Commissioner Of Customs vs M/s Universal Dredgers Ltd. & Anr.

Motor vessel “Darya Manthan”, carrying an American Flag, was imported to India through the Bhubanewar Customs in the year 2011. It is stated that, at the time of such importation, a Bill of Entry was presented for the stores, but not for the vessel; and consequently that the charterers - M/s Manthan Dredging Ltd. (herein after referred to as “Manthan”), did not discharge the customs duty. They explained that no customs duty was leviable on the vessel, since it was a dredger, until 2011; but concede that, subsequent to 2012, through a new notification, the aforesaid small window of period attracted such duty.

“Manthan” maintains that the normal procedure in the past was that the vessel, being exempt from customs duty, would not present a bill of Entry for itself, but only for the stores; and that this is exactly what was done in the year 2011 also. They add that the vessel originally was declared to be on Foreign Run, to be, after import, converted into Coastal Run on their application, which was allowed by the Bhubanewar Customs. They disclose that the dredger was thereupon used for dredging activities in various parts; and as part of it, in the year 2012, it entered Kochi, to be used in various parts - with it being chartered to other disponent owners, namely Universal dredgers Ltd. and Samudra Dredgers U.K.Ltd., - for dredging activities.

It transpires that the Kochi Customs issued show cause notice to “Manthan”, as also to the disponent owners afore mentioned, invoking Section 28 of the Customs Act, 1962 (“Act” for short) asking them to show cause why action be not initiated against them, for not discharging the customs duty at the point of importation.

The afore led to several grounds of litigation, including before the Customs, Excise and Service Tax Appellate Tribunal, Bangalore (CESTAT); and orders were issued by it, to be challenged through Cus.Appeal.No.s 11, 12, 13 of 2021, leading to a judgment delivered by a learned Division Bench of this Court on 11.11.2022.

Pertinently, after going through the questions of law settled by the learned Tribunal and finding them to be insufficient, the learned Division Bench set aside the orders and remitted the matter to the learned Tribunal, framing the following questions of law;

The learned Tribunal disposed of the appeals in question, finding that the importation of the vessel happened at Paradip Port, namely within the Bhubaneswar customs; consequently, holding that a levy by the Kochi Customs, through Section 28 of the Act, is not possible, but without answering question Nos.1 and 2 afore, perhaps being under the impression that it had become unnecessary.

Against the impugned orders of the learned Tribunal, the Commissioner of Customs has filed Customs Appeals Nos.3/2025, 4/2025 and 5/2025; while, Manthan Dredging and the other two disponent owners, have filed Customs Appeal Nos.7/2025, 8/2025 and 9/2025 respectively.

Sri.T. Viswanathan, instructed by Sri.Karthik.S.Nair, learned counsel appearing for “Manthan” and the disponent owners, conceded before us that his clients have filed the appeals by way of abundant caution, since the question of jurisdiction has not been considered by the learned Tribunal, in spite of specific directions from this Court. He, nevertheless, admitted that all the other issues have been found in favour of his clients and that they support the same.

Sri.P.R.Sreejith – learned Senior Panel Counsel appearing for the Commissioner of Customs, argued that the findings of the learned Tribunal on the afore extracted questions of law, framed by this Court, are in error and without proper thought, for the singular reason that the original Charterer and the disponent owners admit unreservedly and unequivocally that they did not discharge any customs duty at the time when the vessel was brought into Paradip Port in the year 2011, within the jurisdiction of the Bhubanewar Customs. He contended that, in such circumstances, when the vessel entered the territorial limits of Kochi, the Commissioner of Kochi was fully authorised to levy the applicable customs duty, invoking Section 28 of the “Act”; and consequently that the demands made on “Manthan” and the disponent owners are without error. He contended that the learned Tribunal ought to have answered all the questions framed by this Court, including qua the ambit of Section 28 of the “Act” and that it not having done so, leads to an irresistible conclusion of its orders being vitiated. He prayed that the impugned orders of the learned Tribunal be therefore, set aside; and the impugned demand notices be sustained.

The constitutive facts involved in this case are without contest.

That the vessel came into India in the year 2011 through the Paradip Port, under the control of the Bhubanewar Customs, is admitted. Further that a Bill of Entry for the vessel was not presented, but only for its stores, before the Bhubanewar Customs stands admitted.

The vital question is why the Bhubanewar Customs did not demand customs duty for the vessel from the original charterer, namely “Manthan”; and on this, revolves the answer to the controversy presented before us.

Sri.Viswanathan admitted that the reason why the Bhubanewar Customs did not demand Customs duty from his client is not known to them; and then explained that they, perhaps, did not do so thereafter because of the specific time limit in Section 28 of the “Act”, which prohibits them from demanding it after a period of six months – as it was at the relevant period, and two years as of now. He then contended that, even if any allegation, as now made against his client is tenable, the jurisdiction to invoke Section 28 of the “Act”, would be only with the Bhubaneswar Customs, and not with the Commissioner of Customs, Kochi. He read to us the provisions of Section 28 of the “Act”, to say that it takes into account only cases where duty has not been levied or paid; has been short -levied or short - paid and not any other, - in contradistinction to the provisions of Section 125 of the “Act”; and hence, that the learned Tribunal ought to have concluded the question of jurisdiction against them, but which they have not done. He concluded, submitting that this would not, however, preclude this Court from considering that aspect because, it is question of law; specially when the facts are not in dispute.

We had heard the learned Counsel for the parties at the time when we admitted this matter, and through the order dated 09.03.2026, we framed the following questions;

It is ineluctable that the real point of contest in this case is if the vessel in question had been imported into India in the year 2011, or if its entry into Kochi will have to be seen as a fresh case of import, so as to attract Section 28 of the “Act”.

We do not require to labour on this much because, as rightly found by the learned Tribunal, the vessel can only be construed to have been imported into India at the point of first entry, which was at the Paradip Port under the Bhubaneswar Customs. Going by the law that held the field then, it is apodictic that the charterer, namely “Manthan”, ought to have presented the Bill of Lading for the vessel, since Customs duties were not exempted at that time; but they did so, only with respect to its stores. For some reason, this appears to have been accepted by the Bhubaneswar Customs; and this is manifest from the fact that there is not even a whispering allegation that “Manthan” had committed any act surreptitiously, or in a furtive manner. The officials of Paradip Customs were certainly aware of the import, which is indubitably established because they allowed the application for conversion, preferred qua the vessel by “Manthan”, from Foreign Run; to Coastal Run and axiomatically, any imputation of the charterer not disclosing facts, as they ought to have, cannot arise.

To paraphrase, the question why the Bhubanewar Customs never levied Customs duty, or made a demand on it, under Section 28 of the “Act”, when the vessel was imported to India through the Paradip Port in the year 2011, remains a mystery, which perhaps cannot be resolved now.

As far as this Court is concerned, we are only called upon to decide whether the entry of the vessel into Kochi under the Coastal Run authorisation, can be construed to be a fresh case of import; thus enabling the Commissioner of Customs, or the Officers under him, to invoke Section 28 of the “Act” and impose levy.

The learned Tribunal has considered this matter, adverting to all relevant and germane inputs; and we find favour with its reasoning and holdings, for the reasons we will now record.

When, even the Commissioner of Customs, Kochi, does not have a case that the import of the vessel into Paradip Port in the year 2011 was done either in a covert manner or clandestinely, one cannot comprehend how he then proceeds to invoke Section 28 of the Act; to levy Customs duty on it, which ineluctably appears to be an omission or failure by the Bhubaneswar Customs; at that time. The attempt of the Commissioner of Customs, Kochi is virtually to make up for the alleged omission or failure of the Bhubaneswar Customs; and make the levy, which ought to have been done in the year 2011, by construing that the entry of the vessel, on a Coastal Run permission, into its territory is a fresh import.

By no stretch of imagination can such a contention be countenanced because, the vessel had entered India in the year 2011, to be within its territory throughout; but to then move to Kochi in the year 2012, for the purpose of dredging operations with the disponent owners. One wonders how this would be treated as an import into Kochi, because it is well settled and does not enjoin us to expatiate that a vessel can be imported only into India, and not into Kochi.

We, therefore, do not require to concern ourselves with the question whether the import of the vessel was into Kochi, because it certainly was into the Paradip Port in the year 2011, subsequent to which, it came to Kochi in the year 2012.

As rightly argued by Sri.P.R.Sreejith, the learned Tribunal was obligated, by the earlier judgment of this Court to answer the question of jurisdiction of the Commissioner of Kochi, under Section 28 of the “Act”; but though it did not do so, we do not deem it necessary at this stage to remit the matter to it for that purpose.

This is for the reason that it is uncontestable that Authority obtains the right to invoke Section 28 of the “Act”; only consequent to the import of a vessel, and in no other circumstances. As said above, the import took place in the year 2011, and the Bhubaneswar customs, for reasons best known to them, did not levy Customs duty; and resultantly, the charterer did not discharge it either. The vessel travelled to Kochi the next year and was used for dredging purposes, by the disponent owners; and it is then that the Commissioner of Kochi, took upon himself the burden under Section 28 of the “Act” and sought to levy the duty.

It is therefore, apodictic that the Commissioner of Kochi did not obtain any jurisdiction, either under Section 28 of the “Act”, or to make a demand for the Customs duty.

With that said, we wish to clarify that, subject to the provisions of law, our observations herein would not preclude the Bhubaneswar Customs from initiating or pursuing action as is permissible.

After we dictated this part of the judgment, Sri.Viswanathan – learned counsel for “Manthan” intervened to point out that the learned Tribunal has also found that the demand made by the Commissioner of Customs, Kochi, under Section 28 of the “Act”, beyond a period of six months is illegal. We do not propose to answer this because, we have already held that the said Authority did not obtain jurisdiction to invoke the said provision at all. This issue is therefore, left open.

In the afore circumstances, we answer the questions framed by us in the following manner.

Consequently:

b). Customs Appeals Nos.7, 8, and 9 of 2025 are allowed in terms of our observations.

As a necessary corollary to the above, the bank guarantee stated to have been furnished by the appellants in Customs Appeal Nos. 7, 8 and 9 of 2025, shall be returned to them by the Commissioner of Customs, Kochi, or such other Authority, forthwith.