Supreme Court of India
ABAN LOYD CHILES OFFSHORE LTD. & ANR.versusUNION OF INDIA & ORS.
- Citation
- 2008 INSC 492
- Decided
- 11 April 2008
- Disposal
- Dismissed
- Bench
- ASHOK BHAN
Holding
Oil rigs stationed in designated offshore areas are not foreign‑going vessels, and imported stores for them attract customs duty.
Summary
The appellants, offshore drilling companies, operated oil rigs in India's designated offshore areas (continental shelf and exclusive economic zone) and sought to import stores for the rigs without customs duty, relying on the exemption for foreign‑going vessels under the Customs Act. The Revenue authorities, citing notifications extending the Customs Act to these offshore zones, demanded duty. The Supreme Court examined whether such rigs qualify as "foreign‑going vessels" under Section 2(21) of the Customs Act and whether the exemption under Sections 86 and 87 applies. It held that the Maritime Zones Act, 1976 and the related notifications deem the designated offshore areas part of Indian territory for the purpose of the Customs Act, so the rigs are not foreign‑going vessels and the stores are liable to duty under Section 12. Consequently, the exemption does not apply. The Court dismissed the appeals.
Issues considered
- Whether oil rigs operating in the continental shelf/exclusive economic zone are "foreign‑going vessels" under Section 2(21) of the Customs Act, 1962.
- Whether imported stores supplied to such rigs are exempt from customs duty under Sections 86 and 87 of the Customs Act.
Legislation cited
- Constitution of Indias. Article 1(3), s. Article 297
- Customs Act, 1962s. 12, s. 2(21), s. 2(27), s. 2(28), s. 52, s. 53, s. 54, s. 85, s. 86, s. 87
- Customs Tariff Act, 1975
- General Clauses Act, 1897s. 3(28)
- Maritime Zones Act, 1976s. 3, s. 5, s. 6, s. 6(5), s. 6(6), s. 6(7), s. 7, s. 7(6), s. 7(7)
Subjects
customs dutyforeign‑going vesseloffshore oil rigdesignated areacontinental shelfexclusive economic zoneMaritime Zones ActUNCLOSinterpretation of statutesimport duty exemption
Judgment
[2008] 6 S.C.R. 468
A ABAN LOYD CHILES OFFSHORE LTD. & ANR.
V.
UNION OF INDIA & ORS.
(Civil Appeal No. 2236 of 2002)
APRIL 11, 2008
B
(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
Maritime Zones Act, 1976 - ss. 6 and 7 - International Law -
F 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
were dismissed by the High Court following its judgment G
in Pride Foramer's case 2 . 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
the territorial waters of India, are 'foreign going vessels'
B 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
designated areas by virtue of the Maritime Zones Act, 1976.
G
[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
and revenue jurisdiction of the coastal States is extended
c
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
international community of States. Pursuant to such D
;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 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 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]
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.
c 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
be looked into and enforced if they are not in conflict with
0
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; 527-
A, 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
Maritime Zones Act, 1976, then the oil rig located in the F
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
outside the territorial waters, as understood under
B 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
other Acts such as Maritime Zones Act, 1976 which are in
E 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
zone. Consequently, if mineral oil is extracted or produced
F 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.
r·
r·
Amership Management Pvt. Ltd. Vs. Union of India (1996)
86 ELT 12 (Born.) - distinguished.
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2236
of 2002.
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].
3. The principal issue that falls for consideration in this
case is:-
"Whether oil rigs engaged in operations in the exclusive
F 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?"
G
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.
Ltd. v. Union of India [(1996) 86 ELT 12 (Born)] allowed a E
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
leave petitions in this matter had been ordered to be linked
B 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
submitted for the information of the Hon'ble court that
D
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
dated 24th May, 1999, 7th July, 1999 and reminder dated
E 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,
'the Maritime Zones Act. 1976') by which certain areas were .fi
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. 11/87-
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
"designated areas" . B
.
...
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
.
, ~-
, High Court which has been dismissed by the impugned Order
following the decision in Pride Foramer's case (supra).
B
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
the following broad heads: -
c
"(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
that oil rig is a vessel, thus, submission categorized as (A) was
F
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.
G
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 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: -
"(i) ARTICLE 1(3) OF THE CONSTITUTION OF INDIA
provides that the ''TERRITORY OF INDIA" shall
comprise of-
D
a) the territories of States;
b) the Union territories specified in the First
Schedule; and
E c) such other territories as may be acquired."
(ii) SECTION 3(28) OF THE GENERAL CLAUSES ACT
provides that: -
"India" Shall mean-
F (a) XXX XXX
(b) xxx xxx
(c) as respects any period after the
commencement of Constitution all territories for
G the time being comprised in the territory of
India."
(iii) SECTION 2(27) OF THE CUSTOMS ACT, 1962
defines "INDIA" as under:-
H " "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 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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."
B (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
c 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
D
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,
E 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: -
F
"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
G
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: -
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR v. 489
UNION OF INDIA & ORS. [BHAN, J]
ARTICLE 297- A
"All 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."
Article 297 was amended in 1963 to include the words "or B
I the continental shelf' after the words territorial waters.
Article 297 was again amended in 1976 to read as under:-
ARTICLE 297-
"Things of value within territorial waters or continental shelf c
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
D
continental shelf, or the exclusive economic zone, of
India shall vest in the Union and be held for the
purposes of the Union.
(2) All other resources of the exclusive economic zone
of India shall also vest in the Union and be held for E
the purposes of the Union.
(3) 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 F
+ Parliament."
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 G
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 H
490 SUPREME COURT REPORTS [2008] 6 S.C.R.
..,,.
A Reasons of the Bill introduced for enactment of the Maritime
Zones Act, 1976 which, inter alia, provides as under: -
"Statement of Objects and Reasons
"The Bill is a sequel to the latest Constitution Amendment
B 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
c 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 be
such as may be specified, from time to time, by or under
any law made by Parliament.
D
"2. 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
E 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
F framework specifying the nature, scope and extent of
India's 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
G
exclusive economic zone. Hence this Bill.
"3. 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
H territorial waters and the continental shelf are traditional
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 491
UNION OF !NOIA & ORS. [BHAN, J.)
concepts in international Law and the national jurisdiction A
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 B
,.,\ . 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 territoryc
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
D
itself. The Bill empowers the Central Government to alter,
,A 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. E
"4. 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 particular
resources or particular groups of resources of the F
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."
22. Section 3(2) defines the limit of territorial waters as G
the line every point of which is at a distance of twelve nautical
miles from the nearest point of the appropriate base line. Section
-1..
3(3) authorizes the Central Government to alter the limits of
territorialwaters. The same reads as under: -
H
492 SUPREME COURT REPORTS [2008] 6 S.C.R.
A SECTION 3(3)-
"Sovereignty 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
B practice, alter, by notification in the Official Gazette, the
limit of the territorial waters."
23. Section 3(4) of the Maritime Zones Act, 1976, reads
as under: -
c SECTION 3(4)-
"No notification shall be issued under sub-section (3)
unless resolutions approving the issue of such notification
are passed by both Houses of Parliament."
D 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
"designated area". The same reads as under: -
SECTION 6(5)-
E
"The 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
F
(b) make such provisions as it may deem necessary
with respect to,- ct
(i) the exploration, exploitation and protection of
the resources of the continental shelf within such
G 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
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 493
UNION OF INDIA & ORS. [BHAN, J.]
(iii) the protection of marine environment of such A
designated area; or
(iv) customs and other fiscal matters in relation to
such designated area.
Explanation-A notification issued under this sub-section B
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." c
25. Central Government, has been authorized to extend
the enactment for the time being in force in India to the continental
shelf of any "designated area" on the continental shelf by issuing
a notification under Section 6(6) which reads as under: -
D
SECTION 6(6)-
"The 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 E
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 F
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 G
India."
26: Section 6(7) of the Act reads as under: -
SECTION 6(7)-
H
494 SUPREME COURT REPORTS [2008] 6 S.C.R.
y
A "Without 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
B States:
I'
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."
c 27. Section 7 defines "exclusive economic zone of India".
Section 7(6) authorizes the Central Government to declare any
area in the exclusive economic zone in the "designated area".
The same reads as under: -
SECTION 7(6)-
D
"The Central Government may, by notification in Official
Gazette,-
(a) declare any area of the exclusive economic zone to
be a designated area; and
E (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
F (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
G (iii) the safety and protection of artificial island, of shore
terminals, installations and other structures and
devices in such designated area; or
,.j.
(iv) the protection of marine environment of such
designated area; or
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 495
UNION OF INDIA & ORS. [BHAN, J.]
(v) customs and other fiscal matters in relation to such A
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 B
J schemes or any other mode of ensuring freedom of
navigation which is not prejudicial to the interests of India."
28. Under Section 7(7) of the Maritime Zones Act, 1976,
Central Government has been authorized to extend the c
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)- D
"The 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 E
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
F
has been extended is a part of the territory of India."
29. The relevant notifications issued under the Maritime
Zones Act, 1976 are M.E.A. No: S.O. 429 (E) dated 18.07.1986 G
(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: -
H
496 SUPREME COURT REPORTS [2008] 6 S.C.R.
A "S.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 1976), the Central
B 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
c five hundred metres from the said installations structures
and platforms as designated areas for the purposes of
the said sections."
31. As per notification No. 11/87-CUSTOMS dated
14.01.1987, the provisions of Customs Act were extended to
D areas in the Continental Shelf and the Exclusive Economic Zones
of India. The text of the notification is as under: -
"GSR 30(E)-ln 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
E 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
F 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 13th July, 1986, with
effect from 15th day of January, 1987."
G 32. The text of notification no. S.O. 643 (E) dated
19.09.1996 is as under: -
"S.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
H Shelf, Exclusive Economic Zone and Other Maritime Zones
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 497
UNION OF INDIA & ORS. [BHAN, J.]
Act, 1976 (80 of 1976), the Central Government hereby A
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 B
.-J.
/ said installations, structures and platforms as designated
areas for the purposes of the said sections."
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 c
as under: -
"S.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
D
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 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 E
Gazette for the following purpose namely
"a) the prospecting for extraction of production of mineral
oils in the continent shelf of India or the exclusive
economic zone of India and F
... b) 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 "mineral
G
oils" include petroleum and natural gas."
4 INTERNATIONAL COVENANTS AND PROVISIONS
THEREOF
34. In the Eleventh Session, on 30.04.1982, Confer~nce
H
498 SUPREME COURT REPORTS [2008) 6 S.C.R.
A 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 Nations Convention on the Law of
Sea, 1982 (for short, "UNCLOS, 1982") has 320 Articles. They
are divided into seventeen parts and nine annexures. It lays down
B rules for all parts and virtually all users of seas and oceans. The
relevant clauses thereof are as under:-
" Article 2 - Legal status of the territorial sea, of the
air space over the territorial sea and of its bed and
subsoil:-
c
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.
D
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
E 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,
F measured from baselines determined in accordance with
this Convention.
Article 33. Contiguous Zone: -
1. In a zone contiguous to its territorial sea, described
G 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 regulations within its territory or
territorial sea; (b) punish infringement of the above
H laws and regulations committed within its territory or
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. , 499
UNION OF INDIA & ORS. [BHAN, J.]
territorial sea. A
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 B
economic zone: -
The exclusive economic zone is an area beyond and
adjacent to the territorialsea, 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 c
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: -
D
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 E
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 F
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.
G
2. In exercising its rights and performing its duties under
L 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. H
500 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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 - Breadth of the exclusive economic zone.
B 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 - Customs duties, taxes and other
charges:-
c
1. 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.
D 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."
E 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
F 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' oil rigs
G answer the description of a "foreign going vessel" 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
H challenged before this Court. That it was. held in Amership
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 501
UNION OF INDIA & ORS. [BHAN, J.]
.f
Management case (supra) that oil rigs were vessels and were A
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's case (supra), the Bombay High
c;r-:7 Court proceeded on the basis that the oil rig was a vessel. It B
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 Co.urt was that they are not "foreign
going vessels" because the continental shelf and exclusive
economic zones are parts of India in view of the provisions of c
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, 14.01.1987and19.09.1996. The provisions of the
Customs Act were extended to contiguous zones, continental
shelf and exclusive economic zones, consequently, the oil rigs D
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's case (supra) following which
the present case has been decided, is based on the incorrect E
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' are entitled
to the benefit of the exemption under Section 86(2) read with
Section 87 of the Customs Act, 1962 with regard to "stores"
F
consumed on the oil rigs. Elaborating further, it was submitted
that Chapter XI of the Customs Act, 1962 contains 'Special G
provisions regarding baggage, goods imported or exported by
... post and stores'. The expression "stores" is defined in Section
2(38). The goods imported by the Appellants are 'stores'.
Section 87 contains statutory exemption with respect to the
transshipment of stores. According to him, in order to claim the
H
502 SUPREME COURT REPORTS [2008] 6 S.C.R.
~I
A 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;
B 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.
C 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
D 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
E 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's
F 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- "Except as otherwise provided
G in this Act. .. duties of customs shall be levied ... on goods
imported into, or exported, from India". 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
H present case, there is no levy of customs duty on the imported
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 503
UNION OF INDIA & ORS. [BHAN, J.]
'-,(
stores since the statute itself in Sections 86(2) and 87 makes a 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 B
~
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 c
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
D
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 E
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 F
>!t.., India, 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,
G
whereas "territorial waters of India" is used in Sections 2(21)
and 2(27), the expression "contiguous zone of India" 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 H
504 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B 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
c 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. 1.n the context of a taxing
D
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
E not adversely affect the Appellants' case. It was argued that the
"territorial waters of India" are a definite concept. The "territorial
waters" 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
F 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
G
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
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 505
UNION OF INDIA & ORS. [BHAN, J.]
'·/. breadth of territorial area shall not exceed 12 nautical miles. A
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 "foreign going vessel" carrying on operations outside the
territorial waters of India, as defined under Section 2(21) of the B
~'"
;
Customs Act. It would be impermissible to read any words into
the definition of "a foreign going vessel" or to substitute the words
"territorial waters of India" with any other words. The effect of
the High Court Judgment and the Respondent's submissions
is to substitute the words "territorial waters of India" with the c
words "territory of India"/ "continental shelf of India"/" India" 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 fall within the plain language and
meaning of the definition in Section 2(21) of the Customs Act. D
...- 45. That since, there has been no change in the definition
of the expression "foreign-going vessel" in the Customs Act,
and this definition continues to utilize the expression "outside
the territorial waters of India", the mere fact that the provisions
of the Customs Act have been extended to the continental shelf E
and exclusive economic zone makes no difference to the
Appellants' 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 F
.. 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, G
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 H
506 SUPREME COURT REPORTS [2008] 6 S.C.R.
). J
A 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
B 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
c 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
D 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
E 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
F territorial waters limit remains at 12 nautical miles and the limited
sovereignty which can be exercised therein - for the purposes ,.
of exploration and exploitation of resour~es - does not result in
the definition or meaning of territorial waters of India or foreign
going vessel being changed. According to him, the Appellants'
G vessels would continue to be entitled to be classified as such
and claim exemptions contained in the Customs Act as a
consequence thereof.
-k
48. That there is a clear distinction between the concept
of (i) the territory of India and (ii) the deeming provisions
H
0
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 507
UNION OF INDIA & ORS. [BHAN, J.]
regarding the extension of an enactment to designated areas A
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 areas are not the territory of India and do not fall
under any of the clauses of Article 1(3). Apart from the s
."(
I
Constitution not treating the designated areas as a part of the
territory of India, such a notion would also run counter to India's
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 C
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
0
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 E
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 F
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. G
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 Costa I States
have the power to legislate or take such appropriate measures
to exercise its sovereign power over that territorial limit. It is H
508 SUPREME COURT REPORTS [2008] 6 S.C.R.
),/
A 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
B 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 "sovereignty" over "territorial
c waters". 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
D
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
E which are in pari-materia have to be read together.
52. It was submitted that the Appellants' 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
F 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.
G 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 ·"'I'
over an area which is recognized as the maritime limit of the
Coastal State which was being exercised.
H
I
ABAN LOYD CHILES OFFSHORE LTD. & ANR v. 509
UNION OF INDIA & ORS. [BHAN, J.]
'* 54. That it has been clarified that India's jurisdiction under A
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 B
.... 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 c
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 T1 O] and MF (DR)
Circular No. 22/2002 Cus. dated 23.04.2002 [2002 (142) ELT
T20].
D
r~ 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. E
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 "foreign going F
vessel". 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 'store' 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 G
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
H
510 SUPREME COURT REPORTS (2008] 6 S.C.R.
.l,·
A 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's case (supra) would result in
absurd situation. The Appellant wants the Court to read Section
B 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
c 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
D
is being made to substitute the phrase appearing in the Customs
~
Act contrary to its intention, it is submitted, has no basis. What '
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.
E 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
F 60. The Customs Act is an Act to consolidate and amend
the law relating to customs. In order to appreciate the contentioris
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
G 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
H Section 14 and duty payable is required to be determined
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 511
• UNION OF INDIA & ORS. [BHAN, J.]
according to the rates specified under Section 15 of the A
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 B
VII I specifically provides that the provisions of Chapter VI II 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 "stores" i~ Section 2(38). c
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 D
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 E
. duty. Section 86(1) provides that stores imported in a vessel or
aircraft, m;:iy, without payment of duty, remain on board of such
ves~el 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 F
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 G
depends upon the answer to the question: "Whether 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 "foreign going
vessel" to mean any vessel engaged in the carriage of goods H
512 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B purpose whatsoever.
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
C 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 "unless the context otherwise requires" which
shall mean or include all things or situations and it shall not be
0
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 "India" in the light
of the provisions of law, i.e., keeping in view the provisions of
Customs Act read with Maritime Zones Act, 1'976 as the
E provisions thereof are applicable to the facts of the present case.
Under Section 2(27), "India" includes the territorial waters of
India. Under the General Clauses Act, "India" 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
F 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, "India';
commonly understood is the geographical entry comprising only
G of the land mass. For certain purposes, the country referred to
as "India" may extend into the sea upto the limit of "territorial
waters" or "contiguous zone" or "continental shelf' or "exclusive
economic zone" or "other maritime zones".
'
65. Under the provisions of Article 297 of the Constitution
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR v. 513
UNION OF INDIA & ORS. [BHAN, J]
';t
of India, all lands, minerals and other things of value underlying A
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 "territorial
waters", "continental shelf', and "exclusive economic zone".
Clause (3) of Article 297 states that their limits shall be such as B
.~
may be specified by Parliament. In 1976, Parliament
implemented the amendments to the Constitution of India by
passing the Maritime Zones Act, 1976.
66. SE:ction 3 of the Maritime Zones Act, 1976 provides
that the sovereignty of India extends and has always extended c
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 D
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 E
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 F
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
G
of India extends to a distance of 200 nautical miles from 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. ·
H
514 SUPREME COURT REPORTS [2008] 6 S.C.R.
"'~
A 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
B 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
c 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
D
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
E 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
F 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.
G
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.
H Sovereignty of India extends over the territorial waters but the
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 515
UNION OF INDIA & ORS. [BHAN, J.]
position is different in the case of continental shelf and exclusive A
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 B
· .i.. 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 c
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 modificatiot'ls which it thinks fit to the D
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 E
exclusive 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 F
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 G
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. H
516 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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. "Territorial waters" extends upto 12
nautical miles from the low water mark line of the coast (base
B line) which is consistent with the UNCLOS, 1982. Under sub-
section (28) of Section 2, "Indian customs water" 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
C 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
0
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
E 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
F 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
G 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
H
ABAN LOYD CHILES OFFSHORE LTD. & ANR. v. 517
UNION OF INDIA & ORS. [BHAN, J.]
""t
and consolidates the traditional law within a single, unificatory A
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 B
~.
I 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.
72. It is a concept of restricted sovereignty linked to the c
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.
D
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. E
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 F
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
G
of the United Nation's 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 H
518 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B pursuant to such recognition antj 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
c 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
zone. The Customs Act extends to the whole of India and not
simply to the territorial waters of India. Customs Act does not
0
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.
E
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
F 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
G 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
H 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
D
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 E
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
520 SUPREME COURT REPORTS [2008] 6 S.C.R.
.,...
A central excise duties under the Central Excise Act, 1944."
78. 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
79. 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
F 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
G
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.
80. 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
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
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
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. F
-'V
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 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
522 SUPREME COURT REPORTS [2008] 6 S.C.R.
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
E 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
F 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
G 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.)].
84. 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
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 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
524 SUPREME COURT REPORTS [2008] 6 S.C.R.
.,..-
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
D
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
E 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
G 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
H 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.
86. 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.
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 E
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 F
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
G
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
526 SUPREME COURT REPORTS [2008] 6 S.C.R.
~-
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."
89. 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
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
G 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
H 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
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 D
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 E
in these appeals and dismiss the same with costs.
R.P. Appeals dismissed
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