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TMI Blog2004 (3) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ported and two consignments of Skimmer/Pump unit/Spares BOOM and spares accessories, generator, etc. and warehoused the same vide warehousing Bill of Entry Nos. 4827 and 4828 both dated 13th July, 1993. These goods were components of collapsible barge which was to be installed/fitted on the tug and used for cleaning the water which is polluted on account of oil leakage/spillage. The said Bills of Entries were assessed to duty at Rs. 37,12,508/- and Rs. 47,03,345/- respectively and permitted to be warehoused without payment of duty. Thereafter, on 26th July, 1993 the petitioners filed two shipping bills bearing Nos. 459721 and 459722 in terms of Section 69 read with Section 90(2) of the Customs Act, 1962 (hereinafter referred to as 'the Act' for short). In the said shipping bills the consignee was shown as 'S.S.K. Controller of Procurement, Naval Dockyard, Lion Gate, Bombay'. The said shipping bills also contained an endorsement "certified that stores meant for Indian Naval Ship only" duly signed by P.R. Seshadri, Incharge Stores, Local Purchase, Naval Dockyard, Mumbai. In view of these endorsements made on the shipping bills, the goods were assessed and cleared without payment of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commission opposing the claim of the petitioners. After hearing the parties, the Settlement Commission by its order dated 3rd December, 2002 held that the supply of the goods covered under Shipping Bill Nos. 459721 and 459722 both dated 26th July, 1993 did not qualify for duty free clearance under Section 90 of the Customs Act read with Exemption Notification No. 195/76-Cus., dated 2nd August, 1976. The Commission settled the case for duty amount of Rs. 93,88,432/- (Rs. 84,15,853/- for goods covered under 2 shipping bills + Rs. 9,72,579/- admitted liability under the 3rd shipping bill) and after appropriating the amount deposited by the petitioners, directed the petitioners to pay the balance sum of Rs. 34,52,987/- within 30 days from the date of receipt of the said order. The Commission directed the petitioners to pay interest at the rate of 10% from the date of clearance of the goods from the warehouse till the date of deposit of Rs. 59,35,445/- and on the balance amount till the date of payment. The Commission also imposed nominal penalty of Rs. 9,00,000/-. Challenging the aforesaid order of the Settlement Commission, the present petition is filed. 7.Mr. Nankani, learned Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in error in holding that the duty on the goods is recoverable with interest at 10%. It was submitted that since the goods were cleared from the warehouse before the expiry of the warehousing period, no interest was payable on the said goods. It was submitted that the interest under Section 61(2) of the Customs Act as it stood at the relevant time was payable only in cases where the goods remained in the warehouse beyond the warehousing period. In the present case, the goods were cleared within the warehousing period, and therefore, the Settlement Commission could not have ordered for payment of interest. It was submitted that Section 127C(7) of the Customs Act provides that the Settlement Commission shall pass an order in accordance with the provisions of the Act. It was submitted that since Section 61(2) of the Customs Act relating to the interest is not applicable in the present case the order of the Settlement Commission levying interest is illegal and is liable to be quashed and set aside. 10.Mr. Rana, learned Senior Advocate appearing on behalf of the respondents submitted that to be eligible for exemption from payment of customs duty under Section 90 of the Customs Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hipped to Vizag then the same would be transhipped under the escort of the Customs Preventive Officers of the jurisdictional customs house. In the present case, the petitioners did not follow the said procedure deliberately, because after obtaining the signature from the storekeeper at the Naval Dockyard, the petitioners were to get absolute custody of the goods with a view to divert the same in the open market. It was submitted that once it is held that the goods are clandestinely removed from the warehouse, then the duty is payable with interest under Section 61(2) of the Customs Act, 1962. It was submitted that in the light of the decision of this Court in the case of Hitech Engineers v. Union of India reported in 2004 (1) BCR 776 which is squarely applicable to the present case, the petition deserves to be dismissed with costs. 12.We have heard Counsel on both sides and we have perused records placed before us. Admittedly, the petitioners herein i.e. M/s. B.K. Industrial Corporation and M/s. Hitech Engineers are sister concerns. The partners of the petitioner firm are also partners in Hitech Engineers. The modus operandi adopted by both these firms was to import various items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the imported goods the petitioners had not declared that the said goods are to be supplied to the Indian Navy without payment of duty. In fact, it was stated that the goods are liable to duty amounting to Rs. 47,03,345/- and Rs. 37,12,508/- respectively. Accordingly the goods were assessed to duty and were permitted to be warehoused without payment of duty. Thus, it is clear that while warehousing the goods there was no declaration such as 'stores to be supplied without payment of duty' as contemplated under Section 85 of the Customs Act. (b) While seeking clearance of the said goods from the warehouse, two shipping Bills were filed by the petitioners showing the consignee as 'S.S.K. Controller of Procurement, Naval Dockyard, Lion Gate, Bombay'. The Controller of Procurement, Indian Navy, in his statement recorded under Section 108 of the Customs Act has stated that there is no person having designation as 'S.S.K. Controller of Procurement, Naval Dockyard, Lion Gate, Bombay'. Thus, the name of the consignee shown by the petitioners in the shipping bills were totally false and non-existent. (c) The two shipping bills filed by the petitioners in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter taking delivery of the goods from Mr. Seshadri at the Lion Gate at Bombay, the petitioners were in the absolute custody of the goods. Shri Kirit Kamdar, partner of the petitioner in his statement recorded under Section 108 of Customs Act, 1962 has admitted that the goods cleared by them under Section 90 of the Customs Act showing the Indian Navy as consignee have been sold by them in the open market for cash consideration. In these circumstances, even if the goods are ultimately supplied to DGNP, Vizag, it cannot be said that at the time of clearance the goods were meant to be supplied to DGNP, Vizag and it cannot be said that the goods supplied by the petitioners to the DGNP, Vizag are the same goods covered under the two shipping bills which are subject-matter of the present petition. (g) The evidence brought on record clearly show that the ship stores are always received by the captain/master of the vessel or by a person authorised by them. It is also brought on record that whenever the goods are to be supplied to the Indian Naval Ships at the Naval Dockyard at Bombay, the Gate Officer at the Naval Dockyard, Bombay simply endorses on the shipping bill by putting re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yard. The said storekeeper had no authority to handover the goods to the petitioners for being delivered to DGNP at Vizag. Once the petitioner had exclusive custody of the goods without any Customs supervision any subsequent supply of the said goods to the DGNP, Vizag Navy will not qualify for duty free clearance, because it cannot be said that the same goods which are the subject-matter of the shipping bills in question have been supplied by the petitioners to the DGNP, Vizag. The fact that the partner of the petitioners has admitted that some of the consignments cleared by them duty free by showing the Indian Navy as consignee have in fact been sold in the open market for cash consideration clearly shows that at the time of clearance the goods were not intended for supply to the Indian Navy. Thus, it cannot be said that the goods covered under the two shipping bills which are subject-matter of the present petition have been supplied to the Indian Navy within the meaning of Section 90 of Customs Act. 16.Assuming that the goods covered under the two shipping bills have been ultimately supplied to DGNP, Vizag, still, the benefit of Section 90 would not be available because it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere local tenders and not the tenders for import. Like the ship chandlers, if the petitioners wanted to supply the goods from the warehouse to the tug of the DGNP, Vizag as stores, then the petitioners should have followed the requisite procedure prescribed for clearance of the goods from the warehouse to the concerned destination at DGNP, Vizag. If the goods were imported for being supplied to DGNP, then while seeking order for warehousing the goods, the petitioners should have declared that the goods are to be supplied to DGNP duty free. Similarly, while seeking delivery of the goods from the warehouse, if the petitioners wanted to supply the goods to DGNP, then the petitioners should have so declared in the shipping bills so that appropriate procedure for delivery of goods at Vizag could be followed. Neither at the time of storing the goods in the warehouse nor while seeking clearance from the warehouse the requisite procedure has been followed by the petitioners. In these circumstances, the benefit under Sections 85 to 88 of the Customs Act is also not available to the petitioners. 19.The contention of the petitioners that the Settlement Commission had no power to levy intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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