2022 (4) TMI 575 - HC - Customs

Validity of Show Cause notice and order in original - Maintainability of petition - availability of alternative remedy of appeal - Requirement of judicial review on the process of decision making leading to the order-in-original - Benefit of exemption - Essentiality Certificate - import of drill ship - section 129A of the Customs Act - HELD THAT - The writ petition was admitted without keeping the point of its entertainability on the ground of non-exhaustion of the appellate remedy open. Once the writ petition was admitted after considering and overruling the preliminary objection raised by Mr. Jetly it stands to reason that the order dated 6th October 2020 is a final order on the objection which has since attained finality by reason of no appeal being preferred thereagainst by the respondents. The objection now raised is hit by res judicata. It is well-settled that the principle of res judicata applies at different stages of the same proceedings. Thus we have a case before us where the Court has by its order dated 6th October 2020 admitted this writ petition. The stage of entertainment has been crossed with such order. What remains is the question of adjudication of the rival claims of the parties based on the authorities cited. Even though a writ petition may have been admitted and Rule Nisi issued perceiving that it involves a purely legal point which requires an adjudication on merits but at the time of final hearing it appears to the same Court that such legal point arising for determination would involve investigation of certain disputed questions of fact and which could well be agitated and appropriately decided by the statutory appellate forum there is no reason as to why the writ petition can still not be disposed of by the Court expressing that the petitioner would have the liberty of raising all points in a statutory appeal against the order-in-original and obtain a determination both on factual and legal issues - It should therefore be the endeavor of the Court to decide the lis on factual issues on the basis of affidavit evidence if possible; if not the litigant could be relegated to the statutory forum that is available in judicious exercise of discretion. The Principal Commissioner confined his inquiry to the branches of the tree without taking the pains to find what was at its root. Clause 1.1.12(a) of the contract dated 19th September 2013 by and between ONGC and AOL (referred to therein as operator and contractor respectively) required AOL to mobilize and deploy the drilling unit along with crew so as to commence the operations at the designated first drilling location nominated by the operator (ONGC) within a period of 180 days from the date of Letter of Award from the operator. The rig will be deployed by the operator anywhere in offshore Indian water. However the 1st drilling location will be West Coast offshore Indian waters - the purpose of working out a drill ship in oil exploration areas is of a definite character. ONGC having exclusive control over the off-shore areas Aban-ICE could not have been removed at the whims and fancies of AOL and deployed for petroleum exploration in areas not within the control of ONGC or beyond the agreed area. It indeed ought to have been the endeavor of the Principal Commissioner to unearth whether Aban-ICE was used for the substantive purpose i.e. petroleum exploration for which exemption of duty was envisaged by the said exemption notification or whether it was put to use for purposes alien to the contract dated 19th September 2013. Also it does not seem to have exercised the consideration of the Principal Commissioner as to whether the purpose intended to be served for claiming exemption was justified or not. The Principal Commissioner it seems was of the perception that since the Essentiality Certificate had a life of 6 (six) months it could not have been amended and no addition thereto could be effected after expiry of its life - the DGH in issuing the Essentiality Certificate does not perform a quasi-judicial function. We have not been shown any statutory rule following which the Essentiality Certificate has to be issued; on the contrary such certificate is issued in exercise of administrative function and based on policy or expediency. It was therefore open to the DGH to issue the NOC. To amount to suppression of a material fact there has to be something more than a mere non-disclosure. The objection of Mr. Jetly that AOL had willfully suppressed the fact that Aban-ICE is being utilized for other blocks which are not covered under the specific contract dated 22nd December 2008 for which it was imported does not commend to be sound - The order-in-original dated 27th February 2017 suffers from illegality as well as irrationality which constitute vices in the decision making process attracting judicial review. Evaluation of facts by the Principal Commissioner upon such review leads to the conclusion that the facts taken as a whole did not logically warrant the conclusion he did reach for which the said order is liable to be invalidated. Petition allowed.

Summary

Issues Involved:
1. Whether the petitioners should be relegated to the alternative statutory remedy available.
2. Whether the order-in-original dated 27th February 2017 suffers from any vices that could attract judicial review.
3. What relief, if any, the petitioners are entitled to.

Detailed Analysis:

Issue 1: Alternative Statutory Remedy
The respondents contended that the petitioners should be relegated to the statutory appellate remedy available under Section 129A of the Customs Act, 1962. However, the court noted that the writ petition was admitted by a coordinate bench on 6th October 2020, which overruled the preliminary objection regarding the non-exhaustion of the appellate remedy. The court held that once the writ petition was admitted, the objection is hit by res judicata, and the principle of res judicata applies at different stages of the same proceedings. Therefore, the court decided to proceed with the adjudication of the writ petition on its merits.

Issue 2: Judicial Review of the Order-in-Original
The court examined whether the process of decision-making leading to the order-in-original dated 27th February 2017 suffered from any vices that could attract judicial review. The Principal Commissioner of Customs denied the benefit of the exemption notification to the Drill Ship ABAN-ICE, citing violations of mandatory conditions. The court found that the Principal Commissioner confined his inquiry to the branches of the tree without examining the root cause. The court noted that the contract between ONGC and AOL allowed the deployment of the drill ship in eligible PEL/ML areas and NELP areas, and there was no finding that the drill ship was deployed for purposes alien to petroleum operations. The court also observed that the Principal Commissioner failed to appreciate that the breach was of a technical nature with little or no significance regarding the working of the drill ship for petroleum exploration operations.

The court further noted that the Principal Commissioner erred in negating the effect of the NOC issued by the DGH based on the 'Doctrine of Curability.' The court held that the validity period of six months specified in the Essentiality Certificate was for the purpose of import to avail the benefit of the exemption notification and did not mean that the certificate became non est or invalid after six months. The court also stated that the DGH's issuance of the Essentiality Certificate and the NOC was an administrative function and not a quasi-judicial one, and the Principal Commissioner was not justified in questioning the DGH's approval.

Issue 3: Relief
The court concluded that the order-in-original dated 27th February 2017 suffered from illegality and irrationality, attracting judicial review. The court quashed the order-in-original and discharged the petitioners from all undertakings. The writ petition was allowed, and the parties were directed to bear their own costs.

Conclusion:
The court decided in favor of the petitioners on all issues, quashing the order-in-original dated 27th February 2017, and allowed the writ petition with no costs imposed on either party.