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CASE NO.: Appeal (civil)  2236 of 2002

PETITIONER: Aban Loyd Chiles Offshore Ltd. & Anr.

RESPONDENT: Union of India & Ors.

DATE OF JUDGMENT: 11/04/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: J U D G M E N T With

Civil Appeal No. 6148/2002

Jindal Drilling & Industries Ltd. & Anr.            ...Appellants

-       Versus \026

Union of India & Ors.                                    ... Respondents   

And

Civil Appeal No. 4444/2006

Great Offshore Ltd. & Anr.                                  ... Appellants

- Versus -

Union of India & Ors.                                       ... Respondents

BHAN, J. 1.      These appeals are being disposed of by this common Judgment  as the facts and questions of law involved in these appeals are  the same. For the sake of convenience, the facts are taken from  Civil Appeal No. 6148 of 2002.        2.      This Appeal is directed against the Judgment of the Bombay  High Court dated 05.06.2002 rendered in the Appellant\022s Writ  Petition No.  1336 of 2002. By the impugned Judgment, the High  Court dismissed the Writ Petition on the ground that the  questions in issue were covered by a previous Division Bench  Judgment of the same High Court in Writ Petition No. 1818 of 2002  [Pride Foramer v. Union of India].          3.      The principal issue that falls for consideration in this  case is:-        \023Whether oil rigs engaged in  operations in the exclusive economic  zone/ continental shelf of India,  falling outside the territorial waters  of India, are \023foreign going vessels\024 as  defined by Section 2(21) of the Customs  Act, 1962, and are entitled to consume  imported stores thereon without payment  of customs duty in terms of Section 87

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of the Customs Act, 1962?\024 FACTS  

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, \021ONGC\022). The drilling operations are carried on at  oil rigs/vessels, which are situated outside the territorial  waters of India. 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,  \021respondents\022) 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 oil rig 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, \021the Customs Act\022). The spare parts or  equipment for the oil rigs were \023stores\024 and 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.      The Appellants\022 Writ 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 the Appellants\022 case were dismissed by  this Court\022s Order dated 13.03.2001 which reads as under: -        \023Learned 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 Court’s Order dated 13th May,  1999, it is submitted for the information of  the Hon’ble court that Special Leave Petition  (Civil) No.... of 1999  (D.No.6292 of 1997)

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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 Registry’s  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.\024        8.      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, \021the Maritime  Zones Act, 1976\022) by which certain areas were identified as  \023designated areas\024. The \023designated areas\024 are more than 12  nautical miles away from the shore and are outside the  territorial waters of India.        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 the Maritime Zones Act, 1976  extended the Customs Act and the  Customs Tariff Act, 1975 to the \023designated areas\024.         10.     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 the Maritime 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 \023designated areas\024.         11.     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 the Maritime Zones Act,  1976, extended the Customs Act and Customs Tariff Act to the  continental shelf of India and the exclusive economic zone of  India with effect from the date of publication of the  Notification in the Official Gazette for the following purposes,  viz. :-              \023 a)      the prospecting for extraction for  production of mineral oils in the  continent shelf of India or the exclusive  economic zone of India and

a)      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).\024        12.     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

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Writ Petition. Same is reported as \023Pride Foramer v. Union of  India\024 [(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 the Maritime 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, \021UNCLOS, 1982\022)  concluded as under: -        \023For 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.\024         14.     In the present case, Appellants imported the \023stores\024 by 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 following  order:-        \023Please refer your letter dated 14.12.2001 on  the above subject.       I am directed to inform you that your  request on the above subject can not be  granted in view of judgment of the Hon\022ble  High Court of Bombay in W.P. No. 1818/2000 in  case of M/s. Pride Foramer. It may be noted  that the Hon\022ble Supreme Court\022s interim  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.\024        15.     The Appellants, thereafter, filed the Writ Petition in the  High Court which has been dismissed by the impugned Order  following the decision in Pride Foramer\022s case (supra).        16.     The Counsel appearing for the assessee in Pride Foramer\022s  case (supra), had raised, broadly speaking, three submissions  which were categorized by the High Court under the following  broad heads: -         \023 (A)     The Oil Rig is vessel. (B)     The Oil Rig engaged in  exploration/exploitation of

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offshore oil, gas and other related  services outside the territorial  waters of India whilst operating in  designated area is a foreign going  vessel pursuant to section 2(21)  (ii) of the Customs Act.   (A)     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.\024

17.     The High Court in Pride Foramer\022s case (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 are \023stores\024  and, 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 Other Maritime Zones Act, 1976 existing at the  relevant time and the International Conventions and provisions  thereof: -             \023 i       ARTICLE 1(3) OF THE CONSTITUTION  OF INDIA provides that the  \023TERRITORY OF INDIA\024 shall  comprise of-

a       the territories of States; b       the Union territories specified in  the First Schedule; and c) such other territories as may be      acquired.\024

i       SECTION 3(28) OF THE GENERAL  CLAUSES ACT provides that: -

       \023India\024 Shall mean- a       XXX XXX b       XXX XXX c       as respects any period after  the commencement of  Constitution all territories  for the time being comprised  in the territory of India.\024

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i       SECTION 2(27) OF THE CUSTOMS ACT,  1962 defines \023INDIA\024 as under:-

\023 \023India\024 includes the territorial  waters of India.\024

       This definition under the Customs Act is  relevant for the purposes of the Customs Act  only.

RELEVANT PROVISIONS OF CUSTOMS ACT, 1962

i       SECTION 2(21) assigns the  following meaning to the \023FOREIGN  GOING VESSEL OR AIRCRAFT\024: -

\023foreign-going vessel or aircraft\024  means any vessel or aircraft for  the time being engaged in the  carriage of goods or 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       XXX XXX ; ii      XXX XXX; iii     any vessel or aircraft  proceeding to a place outside  India for any purpose  whatsoever;\024

i       SECTION 2(28) defines to mean INDIAN  CUSTOMS WATER: -

\023Indian Customs Water\024 means the waters  extending into the sea upto the limit of  contiguous zone of India under section 5  of the Territorial Waters Continental  Shelf, Exclusive Economic Zone and other  Maritime Zones Act, 1976, (80 of 1976)  and includes any bay, gulf, harbour,  creek or tidal river;\024   

i       SECTION 52 reads as under: -

\023Chapter not to apply to baggage, postal  articles and stores- The provisions of  this Chapter shall not apply to (a)  baggage, (b) goods imported by post, and  (c) stores.\024

i       SECTION 53 reads as under: -

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\023Transit of certain goods without  payment of duty.-(1) Subject to the  provisions of section 11, any goods  imported in a conveyance and mentioned  in the import manifest or the import  report, as the case may be, as for  transit in the same conveyance to any  place outside India or any customs  station may be allowed to be so  transited without payment of duty.\024

i       SECTION 54 reads as under: -

\023Transhipment of goods without payment  of duty.-(1) Where any goods imported  into a customs port or customs airport  are intended for transshipment, a bill  of transshipment shall be presented to  the proper officer in the prescribed  form:\024

      i       SECTION 86 provides that: -

\023Transit and transhipment of stores.-(1)  Any stores imported in a vessel or  aircraft may, without payment of duty,  remain on board such vessel or aircraft  while it is in India.

(2) Any stores imported in a vessel or  aircraft may, with the permission of the  proper officer, be transferred to any  vessel or aircraft as stores for  consumption therein as provided in  section 87 or section 90.\024   

i       SECTION 87 provides that: -

\023Imported stores may be consumed on  board a foreign-going vessel or  aircraft.-Any imported stores on board a  vessel or aircraft (other than stores to  which section 90 applies) may, without  payment of duty, be consumed thereon as  stores during the period such vessel or  aircraft is a foreign-going vessel or  aircraft.\024

i       ARTICLE 297 OF THE CONSTITUTION OF  INDIA as it originally existed was as  under: -

ARTICLE 297-

\023All lands, minerals and other things of  value underlying the ocean within the  territorial waters of India shall vest  in the Union and be held for the  purposes of the Union.\024

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       Article 297 was amended in 1963 to  include the words \023or the continental shelf\024  after the words territorial waters.

              Article 297 was again amended in 1976 to  read as under: -

ARTICLE 297-

\023Things of value within territorial  waters or continental shelf and  resources of the exclusive economic zone  to vest in the Union:

1       All lands, mineral land other  things of value underlying the  ocean within the territorial  waters, or the continental shelf,  or the exclusive economic zone, of  India shall vest in the Union and  be held for the purposes of the  Union.   1       All other resources of the  exclusive economic zone of India  shall also vest in the Union and be  held for the purposes of the Union.

1       The limits of the territorial  waters, the continental shelf, the  exclusive economic zone, and other  maritime zones, of India shall be  such as may be specified, from time  to time, by or under any law made  by Parliament.\024            20.     The Maritime Zones Act, 1976 was enacted to provide for  certain matters relating to the territorial waters, continental  shelf, exclusive economic zone and other maritime zones of India.  The Maritime Zones Act, 1976 provides that the said Act is a  sequel to the amendment to Article 297 and that it was in  consonance with what has been accepted by the international  community of States.

21.     It is relevant to refer to the Statement of Objects and  Reasons of the Bill introduced for enactment of the Maritime  Zones Act, 1976 which, inter alia, provides as under: -

\023Statement of Objects and Reasons \023The Bill is a sequel to the latest  Constitution Amendment Bill relating to the  substitution of Article 297 by a new Article.  According to new Article 297, all lands,  minerals and other things of value underlying  the ocean within the territorial waters, or  the continental shelf, or the exclusive  economic zone as well as other resources of  the exclusive economic zone, vest in the  union to be held for the purposes of the  Union. The new Article also provides that the  limits of the territorial waters, the  continental shelf, the exclusive economic  zone and other maritime zones of India shall

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be such as may be specified, from time to  time, by or under any law made by Parliament.

\0232. At present India does not have a  comprehensive legislation on the law of sea.  The limits of the territorial waters and the  continental shelf are governed by the  proclamations issued by the President. As  envisaged by new Article 297, it is intended  to provide for the limits of the territorial  waters, the continental shelf, the exclusive  economic zone and other maritime zones of  India by a Parliamentary law. For  safeguarding the interests of the nation, it  is also necessary to provide for a general  legal framework specifying the nature, scope  and extent of India\022s rights, jurisdiction  and control in relation to the various  maritime zones, the maritime boundaries  between India and other States whose coasts  are opposite or adjacent to those of India  and for the exploration and protection of the  resources of our continental shelf and  exclusive economic zone. Hence this Bill.

\0233. The maritime zones of India include the  territorial waters, contiguous zone, the  continental shelf, the exclusive economic  zone and the historic waters of India. The  territorial waters and the continental shelf  are traditional concepts in international Law  and the national jurisdiction in these zones  is well established. The concept of the  exclusive economic zone which has been  developed at the initiative of developing  countries has gained acceptance of the  international community of States. The  concept of contiguous zone which is located  within the exclusive economic zone and over  which additional jurisdiction is claimed by  coastal States has also been accepted by the  international community of States. Provision  has also been made in the Bill regarding the  historic waters of India which are adjacent  to its land territory and over which India  has sovereignty. The limits of these waters  such as the waters in the Palk Bay and the  Gulf of Manaar, will be specified by the  Central Government by notification in the  Official Gazette. The limits of other  maritime zones of India have been specified  in the Bill itself. The Bill empowers the  Central Government to alter, by notification  in the Official Gazette, the limits of these  maritime zones. It has been made clear that  notifications for altering the limits as  specified in the Bill shall not be issued  unless both Houses of Parliament have passed  resolutions approving the issue of such  notifications.

\0234. It is proposed to undertake separate  legislation in future as and when need arises  for dealing in greater detail with the  regulation, exploration and exploitation of

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particular resources or particular groups of  resources of the continental shelf and the  exclusive economic zone as well as with other  matters in which India has jurisdiction in  the maritime zones, and with regard to these  matters the Bill makes only broad general  provisions.\024

22.     Section 3(2) defines the limit of territorial waters as the  line every point of which is at a distance of twelve nautical  miles from the nearest point of the appropriate base line.  Section 3(3) authorizes the Central Government to alter the  limits of territorial waters. The same reads as under: -          SECTION 3(3)-

\023Sovereignty over, and limits of territorial  waters.-(3) Notwithstanding anything  contained in sub-section (2), the Central  Government may whenever it considers  necessary so to do having regard to  International Law and State practice, alter,  by notification in the Official Gazette, the  limit of the territorial waters.\024

23.     Section 3(4) of the Maritime Zones Act, 1976, reads as  under: - SECTION 3(4)-

\023No notification shall be issued under sub- section (3) unless resolutions approving the  issue of such notification are passed by both  Houses of Parliament.\024          24.     Section 6 of the Maritime Zones Act, 1976 defines  Continental Shelf of India. Section 6(5) authorizes the Central  Government to declare any area on the continental shelf as  \023designated area\024. The same reads as under: -

       SECTION 6(5)-

\023The Central Government may, by notification  in the Official Gazette,- a       declare any area of the continental shelf  and its superjacent waters to be a  designated area; and b        make such provisions as it may deem  necessary with respect to,- i       the exploration, exploitation and  protection of the resources of the  continental shelf within such  designated area; or ii      the safety and protection of  artificial islands, of shore  terminals, installations and other  structures and devices in such  designated area; or iii     the protection of marine environment  of such designated area; or iv      customs and other fiscal matters in  relation to such designated area. Explanation- A notification issued under  this sub-section may provide for the

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regulation of entry into and passage  through the designated area of foreign  ships by the establishment of fairways,  sealanes, traffic separation schemes or  any other mode of ensuring freedom of  navigation which is not prejudicial to  the interests of India.\024

25.     Central Government, has been authorized to extend the  enactment for the time being in force in India to the continental  shelf of any \023designated area\024 on the continental shelf by  issuing a notification under Section 6(6) which reads as under: -

       SECTION 6(6)-

\023The Central Government may by notification  in the Official Gazette.- (a)     extend, with such restrictions and modifications  as it thinks fit, any enactment for the time being  in force in India or any part thereof to the  continental shelf or any part [including any  designated area under sub-section (5)] thereof;  and (b)     make such provisions as it may consider necessary  for facilitating the enforcement of such  enactment, and any enactment so extended shall have  effect as if the continental shelf or the  part [including, as the case may be, any  designated are under sub-section (5)] therof  to which it has been extended is a part of  the territory of India.\024

26.     Section 6(7) of the Act reads as under: -                  SECTION 6(7)-

\023Without prejudice to the provisions of sub- section (2) and subject to any measures that  may be necessary for protecting the interests  of India, the Central Government may not  impede the laying or maintenance of submarine  cables or pipelines on the continental shelf  by foreign States:         Provided that the consent of the Central  Government shall be necessary for the  delineation of the course of the laying of  such cable or pipelines.\024

27.     Section 7 defines \023exclusive economic zone of India\024.  Section 7(6) authorizes the Central Government to declare any  area in the exclusive economic zone in the \023designated area\024. The  same reads as under: -

       SECTION 7(6)-

\023The Central Government may, by notification  in Official Gazette,- a       declare any area of the exclusive economic zone to  be a designated area; and

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b       make such provisions as it may deem necessary with  respect to,- i       the exploration, exploitation and  protection of the resources of such  designated area; or ii      other activities for the economic  exploitation and exploration of such  designated area such as the  production of energy from tides,  winds and currents; or iii     the safety and protection of  artificial island, of shore  terminals, installations and other  structures and devices in such  designated area; or iv      the protection of marine environment  of such designated area; or v       customs and other fiscal matters in  relation to such designated area.         Explanation- A notification issued under  this sub-section may provide for the  regulation of entry into and passage through  the designated area of foreign ships by the  establishment of fairways, sealanes, traffic  separation schemes or any other mode of  ensuring freedom of navigation which is not  prejudicial to the interests of India.\024

28.     Under Section 7(7) of the Maritime Zones Act, 1976, Central  Government has been authorized to extend the enactment for the  time being in force in India to the exclusive economic zone or  any part thereof in the exclusive economic zone or any part  thereof by issuing a notification. The said Section reads as  under: -

       SECTION 7(7)-

\023The Central Government may by notification in the  Official Gazette.- a       extend, with such restrictions and modifications as it  thinks fit, any enactment for the time being in force  in India or any part thereof in the exclusive economic  zone or any part thereof; and b       make such provisions as it may consider necessary for  facilitating the enforcement of such enactment, and any enactment so extended shall have effect as  if the exclusive economic zone or the part thereof  to which it has been extended is a part of the  territory of India.\024

29.     The relevant notifications issued under the Maritime Zones  Act, 1976 are M.E.A. No: S.O. 429 (E) dated 18.07.1986 (effective  since Jan. 15th 1987) and No. S.O. 643(E) dated 19.9.1996 which  took immediate effect.

30.     The text of notification no. No: 429 (E) dated 18.07.1986 is  as under: - \023S.O. 429 (E): - In exercise of the powers  conferred by clause (a) of sub-section (5) of  section 6 and clause (a) and sub-section (6)  of section (7) of the Territorial Waters,  Continental Shelf, Exclusive Economic Zones  and Other Maritime Zones Act, 1976 (80 of

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1976), the Central Government hereby declares  the areas in the continental shelf or, as the  case may be, in the exclusive economic zone  of India where the installations, structures  and platforms, the coordinates of which are  given in the Schedule below, are situate and  the areas extending upto five hundred metres  from the said installations structures and  platforms as designated areas for the  purposes of the said sections.\024

31. As per notification No. 11/87-CUSTOMS dated 14.01.1987, the  provisions of Customs Act were extended to areas in the  Continental Shelf and the Exclusive Economic Zones of India. The  text of the notification is as under: -

\023GSR 30(E)-In exercise of powers conferred by  Clause (a) of sub-section (6) of section 6  and clause (a) of sub-section (7) of section  7 of the Territorial Waters, Continental  Shelf, Exclusive Economic Zone and other  Maritime Zones Act, 1976 (80 of 1976), the  Central Government hereby extends the Customs  Act, 1962 (52 of 1962) and the Customs Tariff  Act, 1975 (51 of 1975) to the designated  areas in the Continental Shelf and the  Exclusive Economic Zone of India as declared  by the Notification of the Government of  India in the Ministry Ministry of External  Affairs number S.O. 429(E) dated 18th July,  1986, with effect from 15th day of January,  1987.\024

32.     The text of notification no. S.O. 643 (E) dated 19.09.1996  is as under: - \023S.O. 643(E)- In exercise of the powers  conferred by clause (a) of sub-section (5) of  section 6 and clause (a) of sub-section (6)  of section 7 of the Territorial Waters,  Continent Shelf, Exclusive Economic Zone and  Other Maritime Zones Act, 1976 (80 of 1976),  the Central Government hereby declares the  areas in the continental shelf or, as the  case may be, in the exclusive zone of India  where the installations, structures and  platforms, the coordinates of which are given  in the Schedule below, are situated and the  areas extending upto five hundred metres from  the said installations, structures and  platforms as designated areas for the  purposes of the said sections.\024

33.     The fourth notification number S.O. 189(E) was issued on  11.02.2002, after the filing of the Writ Petition in the High  Court but before rendering of the Judgment. The same reads as  under: -

\023S.O. 189(E), in exercise of the powers  conferred by clause (a) of sub-section (5) of  section 6 and clause (a) of sub-section (6)  of section 7 of the territorial waters,  Continental Shelf, Exclusive Economic Zone  and Other Maritime Zones Act, 1976 (80 of  1976), the Central Government hereby extends  the Customs Act, 1962 (52 of 1962) and

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Customs Tariff Act 1975 (51 of 1975) to the  continental shelf of India and the exclusive  economic zone of India with effect from the  date of publication of this notification in  the Official Gazette for the following  purpose namely              \023 a       the prospecting for extraction of production of  mineral oils in the continent shelf of India or the  exclusive economic zone of India and

a       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). Explanation: For the purposes of this  notification \023mineral oils\024 include petroleum  and natural gas.\024

INTERNATIONAL COVENANTS AND PROVISIONS THEREOF          34.     In the Eleventh Session, on 30.04.1982, Conference adopted  the draft Convention on the Law of Sea by the overwhelming  majority of 159 States. The Convention on the Law of Sea known as  United National Convention on the Law of Sea, 1982 (for short,  \023UNCLOS, 1982\024) has 320 Articles. They are divided into seventeen  parts and nine annexures. It lays down rules for all parts and  virtually all users of seas and oceans. The relevant clauses  thereof are as under:- \023Article 2 \026 Legal status of the territorial  sea, of the air space over the territorial  sea and of its bed and subsoil:- 1.      The sovereignty of a coastal State  extends, beyond its land territory and  internal waters and, in the case of an  archipelagic State, its archipelagic  waters, to an adjacent belt of sea,  described as the territorial sea. 2.      This sovereignty extends to the air space  over the territorial sea as well as to  its bed and subsoil. 3.      The sovereignty over the territorial sea  is exercised subject to this Convention  and to other rules of international law.

Article 3. Breadth of the territorial sea: - Every State has the right to establish the  breadth of its territorial sea up to a limit  not exceeding 12 nautical miles, measured  from baselines determined in accordance with  this Convention.

Article 33. Contiguous Zone: - 1.      In a zone contiguous to its territorial  sea, described as the contiguous zone,  the coastal State may exercise the  control necessary to: (a) prevent  infringement of its customs, fiscal,  immigration or sanitary laws and

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regulations within its territory or  territorial sea; (b) punish infringement  of the above laws and regulations  committed within its territory or  territorial sea. 2.      The contiguous zone may not extend   beyond 24 nautical miles from the  baselines from which the breadth of the  territorial sea is measured.

Article 55. Specific legal regime of the  exclusive economic zone: - The exclusive economic zone is an area beyond  and adjacent to the territorial sea, subject  to the specific legal regime established in  this Part, under which the rights and  jurisdiction of the coastal State and the  rights and freedoms of other States are  governed by the relevant provisions of this  Convention.

Article 56. Rights, jurisdiction and duties  of the coastal State in the exclusive  economic zone: - 1.      In the exclusive economic zone, the  coastal State has: (a) sovereign rights  for the purposes of exploring and  exploiting, conserving and managing the  natural resources, whether living or non- living, of the waters superjacent to the  sea-bed and of the sea-bed and its  subsoil, and with regard to other  activities for the economic exploitation  and exploration of the zone, such as the  production of energy from the water,  currents and winds; (b) jurisdiction as  provided for in the relevant provisions  of this Convention with regard to: (i)  the establishment and use of artificial  islands, installations and structures;  (ii) marine scientific research; (iii)  the protection and preservation of the  marine environment; (c) other rights and  duties provided for in this Convention. 2.      In exercising its rights and performing  its duties under this Convention in the  exclusive economic zone, the coastal  State shall have due regard to the rights  and duties of other States and shall act  in a manner compatible with the  provisions of this Convention. 3.      The rights set out in this article with  respect to the sea-bed and subsoil shall  be exercised in accordance with Part VI.

Article 57 \026 Breadth of the exclusive  economic zone. The exclusive economic zone shall not extend  beyond 200 nautical miles from the baselines  from which the breadth of the territorial sea  is measured.

Article 127 \026 Customs duties, taxes and other  charges:- 1.      Traffic in transit shall not be subject to

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any customs duties, taxes or other charges  except charges levied for specific  services rendered in connection with such  traffic. 2.      Means of transport in transit and other  facilities provided for and used by land- locked States shall not be subject to  taxes or charges higher than those levied  for the use of means of transport of the  transit State.\024

CONTENTIONS ON BEHALF OF THE APPELLANTS

35.     In the Jindal Drilling & Industries Ltd. & Anr. v. Union of  India & Ors. (Civil Appeal No. 6148/2002) and Aban Loyd Chiles   Offshore Ltd. & Anr. v. Union of India & Ors.  (Civil Appeal No.  2236/2002), the subject vessels are oil rigs. In the case of  Great Eastern Shipping Co. Ltd. & Anr. v. Union of India & Ors.  (Civil Appeal No. 4444/2006), the subject vessel is a barge. Oil  rigs are vessels and the barge is also a vessel. Counsel for the  Appellants contends that the Appellants\022 oil rigs answer the  description of a \023foreign going vessel\024 under the Customs Act.  The issue whether oil rigs are vessels was considered in detail  by the Division Bench of the Bombay High Court in Amership  Management case (supra) and this Judgment attained finality  inasmuch as it has not been challenged before this Court. That it  was held in Amership Management case (supra) that oil rigs were  vessels and were entitled to transshipment of stores, without  payment of customs duty, in view of the exemptions contained in  Section 86(2) read with Section 87 and Section 2(21) of the  Customs Act.

36.     In Pride Foramer\022s case (supra), the Bombay High Court  proceeded on the basis that the oil rig was a vessel. It was not  the case of the Department that the exemption is being denied on  the ground that the oil rigs/barge are not vessels. Rather, the  finding of the High Court was that they are not \023foreign going  vessels\024 because the continental shelf and exclusive economic  zones are parts of India in view of the provisions of Sections  6(6) and 7(7) of the Maritime Zones Act, 1976 and for the  purposes thereof and pursuant to notifications issued on  18.07.1986, 14.01.1987 and 19.09.1996. The provisions of the  Customs Act were extended to contiguous zones, continental shelf  and exclusive economic zones, consequently, the oil rigs  proceeding to such areas or operating therein are not foreign  going vessels under Section 2(21) of the Customs Act.

37.     According to the Learned Counsel, the reasoning of the High  Court in Pride Foramer\022s case (supra) following which the present  case has been decided, is based on the incorrect premise.  According to him, this reasoning completely ignores the inclusive  part of the definition contained in Section 2(21). The  requirement of unloading/loading outside India is absent in sub- clause (ii) of Section 2(21).

38.     It is contended by him that the Appellants\022 are entitled to  the benefit of the exemption under Section 86(2) read with  Section 87 of the Customs Act, 1962 with regard to \023stores\024  consumed on the oil rigs. Elaborating further, it was submitted  that Chapter XI of the Customs Act, 1962 contains \021Special  provisions regarding baggage, goods imported or exported by post  and stores\022. The expression \023stores\024 is defined in Section 2(38).

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The goods imported by the Appellants are \021stores\022. Section 87  contains statutory exemption with respect to the transshipment of  stores. According to him, in order to claim the benefit of the  exemption under Section 87 of the Customs Act, the following  conditions must be fulfilled: -

a)      The imported goods must be stores; b)      The stores must be consumed on a vessel or aircraft; c)      The vessel or the aircraft must be a foreign-going vessel or  aircraft; and  d)      The stores must be consumed during the period such vessel or  aircraft is a foreign-going vessel or aircraft.

39.     Where these conditions are fulfilled, a person is entitled  to consume the stores without payment of duty. In addition, under  Section 86(2), a person is entitled to transship stores to a  foreign-going vessel or aircraft, with the permission of the  proper officer. That in the present case, each and every  requirement of Section 86(2) read with Section 87 has been  fulfilled by the Appellants. The Respondents have failed to point  out a single missing ingredient. In the circumstances, the proper  officer/Respondents were duty bound under law to permit the  transshipment of stores without insisting upon the payment of  customs duty. On a strict construction of the plain language used  under the Customs Act, the Appellants were and are entitled to  the benefit of Section 86(2) read with Section 87.

40.     It is further contended that the provisions of the Maritime  Zones Act, 1976 do not impinge on the Appellant\022s entitlement to  the exemption under Section 86(2) read with Section 87 of the  Customs Act. The levy of customs duty on the goods imported into,  or exported from, India is provided for under Section 12 of the  Customs Act, 1962. Section 12 is the charging Section which  provides-       \023Except as otherwise provided in this Act\005duties  of customs shall be levied\005on goods imported into, or exported,  from India\024. The significance of the opening words of Section 12  is that where a provision of the Customs Act exempts the payment  of duty, no duty would be leviable even when goods are imported  or exported. In the present case, there is no levy of customs  duty on the imported stores since the statute itself in Sections  86(2) and 87 makes a specific provision for an exemption. In the  light of the statutory exemption contained in Section 86(2) read  with Section 87, no duty is chargeable from the Appellants with  respect to stores consumed on foreign going vessels. Taking the  argument further, it was submitted that it is settled law that  the import of goods into India commences when the goods cross  into the territorial waters of India and completes when the goods  become part of the mass of goods in the country. The taxable  event is reached at the time when the goods reach the custom  barrier and the bill of entry for home consumption is filed. The  taxable event does not occur on the date when the goods enter the  territorial waters or the goods land in India. The taxable event  occurs when the goods cross the customs barrier. With respect to  the export of goods, the export is complete when a ship moves out  of the territorial waters of India. This is so even where the  goods do not land in any place outside India. According to him,  for the purposes of ascertaining whether there is an import or an  export, the demarcating line is the territorial waters of India.  A fundamental rule for ascertaining whether there has been an  import or export of goods is to determine whether the goods have  crossed into the territorial waters (for the purposes of import)  or whether they have moved out of the territorial waters (for the  purposes of export). 41.     That the Maritime Zones Act, 1976 defines territorial waters  of India, contiguous zone of India, continental shelf of India,

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exclusive Economic Zones of India, etc. Each of these concepts is  distinct from one another and is carefully defined so as to  eliminate any confusion of one concept with any other concept.  Parliament recognizes the distinction and maintains the  distinction in the Customs Act, 1962 as well. For instance,  whereas \023territorial waters of India\024 is used in Sections 2(21)  and 2(27), the expression \023contiguous zone of India\024 is used in  Section 2(28) of the Customs Act.

42.     It is further contended that it is a settled principle of  law that where a power is given to do a certain thing in a  certain way, the thing must be done in that way or not at all.  Other methods of performance are necessarily forbidden. The  extent of territorial waters is prescribed under Section 3(2) of  the Maritime Zones Act, 1976 as 12 nautical miles from the  nearest point of appropriate baseline. Same can be extended only  in the manner prescribed under Sections 3(3) and 3(4) of the  Maritime Zones Act, 1976. Notifications issued under Sections  6(6) and 7(7) of the Maritime Zones Act, 1976 do not extend the  limits of the territorial waters of India. The State or its  Executive cannot interfere with the rights of others unless they  can point to some specific provision of law which authorizes  their act. Applying this principle to the present case, unless  the Respondents can point to a specific provision of law  authorizing the non-availability of the exemption under Sections  86(2) and 87 of the Customs Act, 1962, the actions of the  Respondents would be unconstitutional and ultra vires. In the  context of a taxing statute, such actions would amount to a  transgression of Article 265 of the Constitution of India.

43.     According to the learned Senior Counsel for the Appellants,  the provisions of the Maritime Zones Act, 1976 do not adversely  affect the Appellants\022 case. It was argued that the \023territorial  waters of India\024 are a definite concept. The \023territorial waters\024  are expressly defined under the Maritime Zones Act, 1976 to  extend to 12 nautical miles from the shore. In view of Sections  3(3) and (4), the 12 nautical mile limit of territorial waters  cannot be extended except by a notification in the Official  Gazette. Such a notification may not be issued unless resolutions  approving the issue are passed by both the Houses of Parliament.  Moreover, the Central Government must have regard to  international law and State practice before altering the limit of  the territorial waters. It is undisputed that during the relevant  period or even upto this day, the limit of territorial waters  which is 12 nautical miles has not been extended. The 12 nautical  mile limit as provided by India for its territorial waters is  consistent with international law, specifically Article 3 of  Section 2 of Part II of UNCLOS, 1982 which expressly provides  that the breadth of territorial area shall not exceed 12 nautical  miles.

44.     It was contended that admittedly, the oil rigs are vessels  and are carrying on operations more than 12 nautical miles from  the shore of India.  Hence, the oil rigs clearly answer the  definition of a \023foreign going vessel\024 carrying on operations  outside the territorial waters of India, as defined under Section  2(21) of the Customs Act. It would be impermissible to read any  words into the definition of \023a foreign going vessel\024 or to  substitute the words \023territorial waters of India\024 with any other  words. The effect of the High Court Judgment and the Respondent\022s  submissions is to substitute the words \023territorial waters of  India\024 with the words \023territory of India\024/ \023continental shelf of  India\024/\023India\024 in sub-clause (ii) of Section 2(21). Such an  exercise is impressible in law, particularly, in the case of a  fiscal State. The subject vessels are foreign going vessels and

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fall within the plain language and meaning of the definition in  Section 2(21) of the Customs Act.

45.     That since, there has been no change in the definition of  the expression \023foreign-going vessel\024 in the Customs Act, and  this definition continues to utilize the expression \023outside the  territorial waters of India\024, the mere fact that the provisions  of the Customs Act have been extended to the continental shelf  and exclusive economic zone makes no difference to the  Appellants\022 entitlement for exemption from payment of duty. The  mere applicability of the provisions of the Customs Act, 1962 to  the continental shelf and exclusive economic zone does not mean  that the continental shelf and exclusive economic zone become a  part of the territory of India. It only means that the provisions  of Customs Act including the exemptions contained in Section  86(2) read with Section 87 and Section 2(21), would apply. The  Appellants do not dispute that the Customs Act is applicable to  the continental shelf and the exclusive economic zone. Indeed,  the Appellants are seeking to avail of the benefit of the  exemptions contained in Section 86(2) read with Section 87 and  Section 2(21). The notification issued under the Maritime Zones  Act, 1976, extending the operation of the Customs Act to the  continental shelf and the exclusive economic zone does not  militate against the Appellants enjoying the benefits of these  provisions. That it was open to the Central Government under  Sections 6(6) and 7(7) of the Maritime Zones Act, 1976, to extend  the Customs Act to the continental shelf and exclusive economic  zone with such restrictions and modifications as it thinks fit.  For instance, the Central Government could have excluded the  applicability of the provisions of Sections 86(2) and 87 to the  continental shelf and exclusive economic zone. However, the  Customs Act has been extended to the continental shelf and  exclusive economic zone without any restrictions or  modifications. Hence, all provisions of the Customs Act,  including the exemptions contained in Sections 86(2) and 87 read  with Section 2(21), fully apply.  

46.     It is further submitted that the very fact that the Customs  Act was made applicable to the continental shelf and the  exclusive economic zone itself demonstrates that the continental  shelf and the exclusive economic zone do not, and in fact cannot,  form part of the territory of India. If the continental shelf and  the exclusive economic zone were part of the territory of India,  the Customs Act would per se be applicable and there was no need  to extend the Customs Act, by a notification under the Maritime  Zones Act, 1976.

47.     That none of the notifications issued under the provisions  of Sections 6(6) and 7(7) of the Maritime Zones Act, 1976  purports to extend the limits of the territorial waters. The  territorial waters limit remains at 12 nautical miles and the  limited sovereignty which can be exercised therein \026 for the  purposes of exploration and exploitation of resources \026 does not  result in the definition or meaning of territorial waters of  India or foreign going vessel being changed. According to him,  the Appellants\022 vessels would continue to be entitled to be  classified as such and claim exemptions contained in the Customs  Act as a consequence thereof.

48.     That there is a clear distinction between the concept of (i)  the territory of India and (ii) the deeming provisions regarding  the extension of an enactment to designated areas and such areas  being deemed to be a territory of India for the purposes of  extension of law. In the former case, the territory of India is  circumscribed by Article 1(3) of the Constitution. The designated

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areas are not the territory of India and do not fall under any of  the clauses of Article 1(3). Apart from the Constitution not  treating the designated areas as a part of the territory of  India, such a notion would also run counter to India\022s  international obligations under UNCLOS, 1982. UNCLOS, 1982 does  not contain any provision which enables a party State to assert  full sovereignty over the continental shelf or the exclusive  economic zone as being part of the territory of that State. The  right to exclusively exploit and enjoy resources in an area is  very different from an area being the territory of the State. If  the continental shelf and the exclusive economic zone are treated  as being a territory of India, it would amount to annexation of  international waters/territory into the territory of India. This  would have wide international ramifications and would be contrary  to the principles of international law.

CONTENTIONS ON BEHALF OF THE RESPONDENTS

49.     Learned Senior Counsel Shri V. Shekhar, appearing for the  Union of India submitted that the oil rig is stationed at a  designated area in the continental shelf/exclusive economic zone.  The designated area is within the territorial limits of the  Coastal State (country).  The maritime limit of the Coastal State  would include territorial waters, continental shelf and exclusive  economic zone, as recognized under the International Convention  on the Law of the Sea including rights, exclusive jurisdiction  and duties of the Coastal State with regard to the customs,  fiscal, safety, health, immigration laws and regulations. For  this, he made a reference to Articles 56, 60, 77, 80 of the  UNCLOS, 1982. It is submitted that pursuant to such recognition  of the territorial limit in the Comity of Nations, the Costal  States have the power to legislate or take such appropriate  measures to exercise its sovereign power over that territorial  limit.  It is further contended that Maritime Zones Act, 1976 was  enacted in pursuance to such recognition. Notifications were also  issued pursuant to such recognition and the Customs Act and the  Customs Tariff Act were extended to the designated area of the  continental shelf and exclusive economic zone. There is no  challenge to the Maritime Zones Act, 1976 the various  notifications issued declaring designated areas as well as  extending the Customs Act as being ultra vires or that its  provisions are contrary to the provisions of other enactments.

50.     The Coastal State has \023sovereignty\024 over \023territorial  waters\024. But it has only sovereign rights over the continental  shelf and the exclusive economic zone.

51.     The Customs Act extends to the whole of India and not simply  to the territorial waters of India. Customs Act has no provision  permitting determination of the maritime limit. For this purpose,  one has to revert to the Maritime Zones Act, 1976. Hence,  reference to the Maritime Zones Act, 1976 is inevitable, while  considering any issue relating to maritime issues at that time.          That Section 2(21) of the Customs Act cannot be read in  isolation. The entire scheme of the Customs Act and other Acts  which are in pari-materia have to be read together.

52.     It was submitted that the Appellants\022 vessel may be a  foreign going vessel, and may be carrying its operations outside  the territorial waters (the term as understood under Section 3 of  the Maritime Zones Act, 1976). Nevertheless, for all purposes, it  is within the limit where the Coastal State has a sovereign right  or power to enact or extend any law, and the exemption to a  foreign going vessel will not be available under Sections 86 and  87 of the Customs Act.

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53.     Refuting the submissions advanced on behalf of the  Appellants, it was submitted that the limit of the territorial  waters is not extended. It is only the extension of the sovereign  power over an area which is recognized as the maritime limit of  the Coastal State which was being exercised.

54.     That it has been clarified that India\022s jurisdiction under  the Maritime Zones Act, 1976 extends to the continental shelf and  exclusive economic zone. Consequently, if mineral oil is  extracted or produced in the exclusive economic zone or  continental shelf and is brought to the main land, it will not be  treated as import and, therefore, no customs duty would be  leviable. Likewise, goods supplied to a place in exclusive  economic zone or continental shelf will not be treated as export  under the Customs Act and no export benefit can be availed on  such supply. Any mineral oil produced in the exclusive economic  zone or continental shelf will be chargeable to Central Excise  duty, as goods produced in India. For this, learned Senior  Counsel for the Respondents relied on Circular No. 17/2002 Cus.  dated 13.3.2002 [ 2002 (141) ELT T10] and MF (DR) Circular No.  22/2002 Cus. dated  23.04.2002 [2002 (142) ELT T20].

55.     It is further contented that what is required to be seen is  not whether it is a foreign going vessel or it has moved out of  the territorial waters (Section 2(21) of the Customs Act/Section  3 of the Maritime Zones Act, 1976), but to find whether it is  within the maritime boundary/Customs Act which stand extended.  Anything loaded or unloaded within that boundary would mean there  is an import or export as contemplated under the Customs Act.

56.     That it would be incorrect to contend that the oil rigs  installed by the Appellants answer the description \023foreign going  vessel\024. A vessel may be a foreign going vessel but if the oil  rig is situated in an area which is within the limits to which  the Customs Act applies or extends and if any \021store\022 is consumed  at a site within the area to which the Customs Act applies, then  one cannot take the aid of Section 2(21) of the Customs Act to  take the benefit under Sections 86 and 87 of the same Act.

57.     The fact that even if the oil rig is accepted as a vessel  which carries on its operation in an area over which coastal  State exercises limited sovereign rights and to which the Indian  Customs Act applies, then, the customs duty would be leviable on  the stores consumed on the vessel.   

58.     That there is neither an ambiguity nor the interpretation of  the Court in Pride Foramer\022s case (supra) would result in absurd  situation. The Appellant wants the Court to read Section 2(21) of  the Customs Act in isolation, which is not the correct approach.  There is neither any substitution nor any attempt to read any  provision of the Customs Act in a manner contrary to the intent  and purport of the Act. The fact remains that even if it is a  foreign going vessel, the stores are unloaded and consumed within  the maritime boundary or within the limit of Customs Act, Section  12 will be attracted as it would be construed that there has been  an import within the territory of India to which the Customs Act  applies.  

59.     Refuting the contention of the Appellants that an attempt is  being made to substitute the phrase appearing in the Customs Act  contrary to its intention, it is submitted, has no basis. What

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the Appellants want is that for the present adjudication or  cause, the Court should not look beyond Sections 2(21), 86 and 87  of the Customs Act and that it should not look into the other  Acts. This may not be the right approach as it would undermine  the power of the Parliament and the provisions of the Maritime  Zones Act, 1976 would be rendered meaningless.

       FINDINGS

60.     The Customs Act is an Act to consolidate and amend the law  relating to customs. In order to appreciate the contentions  raised, it is necessary to refer to several steps required to be  taken under the Customs Act for levy of duty on goods imported  into India. Chapter V of the Customs Act deals with levy of and  exemption from customs duty. Section 12 is the charging Section.  Under this Section, all the goods imported into India or exported  from India are liable to customs duty unless the Customs Act  itself or any other law for the time being in force provides  otherwise. The goods imported are required to be valued under  Section 14 and duty payable is required to be determined  according to the rates specified under Section 15 of the Customs  Act or any other law for the time being in force. Although before  the High Court, the Appellant had claimed the exemption from  payment of duty under Section 53 read with Section 54 of the  Customs Act, but the same was not pressed into service before us,  in our view, rightly because Section 52 in Chapter VIII  specifically provides that the provisions of Chapter VIII shall  not apply to (a) baggage, (b) goods imported by posts and (c)  stores. Admittedly, the goods imported by the Appellant are  stores for use in a vessel or aircraft falling within the  definition of \023stores\024 in Section 2(38).

61.     The only argument pressed before us is that the goods would  be exempted from payment of duty in terms of the provisions of  Chapter XI which contains the special provisions regarding (a)  baggage, (b) goods imported or exported by posts and (c) stores.  Section 85 in Chapter XI provides that where the imported goods  are entered for warehousing and the importer subscribes to a  declaration that the goods are to be supplied as stores to a  vessel or aircraft without payment of duty under Chapter XI,  then, the proper officer may permit the goods to be warehoused  without the goods being assessed to duty. Section 86(1) provides  that stores imported in a vessel or aircraft, may, without  payment of duty, remain on board of such vessel or aircraft while  it is in India. Section 86(2) inter alia provides that any stores  imported in a vessel or aircraft may, with the permission of the  proper officer, be transferred to any vessel or aircraft as  stores for consumption therein as provided in Section 87, which  inter alia provides that imported stores may, without payment of  duty be consumed on the vessel as stores during the period such  vessel is a foreign going vessel.          62.     Applicability of Section 86 read with Section 87 depends  upon the answer to the question: \023Whether the oil rig operating  in the designated area is a foreign going vessel? Thus, entire  issue centers around the interpretation of Section 2(21) of the  Customs Act, which defines the \023foreign going vessel\024 to mean any  vessel engaged in the carriage of goods or passengers between any  port in India and any port outside India whether adjoining any  intermediate port or airport in India or not and it amongst  others also includes vessel engaged in fishing or any other  operations outside territorial waters of India, or, any vessel  proceeding to a place outside India for any purpose whatsoever.  

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63.     Contention advanced on behalf of the Appellant is that the  oil rigs which are located in the exclusive economic zones and  are beyond the territorial waters of India, would fall outside  the territory of India and, therefore, the stores consumed on the  oil rigs would be deemed to have been consumed by a foreign going  vessel.  

64.     Section 2 which is a definition Section, opens with the  qualifying words \023unless the context otherwise requires\024 which  shall mean or include all things or situations and it shall not  be open to the Court to give any other meaning to those words  except when the context otherwise requires. In this background,  we have to examine the meaning of the word \023India\024 in the light  of the provisions of law, i.e., keeping in view the provisions of  Customs Act read with Maritime Zones Act, 1976 as the provisions  thereof are applicable to the facts of the present case. Under  Section 2(27), \023India\024 includes the territorial waters of India.  Under the General Clauses Act, \023India\024 is defined to mean all  territories for the time being comprised in the territory of  India as defined in the Constitution of India. Article 1(3) of  the Constitution of India states that the territory of India  shall comprise of States and Union Territories and such other  territories as may be acquired. There is no reference to  territorial waters in Article 1 of the Constitution. In other  words, \023India\024 commonly understood is the geographical entry  comprising only of the land mass. For certain purposes, the  country referred to as \023India\024 may extend into the sea upto the  limit of \023territorial waters\024 or \023contiguous zone\024 or  \023continental shelf\024 or \023exclusive economic zone\024 or \023other  maritime zones\024.

65.     Under the provisions of Article 297 of the Constitution of  India, all lands, minerals and other things of value underlying  the ocean within the territorial waters or the continental shelf  or the exclusive economic zone of India vest in the Union. The  Constitution of India does not itself define the terms  \023territorial waters\024, \023continental shelf\024, and \023exclusive  economic zone\024. Clause  (3) of Article 297 states that their  limits shall be such as may be specified by Parliament. In 1976,  Parliament implemented the amendments to the Constitution of  India by passing the Maritime Zones Act, 1976.

66.     Section 3 of the Maritime Zones Act, 1976 provides that the  sovereignty of India extends and has always extended to the  territorial waters of India and to the seabed and subsoil  underlying, and the air space over such waters. The limit of  territorial waters extends to 12 nautical miles from the nearest  point of low tide along with the base line of India.  Section  3(2) states that the sovereignty of India extends and has always  extended to the territorial waters of India. Section 4 makes the  position clear further as to the use of its territorial waters by  foreign ships, i.e., all foreign ships (other than warships  including sub-marine and under water vehicles) shall enjoy the  right of innocent passage through the territorial waters which in  turn means, the passage will be innocent so long as it is not  prejudicial to the peace, good order or security of India.  Section 5 defines the contiguous zone of India as that part of  the sea which is beyond and adjacent to the territorial waters  and the zone extends to a line which is 24 nautical miles of the  coast. This Section specifically recognizes the competence of the  Central Government to exercise such powers and take such measures  as to consider necessary with respect (a) the security of India,  and (b) immigration, sanitation, customs and other fiscal  matters. Under Section 6(1) of the said Act, the continental  shelf of India extends to a distance of 200 nautical miles from

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the baseline referred to in sub-section (2) of Section 3 where  the outer edge of the continental margin does not extend upto  that distance. Section 6(2) provides that India has and always  had full and exclusive sovereign rights in respect of continental  shelf. Section 6(5) reserves the right with the Central  Government to declare any area of the continental shelf and its  superjacent waters to be a designated area by issuing a  notification and make such provision as it may deem fit with  respect to - (a) the exploration, exploitation and protection of  the resources of the continental shelf within such designated  area; or (b) the safety and protection of artificial islands, of  shore terminals, installations and other structures and devices  in such designated area; or (c) the protection of marine  environment of such designated area; or (d) customs, and other  fiscal matters in relation to such designated area. Section 6(6)  enables the Central Government by notification in the Official  Gazette to extend, with such restrictions and modifications as it  thinks fit, any enactment for the time being in force in India or  any part thereof to the continental shelf or any part [including  any designated area under sub-section (5)] thereof; and to make  such provisions as it may consider necessary for facilitating the  enforcement of such enactment. It, however, provides that any  enactment so extended shall have effect as if the continental  shelf or the part [including, as the case may be, any designated  area under sub-section (5)] thereof to which it has been extended  is a part of the territory of India.         67.     Section 7(1) describes the exclusive economic zone of India  as an area beyond and adjacent to the territorial waters, and the  limit of such zone is 200 (two hundred) nautical miles from the  baseline referred to in sub-section (2) of Section 3. Under sub- section 7 of Section 7, the Central Government may by  notification in the Official Gazette extend, with such  restrictions and modifications as it thinks fit, any enactment  for the time being in force in India or any part thereof in the  exclusive economic zone or any part thereof.        68.     A combined reading of Sections 3, 6 and 7 of the Maritime  Zones Act, 1976 shows that territorial waters, the seabed and  subsoil underlying therein and the air space over such  territorial waters form part of the territory of India.  Sovereignty of India extends over the territorial waters but the  position is different in the case of continental shelf and  exclusive economic zone of India. The continental shelf of India  comprises of the seabed beyond the territorial waters to a  distance of 200 nautical miles. The exclusive economic zone  represents the sea or waters over that continental shelf. From  the reading of Sections 6 and 7 of the Maritime Zones Act, 1976,  it is clear that in respect of the continental shelf and  exclusive economic zone, India has been given only certain  limited sovereign rights and such limited sovereign rights  conferred on India in respect of continental and exclusive  economic zone cannot be equated to extending the sovereignty of  India over the continental shelf and exclusive economic zone as  in the case of territorial waters.  Sub-section (6) of section 6  and sub-section (7) of Section 7 of the Maritime Zones Act, 1976  empower the Central Government by notification to extend any  enactment in force in India with such restrictions and  modifications which it thinks fit to the continental shelf and  the exclusive economic zone and further provides that an  enactment so extended shall have effect as if the continental  shelf or the exclusive economic zone to which the enactment has  been extended is a part of the territory of India. Thus, sub- section (6) of Section 6 and sub-section (7) of Section 7 create  a fiction by which the continental shelf and the exclusive

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economic zone deemed to be a part of India for the purposes of  such enactments which are extended to those areas by the Central  Government by issuing a notification.        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 the Maritime 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.        70.     It may be noted that Indian position is consistent with the  mandate of international law United Nations Convention on the Law  of Sea, 1982 (UNCLOS, 1982) dated 07.10.1982 which has been  signed by India as a member of the United Nations. Under UNCLOS,  1982, the territorial sovereignty of the coastal State extends  beyond the land territory only upto the outer limits of the  territorial sea which is equivalent to the expression in the  Maritime Zones Act, 1976. \023Territorial waters\024 extends upto 12  nautical miles from the low water mark line of the coast (base  line) which is consistent with the UNCLOS, 1982. Under sub- section (28) of Section 2, \023Indian customs water\024 extends seaward  up to the limit of the contiguous zone, namely, a jurisdictional  zone adjoining the territorial sea and encompassing the stretch  of sea waters upto a distance of 12 nautical miles beyond the  territorial waters (which means 24 nautical miles from  appropriate baseline). The coastal State has no sovereignty in  territorial sense of dominium over the contiguous zone, but it  exercises sovereign rights for the purpose of exploring the  continental shelf and exploiting its natural resources. It has  jurisdiction to enforce its fiscal, revenue and penal laws by  intercepting vessels engaged in suspected smuggling or the other  illegal activities attributable to a violation of the above laws  or the existing laws. Undoubtedly, the waters which extends  beyond the contiguous zone are traditionally the domain of the  high seas or open sea which have, juristically speaking, the  status of international waters where all States enjoy traditional  high seas freedoms including freedom of navigation.  The coastal  States can exercise their right of search, seizure or  confiscation of vessel for violation of its customs or fiscal or  penal laws in the contiguous zone but it cannot exercise these  rights once the delinquent vessel enters the high seas. It has no  right of hot pursuit except where the vessel is engaged in  piratical acts which are liable for arrest and condemnation  within the sea for the jurisdiction over piracy since historical  times has been recognized as universal in international law and  any State may exercise that jurisdiction over a pirate  irrespective of the usual considerations of territoriality which  limit the penal jurisdiction.  

71.     With the adoption of UNCLOS, 1982, the legal incidents of  the high seas have been partly modified. UNCLOS, 1982 is a  comprehensive code on the international law of sea. It codifies  and consolidates the traditional law within a single, unificatory  legal framework. It has changed the legal concept of continental  shelf and also introduced a new maritime zone known as exclusive  economic zone. Exclusive economic zone is a new concept having  several new features. What is significant for our purpose is that  the coastal State has in its zone only sovereign rights of  exploitation of the resources and not sovereignty in the sense of  territoriality or dominium. Exclusiveness attaches to resources  exploitation only but does not incorporate the ownership of title  of the coastal State.

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72.     It is a concept of restricted sovereignty linked to the  resources sense sans the incidents of territoriality. This is so  because, in other respects, the status of the waters in this area  as a part of the high seas is specifically recognized and  retained in the Convention.  

73.     In the exclusive economic zone, the coastal State has  exclusive right to exploit for economic purposes like  constructing artificial islands or other platforms or drilling  rigs for oil and mineral exploration and other purposes like  fishing, scientific research, etc but the same is subject to the  navigation and over-freight rights of non-coastal States.  

74.     The oil rig is deemed to be stationed at a designated area  in the continental shelf/exclusive economic zone. The designated  area is within the territorial limits of the coastal State. The  maritime limit of the coastal State would include territorial  waters, continental shelf and exclusive economic zone, as  recognized under the International Convention on the Law of the  Sea including rights, exclusive jurisdiction and duties of the  coastal State with regard to customs, fiscal safety, health,  immigration laws and regulations [See Articles 56, 60, 77, 80 of  the United Nation\022s Convention on the Law of the Sea, 1982  (UNCLOS, 1982)].

75.     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 the Maritime 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 has \023sovereignty\024 over \023territorial waters\024 but  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 to the territorial waters of India. Customs  Act does not contain any provision permitting determination of  the maritime limits. For this purpose, one has to revert to the  Maritime Zones Act, 1976. Hence, reference to the Maritime Zones  Act, 1976 is inevitable while considering any issue relating to  maritime issues.

76.     Appellants may be carrying on its operation outside the  territorial waters, as understood under Section 3 of the Maritime  Zones Act, 1976. Nevertheless, for all purposes, it is within the  limit where the coastal State has a sovereign right or power to  enact or extend any law, and the advantage to a foreign going  vessel will not be available under Sections 86 and 87 of the  Customs Act to such vessels.  

77.     The Counsel for the Appellants may be right in contending  that the limits of the territorial waters has not been extended.  The limits of territorial waters as defined in Section 3 of the  Maritime Zones Act, 1976 has not been extended but under Sections  6 and 7 thereof, sovereign rights can be exercised by the coastal  States on a area which is recognized as the maritime limit of the  coastal State which is being exercised. Section 2(21) of the  Customs Act cannot be read in isolation. The entire scheme of the

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Customs Act and other Acts such as Maritime Zones Act, 1976 which  are in pari-materia have to be read together. Reading of Sections  6 and 7 of the Maritime Zones Act, 1976 makes it clear India\022s  jurisdiction over the Maritime Zones Act, 1976 extends to the  continental shelf and exclusive economic zone. Consequently, if  mineral oil is extracted or produced in the exclusive economic  zone or continental shelf and is brought to the main land, it  will not be treated as import and, therefore, no customs duty  would be leviable. Likewise, goods supplied to a place in the  exclusive economic zone or continental shelf will not be treated  as export under the Customs Act and no export benefit can be  availed on such supply. Any mineral oil produced in the exclusive  economic zone or continental shelf will be chargeable to Central  Excise Duty, as goods produced in India. Implication of  notification no. S.O. 189 (E) dated 07.02.2002 and its  consequences have been clarified in Circular No. 17/2002-Customs  dated 13.03.2002 [2002 (141) ELT T10] in following terms:

\0233. The implication of the said notification  is that mineral oils extracted or produced in  the EEZ and Continental Shelf of India if  brought to the mainland shall not be treated  as import and therefore, no customs duty  shall be leviable on such mineral oils.  Likewise, the goods supplied from the  mainland to a place in EEZ or Continental  Shelf of India in connection with any  activity related to mineral oil extraction or  production shall not be treated as export  under the Customs Act, 1962 and consequently,  no export benefits can be availed of on such  supplies. Another implication of the said  notification is that bringing of any goods  from any other country to any place in EEZ or  Continental Shelf of India in connection with  any activity related to extraction or  production of mineral oils shall be treated  as import under the Customs Act, 1962 and  would be charged to duty accordingly.  Further, mineral oils produced in the EEZ or  Continental Shelf of India would be deemed to  be produced in India and subject to levy of  central excise duties under the Central  Excise Act, 1944.\024

78.     Similarly, in Circular No. 22/2002 dated 23.04.2002  [2002(142) ELT T20], the said notification i.e. S.O. 189 (E) has  been clarified in para 3 as under: -  

\0233. The implication of the said notification  is that mineral oils extracted or produced in  the EEZ and Continental Shelf of India if  brought to the mainland shall not be treated  as import and therefore, no customs duty  shall be leviable on such mineral oils.  Likewise, the goods supplied from the  mainland to a place in EEZ or Continental  Shelf of India in connection with any  activity related to mineral oil extraction or  production shall not be treated as export  under the Customs Act, 1962 and consequently,  no export benefits can be availed of on such  supplies. Another implication of the said

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notification is that bringing of any goods  from any other country to any place in EEZ or  Continental Shelf of India in connection with  any activity related to extraction or  production of mineral oils shall be treated  as import under the Customs Act, 1962 and  would be charged to duty accordingly.\024

79.     It may not be correct to contend that the oil rigs installed  by the Appellants answer the description \023foreign going vessel\024.  A vessel may be a foreign going vessel but if the oil rig is  situated in the area to which the Customs Act applies or extends,  the aid of Section 2(21) of the Customs Act cannot be taken to  get the benefit under Sections 86 and 87 of the same Act. The  principle underlying under Sections 86 and 87 is that the stores  are consumed on board by a foreign going vessel. If the so-called  foreign going vessel is located within a territory over which the  coastal State has complete control and has sovereign right to  extend its fiscal laws to such an area with or without  modifications and the stores were consumed in the area to which  the Customs Act has been extended, reference or reliance to the  vessel being a foreign going vessel shall be of no consequence  and the customs duty would be leviable as the goods are consumed  within the territory to which the Customs Act has been extended  as per the Maritime Zones Act, 1976 and the International  Convention \026 UNCLOS, 1982.

80.     We do not find any ambiguity in this situation. The  interpretation given by the High Court in Pride Foramer\022s case  (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 the Maritime Zones Act, 1976.  

81.     The contention of the Appellants that an attempt is being  made to substitute the phrase appearing in the Customs Act  contrary to its intent is without any basis. What the Appellants  want is that, for the present adjudication or case, the Court  should not look beyond Sections 2(21), 86 and 87 of the Customs  Act and that it should not look into the other Acts. This may not  be the right approach as it would result in undermining the power  of the Parliament to enact laws as well as to render the  provisions of Maritime Zones Act, 1976 nugatory and meaningless.

82.     The fact that the stores are unloaded and consumed within  the maritime boundary or within the limit of Customs Act, Section  12 will be attracted as it would be construed that there would  has been an import within the territory of India to which the  Customs Act applies.  

83.     A Division Bench of Madras High Court in Commissioner of  Income Tax v. Ronald William Trikard and Others [215 ITR 638]  after considering Article 1 and Article 297 of the Constitution  of India, the provisions of the Maritime Zones Act, 1976 and the  provisions of the Income Tax Act which had been extended in the  same way as has been extended in a similar manner as the Customs  Act, came to the conclusion that the salary received by the  assesses for the services rendered in India while working on the  continental shelf/exclusive economic zone and other maritime  zones shall be liable to tax under the Income Tax Act  after the  issuance of the notifications, extended the applicability of the  Income Tax Act to the continental shelf and exclusive economic  zones. Though in the said case, it was held that the salary

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income earned by the assessee prior to 01.04.1983 could not be  charged to tax in the assessment year 1983-84 as the continental  shelf and exclusive economic zone were not part of India prior to  the issuance of the notifications by the Government of India  extending the applicability of the Income Tax Act to continental  shelf and exclusive economic zones. In the said case, the facts  were, that the assessees were employees, during the assessment  year 1983-84, of a non-resident company incorporated under the  law of Panama. The non-resident company entered into a contract  with the Oil and Natural Gas Commission of India for exploring  oil in the seas which adjoined the territories of India. The area  of operation was to be the seas above the continental shelf of  India. The assessee carried on their employment on the oil rig  operated on the seas above the continental shelf. Question arose  whether the income earned by the assessee while working on the  oil rig which was located above the continental shelf would be  exigible to the Income Tax Act, 1961. It was held that in view of  the explanation to Section 9(1)(ii) of the Income Tax Act, 1961,  read with Government of India\022s notification G.S.R. No. 304(E),  File No. 5147/F. No. 133(79)/82 TPL dated 31.03.1983, issued  under the Maritime Zones Act, 1976, the salary received by the  assessees for the services rendered in India became liable to tax  under the Income Tax Act. However, in the said case, on facts, it  was held that the salary income earned by the assessee prior to  01.04.1983 could not be charged to tax under the provisions of  the Income Tax Act, 1961 in the assessment year 1983-84 as the  operation of the notification extending the provisions of Income  Tax Act were not retrospective in nature. In substance, to the  similar effect is the Judgment of the Bombay High Court in  MCDERMOTT International Inc. v. Union of India & Others [1988  (173) ITR 155 (Bom.)].        84.     We agree with the views expressed by the Bombay High Court  in Pride Foramer\022s case (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 a  foreign going vessel 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  expression \023vessel\024 is of the widest amplitude and must be  construed to include \023oil rigs\024. It was held that since the oil  rigs are stationed beyond the territorial waters, supply of  imported \023stores\024 to 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 the  Maritime Zones Act, 1976 together with the notifications issued  pursuant thereto were not considered at all.  

85.     By notification S.O. 429 (E) dated 18.07.1986, and  notification S.O. 643 (E) dated 19.09.1996, issued under clause  (a) of sub-section (5) of Section 6 and clause (a) of sub-section  (6) of Section 7 of the Maritime Zones Act, 1976, the Ministry of  External Affairs has declared certain areas in the continental  shelf or, in the exclusive economic zone of India, where certain  installations, structures and platforms of certain coordinates  given in the Schedule are situated and the areas extending upto  500 meters from such installations, structures and platforms as  \023designated areas\024 for the purposes of Sections 6 and 7 of the  Maritime Zones Act, 1976. The Ministry of Finance (Department of  Revenue) by two corresponding notifications no. 11/87-Customs  dated 14.01.1987 and 64/97-Customs dated 01.12.1997 issued under  clause (a) of sub-section (6) of Section 6 and clause (a) of sub-

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section (7) of Section 7 of the Maritime Zones Act, 1976 have  extended the Customs Act and Customs Tariff Act to the aforesaid  designated areas in the continental shelf and the exclusive  economic zone as declared in the notifications issued by the  Ministry of External Affairs on 18.07.1986 and 19.09.1996. The  combined effect of these notifications is to extend the  application of the Customs Act and the Customs Tariff Act to the  aforesaid areas declared as \023designated areas\024 under the Maritime  Zones Act, 1976. The further effect of these notifications is  that the designated areas of the continental shelf and the  exclusive economic zone become a part of the territory of India  for limited purposes. The natural consequence of such  declarations and the extension of the Customs Act and the Customs  Tariff Act to these designated areas is to introduce the customs  regime to such areas resulting in the levy and collection of  customs duties on goods imported into these areas as if these  areas are a part of the territory of India. In these  circumstances, the definition of \023India\024 as given in Section  2(27) of the Customs Act gets extended by these provisions to  cover areas declared as designated areas beyond the territorial  waters and located the continental shelf and the exclusive  economic zone of India. If one reads the Customs Act without  reading the Maritime Zones Act, 1976, then the oil rig located in  the notified areas/designated areas constitute \023place outside  India\024. On the other hand, the very purpose of Sections 5, 6 and  7 of the Maritime Zones Act, 1976 is to declare an area of the  contiguous zone/continental shelf/exclusive economic zone as a  designated area so that exploration, exploitation and protection  of resources belonging to India could be carried out. Under the  said Act, the Central Government can create artificial island,  offshore terminals, etc. By the said Act, customs and other  fiscal enactments have been extended. Therefore, the object is  very clear that the revenue generated from exploration and  exploitation should accrue to the coastal State viz. India.  As  stated above, the area of exclusive economic zone/continental  shelf, where the oil rigs are stationed (which of course is  outside territorial waters) is deemed to be a part of the  territory of India under the Central Government notifications  issued pursuant to the provisions of the Maritime Zones Act,  1976. The supply of imported spares or goods or equipments to the  rigs by a ship will attract import duty and the ship employed for  transshipment of the goods for that purpose would not be a  foreign going vessel under Section 2(21) of the Customs Act. The  area of discharge or unloading/loading is within India by virtue  of the deeming provisions of Sections 6 and 7 of the Maritime  Zones Act, 1976. The Customs Act stands extended to the  designated areas by virtue of the Maritime Zones Act, 1976. The  oil rigs carrying on operations in the designated area is not a  foreign going vessel as the same would be deemed to be a part of  Indian territory i.e. going from the territory of India to an  area which also deemed to be part of the territory of India.        86.     As stated above, contiguous zone is that part of the sea  which is beyond and adjacent to the territorial waters of the  coastal States. The coastal States though do not exercise  sovereignty over this part of the sea, however, they are entitled  to exercise sovereign rights and take appropriate steps to  protect its revenue and like matters. The police and revenue  jurisdiction of the coastal States is extended to the contiguous  zone as well.

87. The question whether the Courts can look into the provisions  of the international treaties/conventions is no longer res  integra. This Court in Gramophone Company of India Ltd. v.  Birendra Bahadur case [(1984) 2 SCC 534] has held that even in

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the absence of  municipal law, the treaties/conventions can be  looked into and enforced if they are not in conflict with the  municipal law. It was further held that the same may not be  looked into but can also be used to interpret municipal laws so  as to bring them in consonance with international law.               88.     However, in the event where they do not run into such  conflict, the sovereignty and the integrity of the republic and  the supremacy of the constituted legislatures in making the laws  may not be subject to external rules except to the extent  legitimately accepted by the constituted legislatures themselves.  The Court held as under: - \023\005..The doctrine of incorporation also  recognises the position that the rules  of international law are incorporated  into national law and considered to be  part of the national law, unless they  are in conflict with an Act of  Parliament. Comity of Nations or no,  Municipal Law must prevail in case of  conflict. National Courts cannot say yes  if Parliament has said no to a principle  of international law. National Courts  will endorse international law but not  if it conflicts with national law.  National courts being organs of the  National State and not organs of  international law must perforce apply  national law if international law  conflicts with it. But the Courts are  under an obligation within legitimate  limits, to so interpret the Municipal  Statute as to avoid confrontation with  the comity of Nations or the well  established principles of International  law. But if conflict is inevitable, the  latter must yield.\024

89.     In Vishaka & others v. State of Rajasthan & others [(1997) 6  SCC 241], this Court considered the question as to what would be  the position in law if there was no law for effective  enforcement. It was held as under: -        \023\005.The international conventions and  norms are to be read into them in the  absence of enacted domestic law  occupying the field when there is no  inconsistency between them. It is now an  accepted rule of judicial construction  that regard must be had to international  conventions and norms for construing  domestic law when there is no  inconsistency between them\005.\024

90.     Our municipal law, i.e., Maritime Zones Act, 1976 is not in  conflict with the international law, rather the same is in  consonance with UNCLOS, 1982.

91.     Article 127 of UNCLOS, 1982 deals with customs duties, taxes  and other charges. Clause (1) provides that traffic in transit  shall not be subject to any customs duties, taxes or other

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charges except charges levied for specific services rendered in  connection with such traffic and Clause (2) provides that means  of transport in transit and other facilities provided for and  used by the land locked States shall not subject to taxes or  charges higher than those levied for the use of means of  transport of the transit State. According to this Article, where  the goods are in transit to other country shall not be subject to  any customs duties, taxes or other charges except for the charges  levied for specific services in connection with such traffic. In  other words, there is no prohibition for levying customs duties  on the goods which are not in transit for onward transmission to  any other country. If the goods are brought in only while  proceeding to other country, then no customs duty can be levied.  In all other cases, it seems to be permissible.  

92.     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 of the territorial waters of India.  

93.     For the reasons stated above, we do not find any merit in  these appeals and dismiss the same with costs.