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The Supreme Court last week held that with respect to an issue on claiming exemption under the Customs Act against the order passed by the Customs Excise and Service Tax Appellate Tribunal (CESTAT), the appeal would be maintainable before the High Court under Section 130 of the Customs Act, 1962. The bench also noted that a dispute with respect to the exemption claimed and the dispute with regard to the rate of duty are both different, distinct, and mutually exclusive.

This view was taken by the top court while dismissing a Special Leave Petition (SLP) filed by M/s. Asean Cableship Pte. Ltd against an order of the Kerala High Court by which the high court had overruled the objection raised by Asean (the assessee) on the maintainability of the appeal before the High Court under Section 130(1) of the Customs Act, 1962 (the Act).

Essentially, M/S Asean operated the cableship CS Asean Explorer ("vessel AE") for the purposes of laying, repairing, and maintenance of submarines cables. A show-cause notice was issued proposing to initiate action under Sections 111(b) and (f) of the Act read with Section 125 of the Act, which was resisted by CS Asean Explorer. The company had contended that it was a foreign-going vessel falling within the definition of Section 2(21) and Section 87 of the Act and therefore entitled to exemption from payment of any duty under the Act.

The Commissioner of Customs, however, confirmed the demand notice vide order dated April 4, 2013, and also imposed the penalty. Thereafter, the CESTAT accepted the case on behalf of CS Asean, but the Revenue authorities preferred an appeal before the High Court under Section 130(1) of the Act.

Before the high court, CS Asean argued that appeal under Section 130E(b) shall be maintainable to the Supreme Court and not the High Court.

The High court, however, overruled the said objection on the maintainability of the appeal holding that the principal question in the present case was not in relation to the rate of duty but determining whether, vessel AE, is a foreign-going vessel or not and if the vessel AE is a foreign-going vessel, whether Section 87 of the Act would be applicable or not.

Dealing with the SLP against the decision of the High Court, the bench of Justices MR Shah and BV Nagarathna noticed that the vessel AE was a foreign-going vessel and thus the imported stores were eligible to the exemption under Section 87 of the 7 Act. The bench said,

"Therefore, the principal question/issue is the exemption claimed under Section 87 of the Act. Whether the assessee is entitled to exemption as claimed or not, such an issue cannot be said to be an issue relating, amongst other things, to the determination of any question having relation to the rate of duty."

Furthermore, the submission that the duty will be nil and if not, which was the case of the Customs Department, it will be the applicable rate of duty and therefore, such a dispute can be said to be in relation to the rate of duty, was held to have no substance.

"We are of the firm opinion that the dispute concerning an exemption cannot be equated with a dispute in relation to the rate of duty", Court said while dismissing the SLP.

Case Title: M/s. Asean Cableship Pte. Ltd. v. The Commissioner of Customs