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TMI Blog2006 (8) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8901 read with exemption Notification No. 21/2002 dated 1-3-2003 Sr. No. 352. (ii) Old and used Tugs shown in the annexure to the impugned order at Sr. No. (1) Sea Bulk Duke (2) Sea Bulk Harrier (3) M.V. Ronja Tug (5) M.V. Linda (6) M.V. Sea Icon - Supply Vessel (7) M.V. Britoil 29 (8) M.V. Britoil - 8 (total 6 Nos. of Tugs and 1 Supply vessel); and Self-propelled barges shown at Sr. No. (2) HD 1000 and (4) HD 60 (2 Nos.) - all with parts and accessories carry 5% rate of duty as per CTH No. 8905 and exemption Notification No. 21/2002 dated 1-3-2003 Sr. No. 353 read with Notification No. 27/2002 dated 1-3-2002. The effective rate of duty is computed at 0-75% (15% of 5%) actually payable in cash and for the balance 4-25% (85% of 5%) the Bank Guarantees were furnished. (iii) Old and used M.V. Britoil - 56 Tug and Derrick Barge (DB-30) shown in the annexure to the impugned order at Sr. No. 9 with parts, accessories and consumables carry NIL rate of duty as per CTH Nos. 8901, 8905 etc., read with Exemption Notification No. 21/2002 dated 1-3-2002 Sr. No. 214 against Essentiality Certificate dated 6-12-2004 issued by Directorate General hydrocarbons, Ministry of Petroleum and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of Mumbai Custom House, vessels left Mumbai Port. Subsequently, these vessels were seized by the Customs and enquiries were launched and the present proceedings were commenced which culminated in a confiscation order under Section 111(j) of the Customs Act, 1962, as regards the vessels, stores and consumables and penal consequences on the importers and other notifies, which has caused these appeals. 8. After hearing both sides and considering the submissions made, it is found - Section 111(j) under which the Commissioner confiscated the vessels, stores and consumables is not applicable. It is patently illegal to confiscate the vessels under the said Section 111(j) in spite of there being permissions to convert the vessels for Coastal run and port clearances (PC) certificates in respect of 8 vessels and DGH Essentiality Certificate (EC) in respect of 9th vessel Britoil - 56 and Derrick Barge DB-30 being on record. Hence, the confiscation is not sustainable in law. 9. A reading of the provisions of Section 42 of the Customs Act, 1962 indicates that no such order of Port Clearance in writing permitting a conveyance to depart from that Customs Station will be given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods, unloaded in a customs area shall remain in the custody of such person as may be approved by the Commissioner of Customs until they are cleared for home consumption or are warehoused or art transhipped in accordance with the provisions of Chapter VIII. and the Mumbai Port Trust is an approved custodian under this provision for all imported goods, they have not been charged in these proceedings. Under Section 45(2)(b) as they as custodian have permitted the removal of the imported goods from the Customs Area of Port without the permission in writing of the proper officer. Thus unilaterally the importers or their agents and employees cannot be held responsible for having removed the vessels, barges, self-propelled, barges etc. from the Customs Area of Port without a permission. The Ld. Counsel for the Revenue took us through the provisions of Section 47 of the Customs Act, 1962 and stressed that there has been no out charge order obtained under that provisions of the Customs Act, 1962 from the proper officer permitting clearance of the goods for home consumption. We find that the words used in Section 47 is permitting clearance of the goods for home consumption , while u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duties and there is a delay in collection of duties on the ship store, consumables only because of the delay on the part of the AC/DC to accord the approval of the assessments as arrived by the scrutinizing appraiser. Then the removal after Port Clearance by itself should not call for confiscation under the provisions of Section 111(j) of the Customs Act, 1962 as arrived at and or penalty on the appellants, as there is no loss or less payment of Customs Duty. 11. The provisions of Section 111(j) of the Customs Act, 1962 on a plain reading indicate they would be applicable in cases where there is deliberate removal of unaccounted goods without written permission under any of the provisions of the Customs Act, 1962. In this case, the removals were after due permissions of conversion. Preventive Checks on Ship Stores and Port Clearances, obtained, which could have been refused, but were not refused, therefore the confiscation as arrived at cannot be upheld. 12. It is a matter of record that Bills of Entry were filed in the present case. It is also not in dispute that the Vessels were examined. The Vessels left after the conversion into coastal vessels and Preventive Checks and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Derrick Barge DB-30 (Sr. No. 9) were fully exempt from import duties as the same is covered by the EC issued by the DGH. The assessable value of this single B/E covered by DGH certificate itself is Rs. 203,87,65,727/-. The major part of the goods are non-dutiable and non-prohibited. There was thus no effective or/and mala fide removal from Custom Area to call for confiscation and penalty. 15. In making the Application for conversion of the Vessels for coastal run, the CHA indicated that the Bills of Entries have been filed and processed. Except in respect of one vessel, for the remaining vessels, the CHA also attached a copy of relevant Bill of Entry along with the Application for conversion of the vessels for coastal run. A bare perusal of the Bill of Entries would show that no out of charge order has been passed and no duty also had been paid. Despite these facts, the jurisdictional Officer allowed conversion of the vessels and granted the Port Clearance for coastal run. These permissions are not being challenged 16. It is significant to note that the words have been filed and processed used in these applications also do not signify that out of charge order was passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly after grant of port clearances, which was based on the approval of conversion to coastal run, the question of contravening the provision of Section 111(j) of the said Act does not arise at all. 18. There is yet another reason for not applying the said provisions of Hi the said Act. This is because the word permission is not qualified by the word prior . Accordingly, ex post facto permission granted in the facts and circumstances of the present case, where a Bill of Entry was filed, Bank Guarantee for 85% of the duty amount and pay order for the balance 15% of the duty amount was furnished and the Vessels were examined, the assessment at a later stage would regularize the movement of the vessels to the sites where the same were used for ONGC contracts. The Hon ble Supreme Court of India in Life Insurance Corporation v. Escorts Limited, AIR 1983 1370 SC held that where the word permission is not qualified by the word prior , the ex post facto permission is also sufficient. 19. Since goods valued at approximately Rs. 220 crores are non-dutiable, these goods are also not prohibited for import, but are freely permissible for import. The provisions of Section 111(j) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure by the Appellants in all respects. There were no mala fides on the part of importers. Having made the pay orders and Bank Guarantees ready, the importers bona fide believed that the vessels could sail out without any problem. This belief was strengthened by the CHA M/s. J. M. Baxi Co. when they instructed them to sail out as all the Customs formalities were completed and port clearance obtained. It was in the knowledge of the importers that the import bills of entries covering the vessels were filed and duties were tendered them by way of Pay orders purchased on 24/30 Nov. 2004 from the Bank in favour of RBI A/c. Commissioner of Customs - Mumbai Bank Guarantees in favour of Commissioner of Customs furnished to CHA. The details of the pay orders and the duty amounts were shown on the letter head of the Chohung Bank, from whom the pay orders were purchased. Subsequently the same pay orders which were tendered along with the import Bills of entries in respect of the vessels were realized by the Revenue Department, whereas for the consumables and provisions the pay orders covering the duties were purchased upon return of the assessed and approved import Bills of entries o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y processed we meant that the B/E was examined no discrepancy was found it was also assessed by appraiser, normally after which the B/E gets counter signed by the Group DC hence the term processed was used, but since the assessment was not counter signed by the DC out of charge not granted the B/Es not completely processed. Q. 31: On whose instructions the submission in the application to Export Department for the conversion of the subject vessels/barges/tugs was made, that B/Es for vessels/barges, oil, consumables etc. has been filed and processed/cleared? Ans 31: The submission was made by us on the assumption that the B/E will get processed out of charge will be granted. We have not taken any specific instruction from the importer in this regard. Extracts from the statement of Mr. K.Y. Song, Co-ordinator (Marine Spread) of M/s. Hyundai Heavy Inds. Co. Ltd. recorded on 22-12-2004. I am Korean National working in India for M/s. HHIL as coordinator at their office at Chembur, Mumbai. The registered office address of my company in India is Unit No. 2, Commercial Center No. 1, WTC, Cuffe Parade, Colaba, Mumbai - 400 005. I came to India to attend this project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vessels in urgency due to the project being of national importance the remaining formalities could be completed and therefore vessels could be sailed. Based on the above exculpatory statements the ld. Counsel for Appellants urged that the importer (HHI) and K.Y. Song are not liable for any enalties under Section 112(a) of the Act. Redemption fine is not attracted as the good are not liable to confiscation u/s. 111(j) in the first place. As an alternate plea it was also submitted that the lapses/irregularities, if any, are merely procedural/technical. There was substantial compliance on the part of the Appellants. A reference was made to Dredging Contracting v. Commissioner of Customs, Kandla, 2005 (183) E.L.T. 29 (Tri-Mumbai) Aban Loyd Chiles Offshore Ltd. v. Commissioner of Customs, Mumbai, 2003 (156) E.L.T. 490 (Tri-Mumbai) where under the penalties were fully waived and a token redemption fine was imposed since the goods have no Margin of Profit (MOP) and not marketable and are subject to re-export. We agree with these submissions. 24. The ld. Counsel for Respondent submitted that the vessels are goods and also they are carrying cargo. 25. In the rejoinder, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thereafter, the said supply vessel was shuttling between the Bombay High and the port on various dates as per the investigation report given by the MbPT and placed on record and also thereafter on number of occasions. As such the PC in respect of this vessel is called as Advance Port clearance certificate, since the same is given in advance to the sailing of the vessel on working days/hours covering Sundays and holidays. This itself would indicate that there was nothing sinister in the vessels having gone into operations since, if required, they repeatedly come leave the Port. This indicates the bona fides of the importers. 28. The ld. Counsel for the Respondent argued that the vessels were brought back from the work place to Bombay and seized and then released provisionally on 22-12-2004. The fact is stated to be that the vessels were not brought back to Mumbai port area, since the goods were physically not available for seizure. The Department seized the vessels technically in absentia and handed over to the owner of the goods under supratnama this as is borne out by the seizure memos on record in respect of all vessels in question. The seizure itself is technical. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were painted over to suppress their true nature or price of stainless steel containers, which was a banned item. The stainless steel containers were deliberately camouflaged by painting them to resemble mild steel containers, and that this was done with a view to enabling their clearance. Whereas in the present case there is no suppression of facts by the Appellants (HHIL). The vessels/tugs/barges, oil, consumables are not prohibited items and the importer had correctly declared the same as such. (c) N. K. Bapna v. Union of India, 1992 (60) E.L.T. 13 (SC). Confiscation - Goods clandestinely removed from bonded warehouse are liable to confiscation. In rebuttal the Appellants submitted that there was no clandestine removal of any goods from the Customs area without the permission of the proper officer of the Customs. (d) Chowgule Co. Pvt. Ltd. v. Union of India, 1987 (28) E.L.T. 39 (SC). The above case is relevant to understand the definition of goods including the vessels. The questions whether the oceangoing vessels were exempt from presenting B/E with reference to Section 46 of the Act etc., were examined by the Hon ble SC in the above case, whereas in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate reasons for non-payment of dues. In this case such a permission has been granted by an officer working under Customs. Duties were also already tendered to the Department and the procedure of assessment was substantially completed by the CHA except the counter signature of the Group DC. The Applications for Coastal conversion and port clearances made by the CHA M/s. J. M. Baxi Co. together with import B/Es under a covering letter were considered by the Export Department and the permissions granted. Thereafter the Customs Department ought to be precluded from contending that they have no knowledge that the payment of duties was not made in the light of the fact that the pay orders were already tendered to them. Thus none of the cases relied by Revenue would help the case of Revenue. 31. The ld. Counsel for the Appellants cited the following cases in support of their arguments: (a) LIC v. Escorts Ltd. others, AIR 1936 SC 1370 (relied upon - Paras 63 64) (b) Hetero Drugs Ltd. v. Commissioner of Customs, Airport, Chennai, 2004 (168) E.L.T. 211 (Tri.-Bang.) [relied upon - Paras 8, 12(a) 12(b)] (c) Great Eastern Shipping Co. Ltd. v. Union of India 1986 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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