2021 (8) TMI 670 - HC - Customs

Provisional release of the Vessel - requirement of furnishing bank guarantee or cash deposit and execution of bond - HELD THAT - The evasion of duty on the materials, namely, the HSD and the sludge oil does not appear to be of substantial amounts for which the bank guarantee of ₹ 35 lakhs, as furnished by the petitioner, can be said to be insufficient. The question is, however, of the Vessel itself being treated as goods and which is valued at ₹ 7 Crores. As to whether the Vessel would be liable for confiscation and further consequential orders, is an issue which would be required to be decided in the adjudication of the show cause notice, which has now been issued to the petitioner calling upon the petitioner to reply the same within 30 days of its receipt. It would be appropriate that the respondents proceed to adjudicate the show cause notice, after the reply is filed by the petitioner within the prescribed period of 30 days granted to it from the date of the receipt of the show cause notice. At this stage it may not be appropriate to consider the merits of the rival contentions which are certainly issues falling under the show cause notice. It would be in the interest of justice that provisional release of the Vessel by the respondents be ordered pending the adjudication of the show cause notice - Petition disposed off.

Summary

Issues:
1. Quashing communication for provisional release of a vessel under Customs Act.
2. Allegations of duty evasion and seizure of the vessel.
3. Validity of bank guarantee and bond submitted by the petitioner.
4. Respondent's contention on protecting revenue and issuance of impugned communication.
5. Show cause notice issued and duty evasion allegations.
6. Treatment of the vessel as goods and provisional release conditions.

Analysis:

1. The petitioner sought to quash a communication for provisional release of their vessel under Section 110A of the Customs Act, 1962. They requested release based on a bond and bank guarantee, disputing the respondent's demand for an increased security deposit.

2. The respondent alleged duty evasion and seized the vessel due to suspicions of customs duty manipulation and unauthorized discharge of restricted items. The petitioner contested the lack of specificity in the seizure memo and the value attributed to the vessel.

3. The petitioner submitted a bank guarantee and bond to secure the vessel's release, which the respondent found inadequate. The respondent argued that the impugned communication aimed to safeguard revenue and impose necessary conditions for release.

4. The respondent contended that the vessel's treatment as goods valued at ?7 Crores justified the provisional seizure. The court directed the respondent to proceed with adjudication based on a show cause notice issued to the petitioner.

5. The show cause notice detailed duty evasion allegations related to the vessel and demanded a response within 30 days. The court emphasized the need for proper adjudication before determining the vessel's liability for confiscation.

6. The court ordered provisional release of the vessel under specified conditions, including acceptance of the bank guarantee and bond, submission of a reply to the show cause notice, and restrictions on vessel movement pending adjudication. The petitioner was also allowed to pursue conversion to an Indian flag vessel, subject to the ongoing proceedings.