2020 (3) TMI 1306 - HC - Customs

Re-quantification of penalty imposed under u/s 116 of CA for short landing of goods - It is the contention of the petitioner that the original Authority had wrongly calculated the discharge quantity to arrive at the short landed quantity for the purpose of imposition of penalty under Section 116 of the Customs Act, 1962 - tolerance limit of 1% to .5% was considered - applicability of Indian Carriage of Goods by Sea Act, 1925 - HELD THAT - Though the provision of the Indian Carriage of Goods by Sea Act, 1925, codifies the Hague Rules, Protocol of Signature, (Brussels, 25 August 1925), it has no application for discharge of imported cargo within India from vessels coming from outside the country - The Hon ble Supreme Court in East and West Steamship Co. George v. S.K.R., 1960 (5) TMI 38 - SUPREME COURT , has also noted the Section 2 of the Indian Carriage of Goods by Sea Act, 1925, states that rules set out in the Schedule shall have effect only in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in India to any other port whether in or outside India. Thus, the said Act is not relevant for considering whether the person-in-charge of the conveyance can state that the bill of lading quantities are not binding of vessels/conveyance or its master. Therefore, the arguments of the Learned Counsel for the petitioner on this ground cannot be entertained. Vessel is permitted to discharge liquid cargo only after a ullage survey is carried out under supervision of the Customs Officer and such survey report is signed not only by the Customs officer, but also by the ship-owner or/and the consignee and its agent - After the discharge of the liquid cargo from the vessel, a fresh survey is to be carried out in presence of the Customs Officer. The discharge completion survey report is to be signed by the Customs officer, ship-owner and the consignee or its agent - The difference in the Bill of Lading Quantity or the ullage Survey Report at the Port of loading with the ullage Survey Report at discharge port is to be treated as short landed quantity for the purpose of Section 116 of the Customs Act, 1962. From the reading of the judgment of this Court in CAG Shipping (India) Pvt. Ltd. v. The Government of India and Others, 2016 (9) TMI 619 - MADRAS HIGH COURT Fluorspar contains moisture to facilitate handling and to reduce dust and therefore presence of high moisture content was recognised. There, the Adjudicating Authority had allowed only 0.5% which is universal accepted principle in Maritime law for all the import cargo. However, considering the nature of the import cargo, there the Court had allowed the tolerance limit at 6.47% according to the parameters published by Mr. Michael Miller, an internationally renowned expert on chemicals who had opined that Acid Grade Fluorspar is shipped routinely in the form of damp Filtercake containing 7% to 10 % moisture. The petitioner is directed to remit the penalty re-determined by the 3rd respondent in respect of the following show cause notices within a period of thirty days from the date of receipt of a copy of this order - Petition allowed in part.

Summary

Issues Involved:
1. Validity of the impugned order and consequential orders.
2. Legality of penalty imposition under Section 116 of the Customs Act, 1962.
3. Adherence to procedural guidelines for survey reports.
4. Timeliness of adjudication proceedings.
5. Applicability of the Indian Carriage of Goods by Sea Act, 1925.
6. Relevance of previous case laws and judicial precedents.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order and Consequential Orders:
The petitioner contested the impugned order dated 18-3-2004 by the 1st respondent, which disposed of 11 Revision Applications under Section 129DD of the Customs Act, 1962. The petitioner was aggrieved by the orders of the 3rd respondent dated 3-6-2005 and 6-6-2005, which gave effect to the 1st respondent’s order and reduced the penalties imposed.

2. Legality of Penalty Imposition under Section 116 of the Customs Act, 1962:
The petitioner, a steamer agent, was issued 11 show cause notices under Section 116 of the Customs Act, 1962, for short landing of consignments. The 1st respondent upheld the imposition of penalties but reduced the amounts. The petitioner argued that the original authority wrongly calculated the discharge quantity, leading to erroneous penalties. The 1st respondent justified the penalties, noting the absence of a survey report countersigned by Customs officers, as required by the Bombay High Court's guidelines in Shaw Wallace and Co. v. The Assistant Collector of Customs.

3. Adherence to Procedural Guidelines for Survey Reports:
The 1st respondent noted that no survey report was prepared as per the Bombay High Court’s guidelines, which required a survey report to be countersigned by a Customs officer. The court emphasized that the absence of such a report justified the penalties under Section 116 of the Customs Act, 1962.

4. Timeliness of Adjudication Proceedings:
The petitioner argued that the adjudication orders were passed beyond a reasonable time frame, citing delays of over five years in some cases. The court referred to the Bombay High Court’s decision in Parekh Shipping Corporation v. The Asstt. Collector of Customs, which held that adjudication should occur within a reasonable period. The court found that penalties in cases with significant delays (Serial Nos. 2, 5, 6, 8, 10 & 11) could not be sustained due to the unreasonable delay.

5. Applicability of the Indian Carriage of Goods by Sea Act, 1925:
The petitioner argued that under Section 6 of the Indian Carriage of Goods by Sea Act, 1925, the quantity mentioned in the bill of lading is not prima facie evidence against the carrier for bulk cargo. The court, however, found that this Act was not relevant for determining liability for short landing under the Customs Act, 1962, as it applies only to contracts of carriage from Indian ports.

6. Relevance of Previous Case Laws and Judicial Precedents:
The court considered several precedents, including decisions from the Bombay High Court and Madras High Court, which emphasized the importance of timely adjudication and the necessity of following procedural guidelines for survey reports. The court noted that in cases where the Revisional Authority found no intentional fault by the petitioner, penalties should be reconsidered.

Conclusion:
The court directed the petitioner to remit the re-determined penalties for certain show cause notices (Serial Nos. 1, 3, 4, 7, and 9) within thirty days. The writ petition was partly allowed, and penalties for other cases with significant delays were set aside. The court emphasized the importance of adhering to procedural guidelines and timely adjudication in customs matters.