The Commissioner Of Customs ... vs M/S Hyundai Heavy Industries And ...
2017 Latest Caselaw 4427 Bom

                                                    202_cuapp_2_2007_m.doc

           IN THE HIGH COURT OF JUDICATURE AT BOMBAY
               ORDINARY ORIGINAL CIVIL JURISDICTION
                   CUSTOMS APPEAL NO.2 OF 2007

The Commissioner of Customs 
(Imports)
Office of the Commissioner of Customs 
(Import),  New Custom House, Ballard 
Estate, 
Mumbai-400 001                                      ...Appellant
                      Versus 
1) M/s. Hyundai Heavy Industries
Co. Ltd., 301, 3rd floor,
 Sarjan Plaza, 100,
Annie Besent Road, Worli, 
Mumbai-400 018.

2) M/s. Boskalis Westminister Middle-
East Ltd., 794, Vinayak Kegaon, Uran, 
Dist. Raigad, Maharashtra.

3) M/s. CGG Marine
1, D-4, Commercial Area Vasant Kunj, 
New Delhi-110 070.

4) M/s. J.M. Baxi & Co.,
16, N.G.N. Vaidya Road (Bank Street), 
P.O. Box No.731 Fort, Mumbai- 400 001

5) Shri K.Y. Song, Co-ordinator (Marine 
Spread)
M/s. Hyundai Heavy Industries
Co. Ltd., 301, 3rd floor,
 Sarjan Plaza, 100,
Annie Besent Road, Worli, Mumbai-400 
018.

6) Shri Arjan Schrijen
Technical Inspector
M/s Boskalis Westminister Middle-East 

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Ltd., 794, Vinayak kegaon, Uran, Dist. 
Raigad, Maharashtra.

7) Shri Serge L, Shore Representative 
M/s. CGG Marine 1, D-4, Commercial 
Area Vasant Kunj, New Delhi-110 070.

8) Shri Krishna B. Kotak, Partner M/s. 
J.M. Baxi & Co., 16, N.G.M. Vaidya 
Road (Bank Street), P.O. Box No.731 
Fort, Mumbai- 400 001.

9)Shri A Pais, Senior Executive and 
Authorised Signatory M/s. J.M. Baxi  & 
Co., 16, N.G.N. Vaidya Road (Bank 
Street), P.O. Box No.731 Fort, Mumbai- 
400 001.

10) Shri Sandeep Ail Manager (clearing 
& Forwarding) M/s. J.M. Baxi  & Co., 
16, N.G.N. Vaidya Road (Bank Street), 
P.O. Box No.731 Fort, Mumbai- 400 
001.

11) Shri S Dhulekar 
General Manager (Operations)
M/s. J.M. Baxi  & Co., 16, N.G.N. 
Vaidya Road (Bank Street), P.O. Box 
No.731 Fort, Mumbai- 400 001.

12. Shri R.M. Bakshi, Senior Manager 
M/s. J.M. Baxi  & Co., 16, N.G.N. 
Vaidya Road (Bank Street), P.O. Box 
No.731 Fort, Mumbai- 400 001.

13. Shri K.C.M. Giri,
Senior Manager (Operations)
M/s. J.M. Baxi  & Co., 16, N.G.N. 
Vaidya Road (Bank Street), P.O. Box 
No.731 Fort, Mumbai- 400 001.



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14. Shri D.K. Shrivastava
General Manager (Operations)
M/s. J.M. Baxi  & Co., 16, N.G.N. 
Vaidya Road (Bank Street), P.O. Box 
No.731 Fort, Mumbai- 400 001.                    ...Respondents
                                   .....
Mr. Pradeep S. Jetly with Mr. Jitendra B. Mishra for the 
Appellant.
Mr. Hormaz Daruwalla with Ms Krishna Borkute i/b. Mr. 
Subodh Kurdukar for the Respondent No.2.
Mr. V. Subramaniam for the Respondent No.4.

                                    CORAM :  ANOOP V. MOHTA &
                                             SMT. ANUJA PRABHUDESSAI, JJ. 

DATED : 13th JULY, 2017.

ORAL JUDGMENT (Per Anoop V. Mohta, J.):-

Present Appeal is under section 130 (1) of the Customs Act,

1962 ('the Customs Act').

2. The Appellant /Department preferred this Appeal against

common order dated 14th August, 2006 passed by the Customs, Excise

and Service Tax Appellate Tribunal ('CESTAT') whereby, the order of

imposing penalty and confiscation passed by the Commissioner of

Customs (Imports) Mumbai, has been set aside. All the Respondents

were the Appellants before the Commissioner of Customs. The other

connected appeals are also listed with this Appeal.

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3. This Court on 18th July, 2007, admitted the departmental

Appeals on following common questions of law:-

"Admit on the following substantial questions of law:-

a) Whether the CESTAT was correct in holding that the order of confiscation under section 111(j) of the Customs Act, 1962 was not legal on the ground that the importers had obtained the permissions for conversion of the vessels and the port clearance without obtaining an order permitting clearance of goods for home consumption under section 47 of the Customs Act, 1962?

b) Whether CESTAT was correct in holding that clearance of the goods on the basis of the port clearance permissions was proper despite the fact that Bills of Entry were filed by importers for home consumption under section 46 of the Customs Act, 1962 for clearance of such goods wherein permissions were statutorily to obtained for clearance of the goods as per the provisions of section 47 of the Customs Act, 1962?

c) Whether the CESTAT was correct in treating the goods imported only as foreign vessels, requiring permissions for conversion and port clearance instead of treating them also as imported cargo whereas the importers had imported vessels and had filed Bills of Entry for clearance of the vessels as goods as required under section 46 of the Customs Act, 1962 for the clearance of which the compliance of the provisions of section 47 was a statutory requirement?

d) Whether the CESTAT was correct in holding that the confiscation under section 111(j) is not applicable since the section 111(j) deals with permission for removal of the goods while section 47 of the Customs Act, 1962 relates to permission for clearance and nowhere in the Act the terms 'removal' and 'clearance' have been defined.

e) Whether the CESTAT was correct in holding that the confiscation under section 111(j) was not correct since

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the importers had the pay orders ready for payment of duty whereas, as per section 47 of the Customs Act, 1962, the importer on filing the Bills of Entry can clear the goods only after the payment of import duty as assessed thereon and any charges payable under the Act?

ADDITIONAL QUESTION OF LAW

Having regard to facts and circumstances of the case whether the order of the Tribunal is sustainable in Law having been passed after six months of conclusion of hearing of Appeal.

2. Ad-interim relief in terms of prayer clause (c) except the bracketed portions with the following directions:-

i. The respondent No.1 to furnish a bond for the full amount of penalty and fine in favour of the appellant and further bank a guarantee for 50% of the amount of fine and penalty in favour of the appellant within a period of 6 weeks from today and shall keep the same alive pending hearing and final disposal of the appeal.

ii. The existing bank guarantee already given by the respondent No.1 to the appellant to be returned on the respondent No.1 furnishing the bank guarantee as indicated in the order.

iii. This order is subject to the final order in this petition.

3. Notice waived on behalf of respondent No.1 to 14."

Restricted background of litigations, for deciding the appeal on law points:-

4. The Importer (Respondent No.1) M/s. Hyundai Heavy

Industries Co. Ltd. submitted about 9 bills of entry (the Bill) on

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respective dates. Respondent No.2 M/s. Boskalis Westminister Middle

East and Respondent No.3 M/s. CGG Marine filed respective Bill. All

three importers filed their Bills through M/s. J.M. Baxi.

5. On 04/11/2004, Custom House Agent (the "CHA") M/s.

J.M. Baxi requested Dy. Commissioner, Export Department of Customs,

Mumbai (the Export Department) to issue instructions to convert vessel

'M.V. Echo Star' of Importer M/s. CGG Marine from "Foreign Run to

Coastal Run" as the Bill dated 03.11.2004 was filed at Import

Department and cleared. On 06/11/2004, the Importer M/s. CGG

Marine cleared the goods after obtaining the conversion of the Vessel

and port clearance. The goods of the Bills were examined on first

check. As stated, they had not discharged the duty liability and the

goods were not ordered "Out of charge" from the proper officer of the

Customs. On 20.11.2004, the goods of Bill dated 11.11.2004 of M/s.

Boskalis Westminister Middle East were examined on first check and

import documents were forwarded to Import Appraising Group for

further assessment.

6. On 22.11.2004, M/s. J.M. Baxi requested the Export

Department, to issue instructions to convert the vessel 'M.V. Sea

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Diamond' of Importer M/s. Boskalis Westminister Middle East from

"Foreign Run to Coastal Run" as the Bill dated 11.11.2004 filed at

Import Department and processed. On 23rd November, 2004, Importer

M/s Boskalis Westminister Middle East cleared the goods as stated,

without payment of custom duty and obtaining the "Out of charge"

from the proper officer of the Customs.

7. On 24.11.2004, M/s. J.M. Baxi requested the Export

Department to issue instructions to convert the vessel/barge of M/s.

Hyundai Heavy Industries from "Foreign Run to Coastal Run" as the Bill

dated 23.11.2004 filed and processed at Import Department of

Customs. As stated, the goods of the Bills were not examined on first

check. It was examined on 27.11.2004.

8. As stated, on 28.11.2004 M/s. Hyundai Heavy Industries

cleared the goods of the Bill, dated 23.11.2004. In the similar fashion,

by stated misrepresentation, on other Bills, the Importer had not

submitted pay order for the total duty leviable on the goods on the

clearance of the goods.

9. On 11/12/2004, the Special Investigation & Intelligence

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Branch (SIIB), Import, Customs-Mumbai, started investigation for

unauthorized removal of the goods from the Customs area without

payment of duty and without obtaining the "Out of charge" from the

proper officer of the Customs.

10. On 22.12.2004/ 23.12.2004, request was made for

provisional release of the subject goods/vessels by Respondent Nos.1,

2 and 3 and the goods were provisionally released on execution of PD

Bond supported by Bank Guarantee of 10% of Assessable Value of the

goods.

11. On 22.02.2005, common Show Cause Notice under section

124 of the Customs Act No.SG/INF-4/DC-2004 SIIB(I) was issued by

the Customs, Mumbai Department (the Department) to 17 noticees

including all three Importers, their Managers and to the CHA and their

officers for their alleged role in removal of vessels/goods from the

customs area, without payment of duty and without obtaining out of

charge.

12. On 31.10.2005, order in Original No.111 /2005/CAC/

CC(I) /AKP was issued by Commissioner of Customs (Imp), Mumbai

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wherein Redemption fine of 5% of Ass. Value was imposed on

importers i.e. 1, 2 & 3 and penalty was imposed on all the Respondents

i.e. 1 to 14 of the Appeals.

13. On 31.10.2005, encashment Letter was issued by the

Appellant to Chouhang Bank in case of M/s. Hyundai Heavy Industries.

On 24.11.2005, Writ Petition No.2745/2005 was filed against the

action initiated by the department for encashment of BG. On

24.11.2005, Judgment in Writ Petition No.2745/2005 was passed by

this Court, directing Respondent No.1 in this appeal to approach

CESTAT.

14. On 28.11.2005, encashment of BG was executed by M/s.

C.G.G. Marine to the extent of Rs.1,23,12,179/- through ICICI Bank,

Mumbai. On 28.11.2005, encashment of BG was executed by M/s.

Boskalis Westminister Middle East Ltd. to the extent of Rs.88,31,774/-

through BNP Paribas Bank, Mumbai.

15. On 30.11.2005, Respondent Nos.1 and 5 filed the Appeal

No.C/1345 & a461/05-Mum with stay Applications. On 15.12.2005 by

order the CESTAT allowed the stay applications. On 20.12.2005, Writ

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Petition (L) No.3054/05 was filed by the department against the

CESTAT order dt.15.12.2005 and judgment was passed.

16. On 22.12.2005, M/s. Hyundai Heavy Industries extended

their both Bank Guarantees amounting to Rs.39.37 crores for another

one year i.e. upto 22.12.2006. On 30.12.2005, Misc. Application for

Transfer of Bench was filed before CESTAT.

17. On 12.01.2006, this Court dismissed Writ Petition (L)

No.3054/2005 as the Tribunal had started the hearing of the main

appeals filed by Respondent Nos.1 and 5. On 19.1.2006, Revenue filed

Writ Petition Lodging No.119 of 2006 for transfer of Bench of the

Tribunal hearing Appeal. On 19.1.2006, hearing was completed by

CESTAT of Appeal No.C/1431 & 1465/05-Mum. and granted two

weeks time to both the parties to file written submissions. On

20.1.2006, this Court dismissed the Writ Petition of the Department as

withdrawn since the hearing before CESTAT had been completed.

18. On 03/02/2006, the Department submitted written

submissions to the CESTAT. The CESTAT, passed the Common Final

Order dated 14.8.2006 wherein the confiscation was set aside.

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Therefore, on 08/12/2006, a prayer was made to cancel the B.G. of

Rs.39.37 crores.

19. On 13.12.2006, the Customs Appeal was filed by the

Department challenging the CESTAT order dated 14.08.2006, making

all the noticees/ the Respondents herein as party. On 14.12.2006, this

Court gave date for hearing of Customs Appeal on 20.12.2006

alongwith W.P. No.3046/2006 of M/s. Hyundai Heavy Industries. On

15.12.2006, the Notice of Motion was filed, supported by the Affidavit

in Customs Appeal Lodging No.99/2006.

Common Show Cause Notices:-

20. The common show cause notices were issued under section

124 of the Customs Act to all the Respondents, by giving the subject

details. The basic allegations that, respective Respondents had

removed unauthorizedly vessels/barges/ tugs/dredger, etc. from the

Customs area, though the subject bills were not assessed. It is stated

that prior to payment of custom duty on port clearance order from

proper officers of Customs, removal of the same was in contravention

of provisions under section 47 of the Customs Act and therefore, liable

for confiscation under 111(j) and penalty under section 112(a) of the

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Customs Act. The reference was made to other provisions of the

Customs Act. The crux is that and as submitted the action of

Respondents of getting the Vessels/Barges/Tugs, removed in

contravention of provisions by "misrepresentation". The Respondents

have denied the same and participated in the proceedings. Ultimately,

the order went against them. They preferred appeal before the

Commissioner, who confirmed the said order, which the CESTAT has set

aside, as recorded earlier.

The relevant provisions:-

21. The relevant Sections /provisions of the Customs Act, in

Chapter VI, which deals with the provisions relating to conveyance

carrying imported and exported goods are sections 17, 18, 30, 38, 42,

46, 47, 111(j) and 112(a), 128(A), 129(A), 130(1) and the related

procedure rules:-

"Section 42. No conveyance to leave without written order.-(1) The person-in-charge of a conveyance which has brought any imported goods or has loaded any export goods at a customs station shall not cause or permit the conveyance to depart from that customs station until a written order to that effect has been given by the proper officer.......

Section 47. Clearance of goods for home consumption.--

[(1)]Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same,

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the proper officer may make an order permitting clearance of the goods for home consumption:......

Section 111. Confiscation of improperly imported goods, etc.-(j) any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission;....

Section 112 (a) Penalty for improper importation of goods, etc.- Any person-....

(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or......."

Reasons in support of operative part of this Judgment:-

22. CESTAT, being a statutory Appellate Tribunal of exports, has

considered, keeping in mind the provisions of law and the documents

so available on record, and so also the background of the transactions.

There is no issue that these vessels, barges, self propelled tugs and

consumable stores on board, were imported. They were chargeable to

the duty, as prescribed. These vessels and barges were imported

subject to re-export conditions after the work of conducting high

technology laying of pipelines etc. from ONGC wells in Bombay High,

to main land at Uran, on the basis of the contract. The bills of entries

were filled in all cases, after the vessels, barges etc. had first entered in

Bombay Port. The bills were noted and thereafter presented for

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assessment. Orders for examination were given. The goods were

examined. The examination reports did not find any mis-declaration of

the goods, as declared on the bills.

The permissions and clearances, so granted never revoked:-

23. The Respondents, Clearing Agent (Shipping Agent), has

completed the formality and obtained the permissions for conversion of

vessels as imported into vessels for coastal run, which was allowed as

also port clearance, under the provisions of section 42 of the Customs

Act. The concerned officers at the relevant time, keeping in mind the

provisions of law and considering the documents, which were placed

on record, granted the requisite permissions and the clearances. The

vessels were examined by the concerned officials. As regards, the

consumable ship stores and the inventories were taken and so the

necessary action ought to have been taken, as applicable. The grant of

port clearances were by following the due procedure at the relevant

time and were subject to the satisfaction, therefore, permitted the

vessels, barges and self propels and others, and accordingly it left for

operation, at the destination so fixed as per the contract in Bombay

High area. The Agent had also obtained necessary bonds required for

clearance of the vessels. The Demand Draft and other sanctions for

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discharge of liabilities on the vessels were filed. The assessments on

the Bills were not completed by the concerned officers in the Mumbai

Custom House, Appraising Group, which ought to have been done at

earliest possible time, without delay. The reasons for Officer's defaults,

if any, cannot be stated to be that the vessels, barges, sales propels

were left in contravention of the cited provisions. The allegations that

the concerned ACDC incharge had not approved the noting and the

Bills were not countersigned, which ought to have been done, cannot

be the reason to accept the case that importers or its agents were in

breach of the provisions. This is in the background that all necessary

permissions, sanctions and clearances have been obtained by the

Respondents and the vessel was left accordingly.

24. The question of penalty and other confiscation will come,

only if, there is a breach and/or contravention of the basic provisions

so raised and referred. The act of release and/or selling of vessels,

barges from Mumbai port, just cannot be overlooked especially when

every mechanism, machinery and required procedure was available

under the provisions and the same were under the control of the

concerned authorities. As noted, they have already been cleared the

requisite permissions/clearances to the Respondents. There was no

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issue about the requisite payment so, deposited at the relevant time.

25. A plain reading of these Sections and considering the fact

that at the relevant time, and subsequently for the period upto the

stage of release, clearances and such removal of the vessel, no way can

be stated to be in contravention of any provisions. The relevant time,

there was proper compliances from the side of the Respondents, now it

cannot be the foundation of misrepresentation. The delay to the

assessment by the Appellant's Officers, cannot be the reason for taking

such action of seizing and confiscating and imposing of penalty.

Admittedly, though there are procedures and powers provided under

the Customs Act to the Appellant of reviewing and/or challenging

and/or revoking the permissions/ clearances so granted, there were no

such steps taken at the relevant time, before taking such drastic action.

There is nothing on record to show that those permissions, clearances

and sanctions so granted by the authorities have been revoked at any

point of time.

26. The submission that, this was a case of misrepresentation

and/or stated fraud, but there was no reason for the Appellant not to

initiate and/or take action and/or to take the proceedings, by recalling

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and revoking those permissions. Having not done so, the action

initiated on the basis of mere allegations on facts in the show cause

notices against the Respondents only is unsupportable and untenable.

The burden is upon the Department to prove the misrepresentation.

The law is settled that the allegations of misrepresentation require the

specific details and particulars for specific actions and against the

specific involved persons. There is nothing on record to show that the

Appellant has taken or initiated any proceedings against the concerned

officers. The show cause notices are silent about the same. The

allegations are unsustainable of not getting assessment, including

provisional assessment and/or non completion of formalities, though

the Respondents' documents, and the data were before the issuance of

such clearances/permissions by the concerned authorities. The

mandate of relevant provisions have been complied with at the

relevant time and the Respondents proceeded accordingly, as the

Appellant's Officers permitted them to do so.

The supportive reasons of the CESTAT- No case of perversity and

illegality:-

27. We have to keep in mind the provisions and the power and

scope of High Court to interfere with the findings so arrived at, by the

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CESTAT. Having once noted above, we have gone through the reasons

while setting aside the order of confiscation and penalty. The CESTAT

has considered the issue of "port clearance" and its procedure, as

prescribed under Section 42 (2)(d) read with Section 111(j) of the

Customs Act. It is noted that the fact of grant of port clearances, which

includes the safeguard and security required for the Custom House

were never recalled. The goods were permitted to remove from the

customs area, by the concerned officers. The importers and/or their

agents or employees cannot be held responsible for removal from the

Customs area of the port in such situation. The CESTAT has noted that

the "removal" and "clearance" cannot be equated to clear the goods for

home consumption under Section 47 of the Customs Act. The

permissions to clear the goods would not be in violation of Section

111(j), which is applicable to "removals" and not to the "clearance".

We also endorse these reasons.

28. The CESTAT has noted that even, the no action of appraisal,

cannot be a reason to hold the Respondents liable. It is noted that this

is not the case of mis-description and of any breach regarding the

declaration. The goods were under import. The Appellants were

ready with the duty/payment. Once the goods are removed by

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obtaining port clearance, there was no question of such confiscation

under provision of section 111(j) of the Customs Act and of penalty on

the Respondents. There was no loss of Duty. This is not a case that

Respondents deliberately, by breaching the basic provisions of law, had

removed unaccounted goods, without written permissions. The show

cause notices itself noted that, all supporting documents, materials and

requisite permissions were placed on record. The nature of contract

and short duration and the purpose and object of these imports and

practical part of removal of vessel with goods through the port, after

getting the clearances and permissions, cannot be overlooked while

considering the allegation of the breach of provisions of the Act. All

the departmental officers of the respective Departments, ought to have

taken decisions simultaneously. As noted, even by the CESTAT that the

removal were after due permission of conversion, preventive checks

on ship stores and port clearance obtained, which in a given case

could have been refused and revoked by the authorities, immediately

before the show cause notice and the actions taken. We have declined

to accept the case of corruption by evasion of custom duty by the

Respondents, as alleged without supporting material and /or the prior

inquiry.

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29. There is no justification and explanation on record as to

why those permissions and clearance were not revoked or set aside.

There is no denial to the fact of granting clearances and permissions

and release of vessels with goods. There is no case of declaration or

mis-declaration. The necessary documents were with the concerned

department, even at the time of such permissions and clearance stage.

Both the parties, including the concerned officers have knowledge of

the documents and the supportive material. It is an admitted position

that the payment of duty has been made before issuing show cause

notice itself.

No case of "misrepresentation", "mis-statement" and of "fraud":-

30. It is settled that Section 46 of the Customs Act

contemplates, directory procedure. Sections 48 and 46 read together

support this aspect. The duties were paid even prior to show cause

notices. Every technical breach cannot be treated, as breach for

penalty or confiscation Hindustan Steel Ltd. Vs. State of Orissa 1. The

goods were released after port clearances and due permissions. The

vessels left the port/Custom's area after due permission, under Section

42 of the Customs Act. All the vessels were subsequently cleared for

1 1978(2) ELT. 159 (S.C.)

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home consumption also. Therefore, the penalty and the confiscation

order is rightly set aside by the CESTAT.

31. It is settled that, mere nonpayment of duties, even if any,

cannot be treated and read for meaning "collusion" or "willful

misstatement" or "suppress of facts". M/S. Uniworth Textiles Ltd vs

Commissioner of Central Excise, Raipur.2 The Respondents have paid

even the same, after due declaration. Therefore, in the present case,

the Department /revenue failed to discharge its burden, as required

under the law. There is no case made out of any "willful" or intent to

evade duty to bring in the case of "fraud" and "collusion". There is no

case of stated "misstatement" or "suppressing of fact". The impugned

order, therefore, needs no interference, even on the ground of stated

delayed decision. All the questions of law, therefore, are required to be

answered accordingly.

32. Having once recorded the above reasons, the written

submissions, based around the action of show cause notice and the

related proceedings, even by recording the statement of concerned

officers and/or of the Respondents, are of no assistance to interfere

2 2013 (9) SCC 753, (2013) 288 ELT, 161.

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with the findings so arrived at by the CESTAT. There is no case of

perversity and/or illegality. The oral evidence, cannot override the

written permissions/clearances, on record. Therefore, for the reasons

recorded above and in addition to the reasons so recorded in the

impugned order, we are inclined to dismiss the appeal. All the

questions are answered accordingly, against the department and in

favour of the Respondents. Hence, this order.

ORDER

(a) The Appeal is dismissed. The CESTAT order, is

maintained.

(b) The questions of law (a) to (e) are answered in

the positive, in favour of assessee and against

the revenue. The additional question is

answered in the positive accordingly;

(c) The consequential action /order to follow;

(d) Interim order dated 18th July, 2007, stands

vacated. The parties to act accordingly.

           (e)      No costs.



        (ANUJA PRABHUDESSAI, J.)                     (ANOOP V. MOHTA, J.)




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