ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. UNION OF INDIA & ORS.

77Copy pinpoint77. 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

ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 519 · UNION OF INDIA & ORS. [BHAN, J.)

'"'" isolation. The entire scheme of the Customs Act and other Acts A such as Maritime Zones Act, 1976 which are in pari-materia have to be read together. Reading of Sectioos 6 and 7 of the Maritime Zones Act, 1976 makes it clear India's jurisdiction over the Maritime Zones Act, 1976 extends to the continental shelf and exclusive economic zone. Consequently, if mineral oil is B ~ 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 c 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) ELTT10] in following terms: "3. 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 F ...... under the Customs Act, 1962 and consequently, no export benefits can be availed ()f on such supplies. Another implica!ion 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 G 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 H

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.,... A central excise duties under the Central Excise Act, 1944."

78Copy pinpoint78. Similarly, in Circular No. 2212002 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: -

B "3. The implication of the said notification is that mineral Jo. 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 c 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 D 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." E

79Copy pinpoint79. It may not be correct to contend that the oil rigs installed by the Appellants answer the description "foreign going vessel". 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 H

ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 521 UNION OF INDIA & ORS. [BHAN, J] ~ within the territory to which the Customs Act has been extended A as per the Maritime Zones Act, 1976 and the International Convention - UNCLOS, 1982.

80Copy pinpoint80. We do not find any ambiguity in this situation. The interpretation given by the High Court in Pride Foramer's case (supra) would not result in any absurd situation as contended B { .... by the Counsel for the Appellant. The Appellants wants the Court 1 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. c

81Copy pinpoint81. 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 D 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. E

82Copy pinpoint82. 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. F -'V

83Copy pinpoint83. 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 G been extended in the same way as has been extended in a -1- 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 H

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A 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 income earned by the assessee prior to 01.04.1983 could not be charged to tax in the assessment B 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 c the assessees were employees, during the assessment year 1983-84, of a non-resLdent 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 0 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's 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 (Born.)].

84Copy pinpoint84. We agree with the views expressed by the Bombay H

ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 523 UNION OF INDIA & ORS. [BHAN, J.] ....., High Court in Pride Foramer's case (supra) that in Amership A 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 B I + Load Lines Convention, 1966 and Central Government Notifications and upon the load lines certificates, held for the purposes of the Customs Act, the expression "vessel" is of the widest amplitude and must be construed to include "oil rigs". It was held that since the oil rigs are stationed beyond the territorial c waters, supply of imported "stores" 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 D issued pursuant thereto were not considered at all. . ~ -t

85Copy pinpoint85. 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 E 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 F _.., "designated areas" 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 G 6 and clause (a) of sub-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 H

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.,..- A 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 "designated areas" under the Maritime Zones Act, 1976. The further effect of these notifications is that the designated areas B 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 c into these areas as if these areas are a part of the territory of India. In these circumstances, the definition of "India" 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 "place - outside India". 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, F 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

ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 525 UNION OF INDIA & ORS. [BHAN, J.] -4 foreign going vessel under Section 2(21) of the Customs Act. A 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 B •.+ 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.

86Copy pinpoint86. As stated above, contiguous zone is that part of the sea which is beyond and adjacent to the territorial waters of the c 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 D f --+ zone as well.

87Copy pinpoint87. 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 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.

88Copy pinpoint88. 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: - " ..... The doctrine of incorporation also recognises the position that the rules of international law are incorporated H

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~- A 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. B 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 c 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."

89Copy pinpoint89. In Vishaka & others v. State of Rajasthan & others D [(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: - ".... The international conventions and norms are to be read into them in the absence of enacted domestic law E 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 .... " F

90Copy pinpoint90. 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.

91Copy pinpoint91. 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 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

ABAN LOYD CHILES OFFSHORE LTD. & ANR v. 527 UNION OF INDIA & ORS. [BHAN, J] A 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 B words, there is no prohibition for levying customs duties on the I .+ 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. c

92Copy pinpoint92. 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.

93Copy pinpoint93. For the reasons stated above, we do not find any merit in these appeals and dismiss the same with costs. R.P. Appeals dismissed