1997 (4) TMI 84 - HC - Customs

Issues Involved:
1. Seizure and confiscation of gold biscuits.
2. Execution and interpretation of the bond by the petitioner.
3. Liability of the owner and master of the vessel.
4. Appropriation of the security deposit for penalty imposed on the radio officer.
5. Validity of the adjudicating officer's order regarding appropriation of the security deposit.

Detailed Analysis:

1. Seizure and Confiscation of Gold Biscuits:
The petitioner, acting as a local ship agent, managed the vessel MV Optima, which arrived at Calcutta Port from Singapore. Customs officers, during a rummage, observed suspicious behavior from the radio officer, Mr. Hernani B. Villanueva, leading to the discovery of concealed gold biscuits weighing 8.2 kgs and valued at Rs. 41,00,000/-. These were seized under the Customs Act for being smuggled goods.

2. Execution and Interpretation of the Bond by the Petitioner:
The petitioner executed a bond on 12th July 1995, binding itself to a sum of Rs. 2 crores, with a specific clause allowing the appropriation of Rs. 5,00,000/- towards penalties, fines, or incidental charges. The bond included a cash deposit of Rs. 2,00,000/- and a bank guarantee of Rs. 3,00,000/-. The interpretation of this bond, particularly the clauses regarding the deposit and appropriation, is central to the dispute.

3. Liability of the Owner and Master of the Vessel:
The adjudicating officer's order on 6-5-1996 confiscated the gold biscuits and imposed a penalty of Rs. 5,00,000/- on the radio officer. However, the charges against the owner and master of the vessel were dropped, and the bond executed by the petitioner was discharged. The bond was intended to cover liabilities of the owner and master, not the personal liabilities of the radio officer.

4. Appropriation of the Security Deposit for Penalty Imposed on the Radio Officer:
The petitioner argued that the bond was executed solely for liabilities arising against the owner or master of the vessel, not for penalties imposed on the radio officer. The respondents contended that the bond's terms should be interpreted to include any penalty imposed by the adjudicating officer, including those on the radio officer.

5. Validity of the Adjudicating Officer's Order Regarding Appropriation of the Security Deposit:
The court emphasized that the bond must be read as a whole, reflecting the intention of the parties. The bond was executed for the owner and master of the ship, not the radio officer. The adjudicating officer's order to appropriate Rs. 5,00,000/- from the bond for the radio officer's penalty was deemed improper. The court ruled that the bond's terms did not cover the radio officer's liability, and the customs authorities lacked the statutory power to obtain a bond covering such liability.

Conclusion:
The petition was allowed, and the order dated 6-5-1996 was quashed to the extent it appropriated Rs. 5,00,000/- from the petitioner's deposit for the radio officer's penalty. The bond and bank guarantee were discharged, and the deposited amount was ordered to be returned to the petitioner within three months. No costs were awarded.

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