Customs Act, 1962 Section 87 — Imported stores may be consumed on board a foreign-going vessel or aircraft

Overview

Section 87 of the Customs Act, 1962 permits the consumption of imported goods onboard foreign-going vessels or aircraft as stores, without attracting customs duty. This provision facilitates international travel and commerce by allowing the use of essential supplies during voyages and flights. The rationale is to avoid double taxation by taxing imported stores when they are eventually consumed outside the domestic territory.

Who Does This Apply To?

This section primarily applies to:

• Owners and operators of foreign-going vessels and aircraft.
• Crew members of foreign-going vessels and aircraft.
• Customs officers responsible for overseeing the clearance and consumption of stores on board.
• Businesses involved in the supply of stores to foreign-going vessels and aircraft.

How It Works

The following steps explain how Section 87 functions:

• Imported Stores Defined: "Stores" refer to goods imported for use or consumption on board a vessel or aircraft during its voyage or flight. This typically includes provisions, supplies, and equipment necessary for the vessel's or aircraft's operation and the well-being of its passengers and crew.

• Duty Exemption: Imported stores on board a foreign-going vessel or aircraft can be consumed without payment of customs duty if they meet certain criteria. This exemption is crucial to the economics of operating a vessel or aircraft in international transit.

• Foreign-Going Requirement: The duty exemption only applies while the vessel or aircraft is considered "foreign-going." This generally means it's engaged in international voyages or flights, transporting goods or passengers to or from foreign locations. Domestic voyages or flights might not qualify under this section. The customs authorities will determine if a vessel or aircraft is foreign-going based on its intended route and purpose.

• Exclusion of Section 90 Stores: Stores covered under Section 90 of the Customs Act, 1962 are specifically excluded from the benefits of Section 87. Section 90 deals with the allowance of certain stores free of duty for vessels bound for foreign ports or airports which have been cleared for such purpose.

Important Conditions & Exceptions

• Condition 1: The goods must be bona fide stores intended for consumption by passengers or crew during the voyage or flight.
• Condition 2: The consumption must occur on board the vessel or aircraft while it is in foreign-going status.
• Exception: Any stores that are sold or transferred ashore are subject to customs duty. The stores can only be consumed onboard the vessel or aircraft.
• Compliance: Proper records and documentation of the imported stores, their consumption, and the vessel's or aircraft's foreign-going status are essential for demonstrating compliance with the customs authorities.

Practical Example

Consider a foreign-going cargo vessel, "MV Shipping Star," carrying imported food provisions (stores) worth ₹50,000 for its crew. While the vessel is sailing from Mumbai to Singapore, the crew consumes these provisions. Under Section 87, no customs duty is payable on these provisions as they are being consumed on board a foreign-going vessel as stores. However, if the vessel decides to sell a portion of these provisions ashore for ₹10,000, customs duty will be applicable on that sold portion as it violates the condition of onboard consumption. The vessel operators need to keep detailed records to demonstrate that the provisions were genuinely consumed as stores during the international voyage.

Key Amendments

No major amendments since enactment.