1986 (8) TMI 83 - HC - Customs

Summary

Issues:
1. Extension of time for furnishing bank guarantee.
2. Whether a ship sold in distress under court orders will be subject to customs duty.
3. Maintainability of the writ petition before filing Bill of Entry and completing inventory.

Detailed Analysis:
1. The petitioner sought an extension of time for furnishing a bank guarantee as per a previous court order. The court noted that the order was ex parte, allowing the respondent to contest the application. The petitioner offered to provide a bank guarantee of Rs. 50,00,000 and a personal guarantee of Rs. 30,00,000. The respondent argued that the writ petition was premature as the petitioner had not submitted a Bill of Entry or allowed customs authorities to take inventory of the ship.

2. The main issue was whether a ship sold in distress under court orders would be subject to customs duty as an imported vessel. The court observed that there was no precedent on this issue, making it a res integra matter. The petitioner argued that with sufficient bank guarantee, breaking the ship and disposing of dismantled materials would not prejudice the respondent. However, the respondent contended that customs duty liability would only arise after proper procedures were followed, such as submitting a Bill of Entry and completing inventory.

3. The court considered the terms of the sale certificate, which stated that the purchaser would bear any duty or levy liabilities post-sale. To protect the rights of both parties, the court directed the petitioner to file a Bill of Entry within two weeks and the respondent to complete inventory within four weeks. Only after these steps were completed could the petitioner break the vessel, subject to providing a bank guarantee and immovable property security. The court emphasized the importance of preserving the interests of both parties without premature actions.

4. The court concluded that allowing the petitioner to break the vessel based solely on a bank guarantee would not be in the respondent's interest. The petitioner was directed to follow the prescribed procedures to ensure transparency and fair treatment for both parties. The court found the main petition not premature, considering the challenge regarding customs duty liability on the vessel.