At least 15 ships of Indian firms, including Oil and Natural Gas Corp. Ltd (ONGC), Great Offshore Ltd, Hind Offshore Pvt. Ltd and Samson Maritime Ltd, have been detained by Indian customs for alleged evasion of duties. Following this, these vessels are losing an average of Rs. 60 lakh a day as they are not able to ferry cargo.

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Shipping industry representatives claimed the Mumbai division of customs has seized even older Indian vessels citing a 2001 regulation. The authorities are demanding levy on these ships at the old value and not taking into consideration depreciation, they said.
The customs authorities demand duty5% of a ships valuewhen shipping companies seek permission to ply coast-to-coast in India. Till such time these ships are plying international routes, they are exempted from paying such duty.

The customs division started charging the fee in November.

Shobha Chary, chief commissioner of customs of zone 1 (Mumbai), confirmed the development. Two customs officials said at least 15 vessels were detained but declined to divulge details citing ongoing investigations.

Experts say the sudden imposition of this duty will adversely affect the shipping lines.

A small ship of Hind Offshore supplying equipment to oil exploration blocks in the sea is under detention for at least a month and another vessel of the same firm has been seized for the past 20 days. Each of them is losing Rs. 10 lakh a day.

A couple of ONGC vessels are losing Rs. 60 lakh a day each as they are detained.

Company representatives met customs authorities early this month regarding this.

Interestingly, in November 2010, the Central Board of Excise and Customs had issued a circular saying vessels already acquired and plying in India do not need to pay any duty.

They are also exempted from filing bills of entry. India-registered ships are required to file bills of entry only at the time of breaking of the vessel, according to finance ministry guidelines.

A bill of entry is a declaration by an importer or exporter of the exact nature, precise quantity and value of goods that have landed or are being shipped out. Prepared by a qualified customs clerk or broker, it is examined by customs authorities for its accuracy and conformity with tariff and regulations.

It is illegal to demand duty on vessels that have been acquired five years ago, said J.S. Sanghvi, a consultant at Sanjosh Consultants Pvt. Ltd. A former Indian Revenue Service official, Sanghvi is advising several of the companies whose ships have been detained.

Earlier, we were not required to pay duty on supply vessels. Now, they are classifying certain supply vessels of my clients as tugs and demanding tax. As we are losing revenue, bankers are also refusing to extend bank guarantee to companies, Sanghvi said. Tugs are small boats that carry cargo.

Anil Devli, chief executive officer at lobby group Indian National Shipowners Association (Insa), said such a duty was announced in 2001 but never implemented. If the law did exist all these years, why was it not implemented? Devli asked.

He said vessels imported before 2001 should not pay any duty. They entered Indian waters several times. No duty on the value of the vessels was sought to be imposed all these years by the very Mumbai customs. Why are the vessels being asked to pay duty on the original value of the vessels? Devli asked.

S. Khader Rahman, additional commissioner of customs (Mumbai), said his organization is not making law but simply interpreting it. He did not elaborate.

Insa has approached the Central Board of Excise saying no duty should be imposed on these vessels since the customs authorities are aware of these vessels being in Indian waters.

Shipping Corp. of India Ltds chairman and managing director S. Hajara said the Indian maritime sector needs a level playing field with other parts of the world. Shipping Corp. manages vessels of ONGC.

Chary of Indian customs said her organization is aware of the gravity of the issue. We understand the repercussions of this in the shipping industry. We are discussing it with our top authorities, and the matter is under the active consideration of the (finance) ministry, Chary said.