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

- **Citation:** [2008] 6 S.C.R. 468
- **Court:** Supreme Court of India
- **Decided:** 2008-04-11
- **Case number:** Civil Appeal No. 2236 of 2002
- **Bench:** Ashok Bhan, Dalveer Bhandari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/aban-loyd-chiles-offshore-ltd-anr-v-union-of-india-ors-24587
- **Pages:** 60

## Headnote

\
Customs Act, 1962:
s. 2(21 ), 2(27), 2(28), 12, 86 and 87 - "Foreign going
c vessel" - "Territory of India" - "Indian custom waters" -
'Designated area' - Connotation of - 'Oil rigs' stationed within
the 'designated area' and carrying on operations in the
continental shelf/exclusive economic zone of India,
consuming imported 'stores' on board - Levy of import duty
D on such 'stores' - HELD: Such oil rigs are not 'foreign going
vessels' - 'Designated area falls within customs regime of
coastal State (India) -Imported 'Stores' supplied to such oil "
rigs will attract import duty u/s 12, and are not entitled to
exemption benefit u/ss 86 and 87 - Customs Act stands
E extended to designated areas and area of discharge or
unloading/loading is within territory of India by virtue of
deeming provisions of ss. 6 and 7 of Maritime Zones Act, 1976
- Constitution of India, 1950 - Article 297 - Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
F Maritime Zones Act, 1976 - ss. 6 and 7 - International Law -
United Nations Convention on the Law of Sea, 1982 -Articles
2,3,33,55,56,57 and 127 - Interpretation of Statutes.
..
Constitution of India, 1950:
Article 1 (3) - "Territory of India' -
Connotation of -
G General Clauses Act, 1897 - s.3(28) - Customs Act, 1962 -
s.2(27).
Interpretation of Statutes:
,f
Provisions of Municipal Law and International Law -
H
468
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
469
UNION OF INDIA & ORS.
Interpretation of - HELD: In absence of municipal law A
International treaties/conventions can be looked into and
enforced if they are not in conflict with municipal law and can
a/so be used to interpret municipal laws so as to bring them in
consonance with international law.
Words and Phrases:
B
;;.
"
Expressions 'contiguous zone', 'designated area', and
'exclusive economic zone' in the context of Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976 !Customs Act, 1962- Connotation of. c
The appellant-assessees were engaged in drilling
operations for exploration of offshore oil and gas. The
drilling operations were carried on oil rigs/vessels
stationed in the 'designated area' but outside the territorial
waters of India. Until November 1993 the appellants and D
7
all other similarly situated companies were permitted to
~
transship imported 'stores' to the oil rigs, for consumption
on board, without levy of any customs duty regardless of
the fact whether the oil rigs were operating within a
designated area or a non-designated area. November 1993 E
onwards, the respondent-Revenue authorities refused to
permit companies engaged in onward offshore operations
to transship 'stores' to the oil rigs without payment of
Customs duty. A writ petition filed by the appellant in the
year 1994 challenging the levy of customs duty on F
..
transshipment of goods/stores imported by drilling
contractors and supplied to oil rigs, was allowed by the
High Court on the basis of its judgment in Amership's
case 1 • But, the subsequent writ petitions filed by the
appellants and some other similarly situated companies G
were dismissed by the High Court following its judgment
in Pride Foramer's case2 . Aggrieved, the assessees filed
1 Amership Management Pvt. Ltd. v. Union of India (1996) 86 ELT 12
(Born)
2 Pride Foramer v. Union of/ndia (2002) 148 ELT 19 (Born)
..
H
470
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A the instant appeals.
The question for consideration before the Court was:
"whether oil rigs engaged in operations in the exclusive
economic zone/continental shelf of India, falling outside
B
the territorial waters of India, are 'foreign going vessels'
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 of the
Customs Act, 1962?"
c
Dismissing the appeals, the Court
HELD: 1.1 The oil rigs carrying on operations in the
'designated area' are not 'foreign going vesse

## Text

_Characters 0–39,331 of 119,366. This is a partial read: ask again with offset=39331 for what follows._

[2008] 6 S.C.R. 468
A
ABAN LOYD CHILES OFFSHORE LTD. & ANR.
V.
UNION OF INDIA & ORS.
(Civil Appeal No. 2236 of 2002)
B
APRIL 11, 2008
(ASHOK BHAN AND DALVEER BHANDARI, JJ.)
\
Customs Act, 1962:
s. 2(21 ), 2(27), 2(28), 12, 86 and 87 - "Foreign going
c vessel" - "Territory of India" - "Indian custom waters" -
'Designated area' - Connotation of - 'Oil rigs' stationed within
the 'designated area' and carrying on operations in the
continental shelf/exclusive economic zone of India,
consuming imported 'stores' on board - Levy of import duty
D on such 'stores' - HELD: Such oil rigs are not 'foreign going
vessels' - 'Designated area falls within customs regime of
coastal State (India) -Imported 'Stores' supplied to such oil "
rigs will attract import duty u/s 12, and are not entitled to
exemption benefit u/ss 86 and 87 - Customs Act stands
E extended to designated areas and area of discharge or
unloading/loading is within territory of India by virtue of
deeming provisions of ss. 6 and 7 of Maritime Zones Act, 1976
- Constitution of India, 1950 - Article 297 - Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
F Maritime Zones Act, 1976 - ss. 6 and 7 - International Law -
United Nations Convention on the Law of Sea, 1982 -Articles
2,3,33,55,56,57 and 127 - Interpretation of Statutes.
..
Constitution of India, 1950:
Article 1 (3) - "Territory of India' -
Connotation of -
G General Clauses Act, 1897 - s.3(28) - Customs Act, 1962 -
s.2(27).
Interpretation of Statutes:
,f
Provisions of Municipal Law and International Law -
H
468
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
469
UNION OF INDIA & ORS.
Interpretation of - HELD: In absence of municipal law A
International treaties/conventions can be looked into and
enforced if they are not in conflict with municipal law and can
a/so be used to interpret municipal laws so as to bring them in
consonance with international law.
Words and Phrases:
B
;;.
"
Expressions 'contiguous zone', 'designated area', and
'exclusive economic zone' in the context of Territorial Waters,
Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976 !Customs Act, 1962- Connotation of. c
The appellant-assessees were engaged in drilling
operations for exploration of offshore oil and gas. The
drilling operations were carried on oil rigs/vessels
stationed in the 'designated area' but outside the territorial
waters of India. Until November 1993 the appellants and D
7
all other similarly situated companies were permitted to
~
transship imported 'stores' to the oil rigs, for consumption
on board, without levy of any customs duty regardless of
the fact whether the oil rigs were operating within a
designated area or a non-designated area. November 1993 E
onwards, the respondent-Revenue authorities refused to
permit companies engaged in onward offshore operations
to transship 'stores' to the oil rigs without payment of
Customs duty. A writ petition filed by the appellant in the
year 1994 challenging the levy of customs duty on F
..
transshipment of goods/stores imported by drilling
contractors and supplied to oil rigs, was allowed by the
High Court on the basis of its judgment in Amership's
case 1 • But, the subsequent writ petitions filed by the
appellants and some other similarly situated companies G
were dismissed by the High Court following its judgment
in Pride Foramer's case2 . Aggrieved, the assessees filed
1 Amership Management Pvt. Ltd. v. Union of India (1996) 86 ELT 12
(Born)
2 Pride Foramer v. Union of/ndia (2002) 148 ELT 19 (Born)
..
H
470
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A the instant appeals.
The question for consideration before the Court was:
"whether oil rigs engaged in operations in the exclusive
economic zone/continental shelf of India, falling outside
B
the territorial waters of India, are 'foreign going vessels'
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 of the
Customs Act, 1962?"
c
Dismissing the appeals, the Court
HELD: 1.1 The oil rigs carrying on operations in the
'designated area' are not 'foreign going vessels' u/s 2(21)
of the Customs Act, 1962, as the 'designated area' falls
within the customs regime of the coastal State (India) and
D would be deemed to be a part of Indian territory. 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
E pursuant to the provisions of the Territorial Waters,
Continental Shelf, Exclusive Economic Zone and Other
Maritime Zones Act, 1976 (Maritime Zones Act, 1976). The
oil rig is thus going from the territory of India to an area
which also is deemed to be part of the territory of India.
F The supply of imported spares or goods or equipments
to the oil rigs will attract import duty. 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
G designated areas by virtue of the Maritime Zones Act, 1976.
[para 85] [524-F, G, H; 525-A, BJ
1.2 The maritime zones of India include the territorial
waters, contiguous zone, the continental shelf, the
exclusive economic zone and the historic waters of India.
H The territorial waters and the continental shelf are
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
471
UNION OF INDIA & ORS.
traditional concepts in International Law and the national A
jurisdiction in these zones is well established. "Exclusive
economic zone" is a new concept, which has been
developed at the initiative of developing countries and has
gained acceptance of the international community of
States. 'Contiguous zone' is that part of the sea which is B
'*
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 c
and revenue jurisdiction of the coastal States is extended
to the contiguous zone as well. 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
D
international community of States. Pursuant to such
;J
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 rights over
that territorial limit. Consequently, Article 297 of the
Constitution of India was substituted on these lines; and E
pursuant thereto the Maritime Zones Act, 1976 was
enacted declaring designated area in the continental shelf/
exclusive economic zone and extending the Customs
Act to such areas. [para 21, 75 and 86] [490-G; 491-A, B;
517-G; 518-A; 525-A, B, C]
F
1.3 With the adoption of United Nations Convention
on the Law of Sea, 1982 (UNCLOS, 1982), to which India
is a signatory, the legal incidents of the high seas have
been partly modified. UNCLOS, 1982 is a comprehensive
code on the international law of sea. It has changed the G
legal concept of continental shelf and 'exclusive economic
~
zone'. What is significant for the purpose of the instant
case 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. H
472
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A Exclusiveness attaches to resources exploitation only but
does not incorporate the ownership of title of the coastal
State. 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
B waters in this area as a part of the high seas is specifically
recognized and retained in the Convention. [para 71-72]
[516-G, H; 517-A, B, C]
1.4 Under sub-section (28) of Section 2 of the
Customs Act, 1962, "Indian customs waters" extend
C 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).
D Undoubtedly, the waters which extend 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
E navigation. The coastal State has no sovereignty in
territorial sense of dominium over the contiguous zone,
but it can exercise the right of search, seizure or
confiscation of vessel for violation of its customs or fiscal
or penal laws in the contiguous zone. However, it cannot
F exercise these rights once the delinquent vessel enters
the high seas. It has no righf 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
G 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. [para 70] [516-8, C, D, E, F, G]
1.5 Section 7(1) of the Maritimes Zone Act which has
H been worded on the lines of Article 57 of the UNCLOS,
•
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
473
UNION OF INDIA & ORS.
-.
1982, describes the exclusive economic zone of India as A
an area beyond and adjacent to the territorial waters, and
the limit of such zone is 200 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 B
..
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.
A combined reading of Sections 3, 6 and 7 of the Maritime
Zones Act, 1976 shows that territorial waters, the seabed c
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 D
shelf of India comprises of the seabed beyond the
;I
territorial waters to a distance of 200 nautical miles. The
exclusive economic zone represents the sea or waters
over that continental shelf. [para 67-68] [514-E, F, G, H;
515-A]
E
2.1 In exercise of the powers vested in the Central
Government under sub-section (6) of Section 6 and subsection (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
F
continental shelf and the exclusive economic zone by
notifications. [para 69] [515-E, F, G]
2.2 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 G
sub-section (6) of Section 7 of the Maritime Zones Act,
•
1976, 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 H
474
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A areas extending upto 500 meters from such installations,
structures and platforms are declared as "designated
areas" for the purposes of Sections 6 and 7 of the Maritime
Zones Act, 1976. By two corresponding notifications no.
11/87-Customs dated 14.01.1987 and 64/97-Customs dated
B 01.12.1997 issued under clause (a) of sub-section (6) of
Section 6 and clause (a) of sub-section (7) of Section 7 of
the Maritime Zones Act, 1976 the Customs Act and
Customs Tariff Act have been extended to the designated
areas in the continental shelf and the exclusive economic
c zone as declared in the notifications dated 18.07.1986 and
19.09.1996. [para 85] [523-D, E, F, G; 524-A]
2.3 The 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
D 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
E imported 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
F located in the continental shelf and the exclusive
economic zone of India. In the exclusive economic zone,
the coastal State {in the instant case India) has exclusive
right to exploit for economic purposes like constructing
artificial islands or other platforms or drilling rigs for oil
G 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.
[para 73-85] [517-D, E; 524-A, 8, C, D]
3.1 The? oil rig is deemed to be stationed at a
H designated area in the continental shelf/exclusive
>
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
475
UNION OF INDIA & ORS.
economic zone. The designated area is within the f\
territorial limits of the coastal State. The maritime limit oJ
the coastal State (in the instant case, India) would include
territorial waters, continental shelf and exclusive
economic zone, as recognized under Article 57 of the
International Convention on the Law of the Sea, 1982; and
B
Articles 56, 60, 77 and 80 thereof recognise rights,
exclusive jurisdiction and duties of the coastal State with·
regard to customs, fiscal safety, health, immigration laws
and regulations. [para 74] [517-E, F]
3.2 It may not be correct to say that the oil rigs C
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 D
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
E
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
F
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 - UNCLOS, 1982.
[para 79] [520-E, F, G; 521-A]
G
3.3 In the instant 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 H
476
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A of India. 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 has been an import within the
territory of India to which the Customs Act applies.
s [para 82 and 92] [521-E, F; 527-C, D]
c
Commissioner of Income Tax v. Ronald William Trikard
and Others 215 ITR 638; and MCDERMOTT International
Inc. v. Union of India & Others [1988 (173) ITR 155 (Born.) -
referred to.
4.1 The question whether the Courts can look into
the provisions of the international treaties/conventions is
no longer res integra. This Court has held that even in the
absence of municipal law, the treaties/conventions can
0 be looked into and enforced if they are not in conflict with
the municipal law, and can also be used to interpret
municipal laws so as to bring them in consonance with
international law. 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
E legislatures in making the laws may not be subject to
external rules except to the extent legitimately accepted
by the constituted legislatures themselves. [para 87 and
88] [525-D, E, F, G]
F
Gramophone Company of India Ltd. v. Birendra Bahadur
(1984) 2 SCC 534 and Vishaka & others v. State of Rajasthan
& others (1997) 6 sec 241 - relied on.
4.2 In the instant case, the municipal law, i.e., Maritime
Zones Act, 1976 is not in conflict with the international law,
G rather the same is in consonance with UNCLOS, 1982.
[para 90] [526-F]
4.3 Article 127 of UNCLOS, 1982 deals with customs
duties, taxes and other charges. According to this Article,
H where the goods are in transit to other country, the same
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
477
UNION OF INDIA & ORS.
shall not be subject to any customs duties, taxes or other A
charges except for the charges levied for specific services
in connection with such traffic. 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 B
~
country, then no customs duty can be levied. In all other
,.
cases, it seems to be permissible. [para 91] [526-F, G; 527A, B]
5.1 There is no challenge to the Maritime Zones Act,
1976, or the notifications issued declaring designated area c
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 "sovereignty"
over "territorial waters" but it has only sovereign rights
over the continental shelf and the exclusive economic D
~
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, E
reference to the Maritime Zones Act, 1976 is inevitable
while considering any issue relating to maritime issues.
[para 75] [518-8, C, D, E]
5.2 If one reads the Customs Act without reading the
F
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, G
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 H
478
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A that the revenue generated from exploration and
exploitation should accrue to the coastal State viz. India.
[pnra 85] [524-D, E, F]
6.1 Appellants may be carrying on its operation
B
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
c Act to such vessels. It is true that 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 an area which is recognized as the maritime
D limit of the coastal State which is being exercised.
[para 76, 77] [518-E, F, G, HJ
... ,
6.2 Section 2(21) of the Customs Act cannot be read
in isolation. The entire scheme of the Customs Act and
E
other Acts such as Maritime Zones Act, 1976 which are in
pari-materia have to be read together. A reading of Sections
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
F
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
G 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. This is clear from notification no. S.O. 189 (E)
H dated 07.02.2002 and Circular No. 17/2002-Customs
..
ABAN LOYD CHILES OFFSHORE LTD. & ANR v.
479
UNION OF INDIA & ORS.
dated 13.03.2002 [2002 (141) ELT T10]. Similarly, in
/-\
Circular No. 22/2002 dated 23.04.2002 2002(142) ELT
T20, the notification S.O. 189 (E) has been clarified.
[para 76-78] [518-H; 519-A, B, C, D; 520-A]
7. The High Court in Pride Foramer's case rightly held
that in Amership Management case the issue was limited
B
to the question as to whether the oil rigs were vessels
and, if so, a 'foreign going vessel' in the light of the
controversy raised in that Judgment. In Amership
Management case, the High Court after relying on the
International Load Lines Convention, 1966 and Central C
Government Notifications and upon the load lines
certificates, held that 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
r;
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
f
Act, 1976 together with the notifications issued pursuant
thereto were not considered at all. [para 84) [523-A, 8, C, D]
Pride Foramer vs. Union of India (2002) 148 ELT 19
(Born.) - approved.
Amership Management Pvt. Ltd. Vs. Union of India (1996)
86 ELT 12 (Born.) - distinguished.
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2236
of 2002.
r·
r·
From the Judgment and Order dated 10.9.2001 and G
24.4.2001 of the High Court of Bombay ~n WP. No 2070/2001
and 1818/2000.
WITH
Civil Appeal No. 6148/2002 and Civil Appeal No 4444;
H
480
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A 2006.
Ramesh Singh (for M/s. O.P. Khaitan & Co.) for the
Appellant in Civil Appeal No. 2236/2002.
Shyam Divan, Rashna Khan, Smjeetaa Inna (For Rajesh
B Kumar) for the Appellant in C.A. Nos. 6148/2002 and 4444/
2006.
V. Shekhar, Aruna Gupta, Alka Sharma, B. Krishna Prasad
and B.V. Bairam Das for the Respondents.
c
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
D Bombay High Court dated 05.06.2002 rendered in the
Appellant's 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
E No. 1818 of 2002 [Pride Foramer v. Union of India].
F
G
3. The principal issue that falls for consideration in this
case is:-
"Whether oil rigs engaged in operations in the exclusive
economic zone/ continental shelf of India, falling outside
the territorial waters of India, are "foreign going vessels"
·•
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 of
the Customs Act, 1962?"
FACTS
4. The Appellants are engaged in drilling operations for
exploration of offshore oil, gas and other related activities under
H contracts awarded by the Oil and Natural Gas Commission (for
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
481
UNION OF INDIA & ORS. [BHAN, J.]
)(
short, 'ONGC'). The drilling operations are carried on at oil rigs/ A
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
B
•:
of the fact whether oil rigs were operating within a designated
,.-1
area_ or non-designated area.
5. November, 1993 onwards, the Revenue Authorities (for
short, 'respondents') refused to permit companies engaged in
onward offshore operations, to transship stores to the oil rigs, c
without payment of customs duty.
6. Appellants filed Writ Petition No. 610of1994 challenging
the levy of customs duty on transshipment of goods/stores
imported by drilling contractors and supplied to oil rigs, as stores D
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.
E
Ltd. v. Union of India [(1996) 86 ELT 12 (Born)] 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, 'the Customs Act'). The spare
parts or equipment for the oil rigs were "stores" and the writ
F
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' Writ Petition No. 610 of 1994 was G
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
H
482
SUPRE1VlE COURT REPORTS
[2008] 6 S.C.R.
,A.
Appe!lsnts' cose were dismissed by this Court's Order dated
13 03 2001 which reads as under: -
"Learned counsel for the appellants draws our attention to
the fact that by an order dated 19th April, 1999 the special
B
leave petitions in this matter had been ordered to be linked
with S.L.P.(C) .... ./1999 (D.No.6232/97). Subsequently, on
:I
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
c
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
D
submitted for the information of the Hon'ble court that
Special Leave Petition (Civil) No .... of 1999 (D.No.6292
of 1997) 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
E
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.
F
Learned counsel for the appellants says that he is not in
a pcA1on to argue the matter.
The appeals are dismissed with costs."
8. The Central Government issued Notification No. S.O.
G 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,
.fi
'the Maritime Zones Act. 1976') by which certain areas were
identified a's designated areas". The "designated areas" are
H more than 12 nautical niiles away from the shore and are
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
483
UNION OF INDIA & ORS. [BHAN, J.]
)(
outside the territorial waters of India.
A
9. The Central Government by Notification No. 11/87CUSTOMS 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
B
"designated areas" .
... ..
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 c
exclusive economic zone where the installations, structures and
platforms were located as "designated areas''.
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 D
~-
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. :-
"a)
the prospecting for extraction for production of mineral
E
oils in the continent shelf of India or the exclusive
economic zone of India and
b)
the supply of any goods as defined in clause (22) o'
Section 2 of the Customs Act, 1962 in connection
F
~-
with any of the activities referred to in clause (a)."
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 G
permission was refused. Aggrieved against, Pride Foramerfiled
Writ Petition No. 1818 of 2000 before the Bombay High Court.
The Bombay High Court by its Order dated 24.04.2001
dismissed the Writ Petition. Same is reported as "Pride
Foramer v. Union of India" [(2002) 148 ELT 19 (Born)].
H
484
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A
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,
B 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, 'UNCLOS, 1982') concluded as under: -
..
"For all the reasons stated above, we are of the view that
the respondents are perfectly justified in refusing to permit
c
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
D
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
E
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."
F
14. In the present case, Appellants imported the "stores"
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:-
G
"Please 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
H
Hon'ble High Court of Bombay in l/'J.P. No. 1818/2000 in
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
485
UNION OF !NOIA & ORS. [BHAN, J.]
case of M/s. Pride Foramer. It may be n'oted that the A
Hon'ble Supreme Court's 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."
1.5. The Appellants, thereafter, filed the Writ Petition in the
B
~-
High Court which has been dismissed by the impugned Order
, , ..
following the decision in Pride Foramer's case (supra).
16. The Counsel appearing for the assessee in Pride
Foramer's case (supra), had raised, broadly speaking, three
submissions which were categorized by the High Court under c
the following broad heads: -
"(A) The Oil Rig is vessel.
(B) The Oil Rig engaged in exploration/exploitation of
offshore oil, gas and other related services outside D
,,;¥
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.
(C) The goods sent to the Oil Rig are stores and are
liable to be transshipped to the Rig without, payment
E
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."
17. The High Court in Pride Foramer's case (supra) held
F
...
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 G
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 CustomG Act, the same was not
pressed into service before us as Chapter VIII in which Sections
H
486
SUPREME COURT REPORTS
[2008] 6 S.C.R.
A 53 and 54 find their place does not apply to baggage, postal
articles and stores (Section 52). Undoubtedly, the goods in
question are "stores" and, therefore, the submission regarding
applicability of Sections 53 and 54 of the Customs Act were not
pressed into service before us.
B
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
C existing at the relevant time and the International Conventions
and provisions thereof: -
D
E
F
G
H
"(i)
ARTICLE 1 (3) OF THE CONSTITUTION OF INDIA
provides that the ''TERRITORY OF INDIA" shall
comprise ofa)
the territories of States;
b)
the Union territories specified in the First
Schedule; and
c)
such other territories as may be acquired."
(ii)
SECTION 3(28) OF THE GENERAL CLAUSES ACT
provides that: -
"India" 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."
(iii) SECTION 2(27) OF THE CUSTOMS ACT, 1962
defines "INDIA" as under:-
" "India" includes the territorial waters of India."
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v.
487
UNION OF INDIA & ORS. [BHAN, J.]
This definition under the Customs Act is relevant for the A
purposes of the Customs Act only.
RELEVANT PROVISIONS OF CUSTOMS ACT, 1962
(iv)
SECTION 2(21) assigns the following meaning to
the "FOREIGN GOING VESSEL OR AIRCRAFT": -
B
"foreign-going vessel or aircraft" 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 C
not, and includes-
(i)
xxx xxx ;
(ii)
XXX XXX;
(iii) any vessel or aircraft proceeding to a place D
outside India for any purpose whatsoever;"
(v)
SECTION 2(28) defines to mean INDIAN CUSTOMS
WATER:-
"lndian Customs Water" means the waters extending into E
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;"
F
(vi)
SECTION 52 reads as under: -
"Chapter 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,
G
and (c) stores."
(vii) SECTION 53 reads as under: -
"Transit of certain goods without payment of
duty.-(1) Subject to the provisions of section 11, any H
488
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2008] 6 S.C.R.
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."
(viii) SECTION 54 reads as under: -
"Transhipment 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:"
(ix)
SECTION 86 provides that: -
"Transit 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."
(x)
SECTION 87 provides that: -
"Imported 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."
(xi)
ARTICLE 297 OF THE CONSTITUTION OF INDIA
as it originally existed was as under: -
~-.,
ABAN LOYD CHILES OFFSHORE LTD. & ANR v.
489
UNION OF INDIA & ORS.