Whether importation procedure is to be followed in respect of confiscated goods?

PJ/Case Laws/2012-13/1276

Case: - CHAUDHARY INDUSTRIES, SANJIV CHAUDHARY Vs UNION OF INDIA,CHIEF COMMISSIONER OF CUSTOMS, COMMISSIONER OF CUSTOMS, DEPUTY COMMISSIONER OF CUSTOMS, ASSISTANT COMMISSIONER OF CUSTOMS

Citation: - 2012-TIOL-811-HC-AHM-CUS

Brief fact: - The Petitioner No. 1 is a registered partnership firm engaged in the business of ship breaking and Petitioner No. 2 is Managing Partner of Petitioner No. 1. Respondent No. 5 is Commissioner of Customs, Chennai who floated tender for sale of confiscated vessel/ship named M.V. GLORIA KOPP which stipulated various conditions. As per the said tender notice amongst other, the conditions nos. 10 and 11 read as under:

“10. TAXES & DUTIES: will be charged extra as per TNGST Act as applicable on date of billing and should be paid along with balance payable amount to the Commissioner of Customs, Custom House, Chennai. ”
11. NO CUSTOM DUTY ON SALE VALUE: The ship is confiscated and will be sold by tender by the Indian Custom Authorities and hence no custom duty will be charged extra on sale value from the purchaser”.

The petitioner firm made an offer for purchase of the said vessel for an amount of Rs. 2, 36,00,000 /-. The said offer made by the petitioner was accepted by respondent no. 5 vide
Communication dated 21-11-2001. In this case, the petitioners complied with the conditions of the tender and also paid the sales tax as per the condition of the tender and accordingly the statutory order of bill of sale was issued in favour of the petitioner firm on 5-12-2001. The Petitioner firm intended to bring the ship to Alang port, District Bhavnagar for the purpose of breaking the said vessel. The petitioner firm addressed a letter to respondent no. 3 , informing respondent no. 3 that they had purchased the said vessel in an auction held by respondent no. 5 and further intimating respondent no. 3 therein, that as per condition no. 11 no customs duty is payable on the said ship, as the ship was confiscated and is sold by tender by the Customs Authority, Chennai and giving all details and relying upon the legal provisions as well as the relevant Notification dated 1-3-2001 requested respondent no. 3 to grant beaching permission of the vessel, without insisting for formalities and also without filing fresh Bill of Entry. It also transpires from the record that another company viz. M/s. Swift (GB) Ltd. of Wembley, U.K. who was one of the interested offerers, by communication dated 26-9-2001 inquired from respondent no.5 as to whether the purchaser would be required to pay customs duty on the value of the ship. In response to the said communication of M/s. Swift (GB) Ltd., respondent no. 5 vide communication dated 26-9-2001 clarified that as the vessel in question was a confiscated item and the same was being sold by tender by the custom authorities no custom duty will be charged on sale from the purchaser as per clause 11 of the condition of sale annexed to the tender notice. Copy of the said communication was sent by respondent no. 5 also to respondent no. 1 as well as respondent no.3. In response to the letter dated 26-12-2001 addressed to respondent no.3 requesting to permit the petitioner to beach the vessel at Alang, the respondent no. 3 vide impugned communication dated 31-12-2001 informed the petitioners that Circular No. 40/97 would be applicable to those vessels which exclusively carry coastal goods and ply as coastal vessels only and same would not be applicable for vessels which are converted from foreign run to coastal run and vice versa. The petitioner firm was further informed that the Notifications mentioned therein indicate that the exemption would be available to Ocean going vessels and not to vessels imported for the purpose of breaking and therefore opined that the petitioner is required to pay customs duty under Chapter tariff heading 8908. The petitioner on receipt of the said communication from respondent no.3 approached respondent no. 5 vide communication dated 3-1-2002 informing him about the stand taken by respondent no. 3, asking the petitioner to pay customs duty and requested for clarification in the said regard. The respondent no. 5 again vide communication dated 7-1-2002 informed the petitioners that as per clause 11 of the tender condition no customs duty is leviable.

Being aggrieved by the said communication dated 31-12-2001 the petitioners have filed this petition under Articles 226 and 227 of the Constitution of India.

Appellant Contention: - Thelearned Counsel of Petitioners has submitted that the vessel purchased by the petitioners in response to the tender notice issued by respondent no.5 was a confiscated vessel as contemplated under Section 126 of the Act and therefore, the same cannot be considered to be imported goods. He further submitted that the petitioners are not the importers as defined under Section 2(34) of the Act as the vessel in question on being confiscated as per Section 126 of the Act was a property of Central Government and, therefore, the transaction between the petitioners and respondent no. 5 cannot be termed as ‘Import'. Therefore the provisions of Section 46 would not be applicable.

The Learned Counsel further submitted that as per condition no. 10 of the tender notice the petitioner firm has already paid sales tax to the Competent Authority at Chennai and the same is indicative of the fact that the vessel in question purchased by them was not an import and that the sales tax having been levied and paid by the petitioners goes to show that it was a transaction of sale between respondent no. 5 and the petitioner. He further relying upon communication of respondent no. 5 submitted that as per condition no. 11 no customs duty is leviable upon petitioners. Therefore the impugned communication dated 31-12-2001 is ex facie bad, illegal and violative of Article 14 of the Constitution of India. He further submitted that the said communication deserves to be quashed and set aside as prayed for in this petition as the same is bad, illegal and de hors the provisions of the Act and, therefore, submitted that this Hon'ble Court would be pleased to quash and set aside impugned communication dated 3-12-2001 as prayed in the petition.

Respondent Contention:- Respondent No. 3 has filed the Affidavit-in-Reply for and on behalf of respondent nos. 2, 3 and 4 and has contended that after the acceptance of the vessel, the buyer is solely responsible for the said vessel and if the buyer continues to use the said vessel as an Ocean going vessel then he is not required to pay any customs duty and the same stands exempted. It is further contended in the said affidavit that vide communication dated 26-12-2001 (Annexure F) the petitioner had contended before the department that the vessel is in coastal run and hence no beaching formalities and other formalities like filing of IGM, filing of Bill of Entry are required and requested to grant permission for beaching. It is further contended on behalf of the respondents that as the petitioners are desirous of breaking the vessel in question they are required to follow the procedure under Section 46 of the Act. Relying upon the judgment of the Apex Court in the case of Union of India v. M/s. Jalyan Udyog, 1993 (68) E.L.T. 9 (S.C.) as well as the judgment of CEGAT, New Delhi in case of M/s. Mustan Taherbhai v. Collector of Customs , 2000 (125) E.L.T. 1001 = ( 2002-TIOL-453-CESTAT-DEL ) , it is contended that the petitioner firm is required to pay customs duty as per Entry 5908 of Customs Tariff Act, 1975 and that condition no. 11 attached with the tender notice by respondent no. 5 would not in any manner oust the applicability of law and such a condition would not create an exception or estoppels against the statute. It is further contended that the petitioner therefore cannot take shelter of the said condition for non payment of customs duty as the vessel is to be beached for breaking up at Alang port.
The learned Senior Standing Counsel appearing for respondent Nos. 1 to 4 supported the communication dated 31-12-2001 and has heavily relied upon the contents of the Affidavit-in Reply as narrated hereinabove and submitted that the petitioners have purchased vessel in question from respondent no. 5 as Ocean going vessel. The Respondents further submitted that the vessel in question has been registered at Panama and, therefore, is covered under the definition of word 'goods' as well as 'import' as defined under the Act and therefore the petitioners are not entitled to any exemption as claimed for and that they are required to follow the procedure as envisaged under Section 46 of the Act. Respondent further argued that the petitioners are amenable to jurisdiction of respondent no. 3 and liable to pay customs duty as per Chapter 8908. They further reiterated that condition no. 11 is stipulated in contract between respondent nos. 5 and the petitioners and the same would not absolve the petitioners from liability arising under the Act. As the condition existing in a contract would not operate as estoppels against the statute. Therefore petition is devoid of any merits and the same deserves to be dismissed.

Reasoning of Judgment: The Hon’ble Court took into consideration the relevant provisions of the Customs Act. The Hon’ble Court held that Section 46 provides for the procedure which an importer is supposed to follow while bringing goods by way of import into the territory of India. In the facts of the present case, the said vessel has not been imported by the present petitioners but as aforesaid has been purchased by the petitioners in an auction held by respondent no. 5, on the said vessel, having been confiscated under S. 126 of the Act therefore, the petitioners are not ‘importer' consequently, the said vessel cannot be treated a s imported goods and hence the petitioners were not amenable to the provisions of the Act and were not required to follow the procedure as prescribed under Section 46 of the Act. The reliance placed by the respondents upon the Notification No. 17/2001-Cus., dated 1-3-2001 is also not applicable in the instant case. A part from the fact that by condition no. 11 the respondent no. 5 had stipulated that no customs duty is payable on the said value as the ship was confiscated and is being sold by Indian authorities. Thus the conclusion arrived at by the authorities that as the said vessel was brought to port Alang for the purpose of breaking it is amenable to customs duty chargeable under CTH 8908 is erroneous. The respondent authorities and more particularly respondent no. 4 has overlooked the fact that the said vessel was not imported by the petitioners but was sold by respondent no. 5 as a property of the Central Government within the territory of India and, therefore, the respondent authority has wrongly come to the conclusion that the petitioners are required to observe the customs procedure as prescribed under law and file bill of entry as contemplated under Section 46 of the Act. The vessel was purchased by the petitioners in an auction as aforesaid and it was neither purchased from a bonded warehouse or nor been imported by the petitioners and therefore the ratio laid down by the Apex Court in the case of Union of India v. M/s. Jalyan Udyog , 1993 (68) E.L.T. 9 (S.C.) as well as the judgment of CEGAT, New Delhi in case ofM/s. Mustan Taherbhai v. Collector of Customs, 2000 (125) E.L.T. 1001 = ( 2002-TIOL-453-CESTAT-DEL ) would not apply to the present case. In view of the foregoing discussion, the petition is allowed. The communication dated 31-12-2001 (Annexure-A) to this petition is hereby quashed and set aside.

Decision: - Petition allowed.

Comment: On analysis of the above case, it is clear that importation procedure under section 46 of the Customs Act is not required to be followed in respect of those goods which have been acquired in an auction for confiscated goods by the Customs authorities because confiscated goods are the property of the Central Government and auction being held within the territory of India, the same cannot be held as imported goods. Therefore, no provision of importation required to be followed.

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PJ/Case Laws/2012-13/1276

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