned counsel for the owners that, if a vessel which is engaged in fishing or  any other  operations  outside  the  territorial waters of  India, though  not crossing  into the territorial waters of  any other  foreign country, could legitimately be included in  the category  of foreign  going vessel,  how  a transhipper  which   often  goes   into  the  open  sea  for transhipping operations cannot be regarded as an ocean-going vessel?      Shri Murthi,  learned counsel for the Revenue contended that the  use of  transhippers is  not for  going beyond the limit of  territorial waters and the ambit of the expression "ocean-going "  could be  judged on the test of its dominant use notwithstanding  that it  may just  into  the  open  sea infrequently. In  support of  the above proposition, learned counsel relled  on the  decision of  this Court in Good year India Ltd.  vs. Union  of India [1997 (92) ELT 14 = 1997 (5) SCC 752].  Learned senior counsel, who argued for the owners of transhippers  on the  other  hand  contended  that  while interpreting the  meaning of  words in  fiscal connotations, meanings attached  to such  expressions by people conversant with the subject should normally be adopted.      A three  Judge Bench of this court in Dunlop India Ltd. vs. Union  of India  & ors.,  [1976 (2) SCR 98] has observed thus:      " It  is well  established that  in      interpreting the  meaning of  words      in   a    taxing    statute,    the      acceptation of a particular word by      the Trade  and its  popular meaning      should  commend   itself   to   the      authority.      xxxxx   xxxxxxxxx    xxxxxxxxxxx      It is  clear that  meaning given to      articles in  a fiscal  statute mush      be as people in trade and commerce,      conversant   with    the   subject,      generally treat and understand them      in the  usual course.  But once  an      article is classified and put under      a distinct  entry, the basis of the      classification  is   not  open   to

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    question. Technical  and scientific      tests offer  guidance  only  within      and known  in common  parlance,  we      then   wee    no   difficulty   for      statutory  classification  under  a      particular entry."      We do not think that, in the present case, the question whether a  transhipping vessel is an ocean-going vessel, can solely rest  on the  test of its dominant use to which their owners put  them at  times. Use  may  vary  from  season  to season, port  to port  and also  managers to managers. So in this area  of understanding  use of the article stands down- staged, and the court must look at to know what actually the commodity is.      In the  Merchants Shipping  Act,  1958  the  expression "sea-going vessels’ is used and defined it in Section 3(41), like this"      "  Sea-going",  in  relation  to  a      vessel means a vessel proceeding to      sea beyond  inland waters or beyond      waters declared  to  be  smooth  or      partially  smooth   waters  by  the      Central Government  by notification      in official gazette."      Though an  endeavour was  made before  the Tribunal  to show that  there is  a shade  of difference  between the two words "sea"  and "ocean", we are not disposed to attach much emphasis on  the nuances  in  the  semantics  now.  For  all practical purposes  the words  "sea"  and  "ocean"  are  two expressions of  the same geographical feature concerning the vast body of salt water one side of which appears as horizon from the other. Hence we have no doubt that what is meant by the expression  "ocean-going vessels"  is not  qualitatively different from  "sea-going vessels",  indeed the  latter may include the former.      How an  ocean-going vessel  is understood  in  maritime enterprises can  now be  looked into.  In the shorter Oxford dictionary, it  is shown  as "a  ship  capable  of  crossing oceans". In  the Random  House Dictionary, it is shown as" a ship designed  and equipped  to travel  on the open sea". In the Collins Dictionary of English Language, it is defined as " a ship suited for the travel on the open sea".      There is  no dispute  for the Department that by design and 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 different angles, it is reasonable to take the  view that merely 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 notification enveloping  all vessels  including transhippers within the  ambit of ocean-going vessels, almost immediately after pronouncement  of the  decision in Chowgule & Co. Pvt. Ltd. (Supra).  That subsequent development on account of its close proximity  of time  cannot  be  overlooked  as  of  no impact.      In the result we accept the contention of the owners of the transhippers  that such  vessels  are  entitled  to  the benefit of  the Notification  dated 11.10.1958.  The appeals are disposed of in the above terms.

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