1999 (4) TMI 538 - AT - Customs

Summary

Issues Involved:
1. Liability of the vessel for confiscation.
2. Confiscation of the cargo (damaged cars).
3. Imposition of penalties on appellants.

Detailed Analysis:

1. Liability of the vessel for confiscation:

The vessel, M.V. Magnolia Ace, carrying 3929 cars of Japanese manufacture, caught fire and was extensively damaged. The ship's owner entered into a salvage agreement with M/s. Semco Salvage and Marine Pvt. Ltd., Singapore, on a "no cure no pay" basis. The damaged ship and cargo were sold to M/s. ITC Global Holdings Pvt. Ltd. (ITC) with the condition that they would be scrapped. The vessel was towed to Alang port for scrapping.

The Customs department issued a show cause notice proposing the confiscation of the ship under sub-section (2) of Section 115 for carrying smuggled goods. However, the argument was made that the vessel was not liable to confiscation because the goods it carried were completely destroyed by fire and unusable. The ship was not being used as a means of conveyance but was itself considered "goods" due to its condition.

The judgment concluded that the ship was not carrying cargo liable to confiscation and the provisions of Section 115 did not apply. The ship was brought to Alang for scrapping, and there was no contravention of the Act. Therefore, the ship was not liable for confiscation.

2. Confiscation of the cargo (damaged cars):

The Customs department proposed the confiscation of the cars under clauses (d) and (h) of Section 111, arguing that they were consumer goods requiring a license and were unloaded in contravention of Section 33.

The judgment noted that the cars were completely damaged by fire and unusable as such. The surveyor Ericson Richards confirmed the extensive damage. Import of scrap was not prohibited or restricted by the import policy in force. The cars were considered scrap, not serviceable motor vehicles, and thus not liable to confiscation under clause (d) of Section 111.

Regarding clause (h) of Section 111, the judgment clarified that the cars were only unloaded after being seized by the department. The act of bringing the cargo to Alang did not constitute unloading. The unloading referred to in Sections 33 and 34 is the physical removal of cargo from the ship, which occurred after the seizure. Therefore, the confiscation of the cars under clause (h) was not justified.

3. Imposition of penalties on appellants:

Penalties were imposed on ITC Global, Sanjeev Jain, Azad Jain, Arihant Ship Breakers, and Ashit Shipping under clause (b) of Section 112.

The judgment found that penalties could not be imposed on Arihant because it was the purchaser in good faith of the ship and had no interest in the cars. Arihant had kept the department informed of the intended beaching of the vessel.

Sanjeev Jain was only a representative of ITC Global and not involved in the transactions leading to confiscation. Therefore, penalties were not imposable on him.

The judgment concluded that none of the appellants contravened the provisions of the Act, and penalties were not justified.

Conclusion:

The appeals were allowed, and the impugned order was set aside. The vessel and cargo were not liable for confiscation, and penalties were not imposable on the appellants. Consequential reliefs were granted.