2011 (4) TMI 166 - HC - Customs

Seizure - As the vessel in question was not released, Writ Petition No.10240 of 2010 was filed, wherein an order was passed on 23 -12 2010 to the effect that the Customs would allow provisional release of the vessel in question - If the vessel is required for the petroleum project, then issuance of the essentiality certificate by DG, Hydrocarbons could not be faulted - DG, Hydrocarbons could not have cancelled the essentiality certificate without hearing the petitioners and without considering the case of the petitioners - The fact that the vessel in question has been used for petroleum operations since last four months is not in dispute - when the vessel is provisionally released, the question of confiscating the vessel under the provisions of the Customs Act, even before adjudication does not arise - Accordingly, the seizure memo dated 7-4-2011 is quashed and set aside and the Customs Authorities are directed to release the vessel forthwith - Decided in favour of the assessee

Summary

Issues:
1. Seizure of imported vessel by Customs Authorities based on cancellation of essentiality certificate.
2. Validity of cancellation of essentiality certificate without hearing petitioners.
3. Justification of vessel seizure under Customs Act.
4. Consideration of vessel's use for petroleum project.
5. Relevance of evaluation by ONGC regarding subcontractors.
6. Legality of vessel seizure before completion of investigations.

Analysis:
1. The petitioners challenged the seizure of a vessel by Customs Authorities following the cancellation of the essentiality certificate by the Directorate General of Hydrocarbons (DG). The vessel was imported for a petroleum project under a contract between the Oil and Natural Gas Corporation (ONGC) and the petitioners.

2. The cancellation of the essentiality certificate without hearing the petitioners was deemed unjustified by the court. The DG's decision was influenced by Customs Authorities, and the cancellation was solely based on ONGC's evaluation of the subcontractors, which was contested by the petitioners.

3. Customs Authorities justified the seizure under Sections 111(h), (m), and (o) of the Customs Act, alleging misrepresentation in obtaining provisional release. However, the court found no merit in this argument as the vessel was indeed required for the petroleum project, and the essentiality certificate was valid at the time of import.

4. The court emphasized that the vessel had been used for the petroleum project since provisional release, fulfilling the requirements of the Customs Act. The vessel's use for petroleum operations for the past four months was undisputed, supporting the petitioners' case for release.

5. The relevance of ONGC's evaluation of subcontractors in handling the vessel was debated. The court clarified that the essentiality of the vessel for the project was paramount, irrespective of the subcontractors involved, as per the Customs Act's provisions.

6. Ultimately, the court ruled in favor of the petitioners, quashing the seizure memo and directing Customs Authorities to release the vessel. The court highlighted that the observations made were preliminary, allowing Customs Authorities to finalize the assessment independently. The petitioners were restricted from using or re-exporting the vessel without Customs Authorities' permission until adjudication completion.