Madras HC Rules Customs Duty Cannot be Demanded on Vessels Imported Before 2012 Notification

The Madras High Court has held that the customs authorities cannot demand countervailing duty (CVD) on vessels that were imported to India before March 17, 2012.

The company, Great Eastern Shipping Company Ltd, challenged the customs department’s demand letters demanding payment of customs duty on two of its vessels, “Jug Rahul” and “Jug Rishi“, before the Madras High Court. The demand letter cited Notification No. 12/2012 dated March 17, 2012, where Serial No. 462, notified exemption to the foreign-going vessels, but duty was required to be paid when such vessels were converted for coastal trade. Based on this, customs authorities asked the company to pay CVD when the vessels were converted to coastal run.

The company submitted that “Jug Rahul” was imported in 2005, and Jug Rishi was imported in 2011. The petitioner company argued that both its vessels were imported before the Notification dated 12/2012. It contended that the 2012 notification cannot be applied retrospectively to the vessels, as they were already imported.

The court referred to an earlier ruling of the Orissa High Court in the petitioner’s own case, where it was held that Notification No. 12/2012 will not affect the imports of its other three vessels that were also imported prior to the date of the notification. The Court noted that the Revenue had also accepted this decision and had not challenged it further.

The revenue argued that the impugned letters were only advisory in nature. However, the High Court rejected this claim, noting that the letter quantified the demand and gave a time limit of 14 days for payment. This, according to the court, made the communication a demand letter.

Therefore, the High Court quashed the customs duty demand issued against the vessels Jug Rahul and Jug Rishi, holding that no customs duty could be imposed on vessels imported before the date of Notification No. 12/2012, i.e., March 17, 2012.