2020 (12) TMI 379 - HC - Customs

Mis-declaration of the country of origin - Provisional release of the vessel - Validity of Circular No.35/2017-Customs dated 16.08.2017 - basic contention of the seizing authority was that the vessel was carrying cargo covered by bill of entry No.2262875 dated 21.09.2020 by mis-declaring the country of origin as Iraq and port of loading as Basrah Iraq - HELD THAT - When respondents had allowed clearance of the consignments and learned counsel for the respondents had made it abundantly clear that respondents are not concerned with the consignments as such but with the vessel a prima facie view may be taken that section 115 of the Customs Act more particularly sub-section (2) thereof may not be applicable. However this is a matter which may require further investigation and adjudication if it comes to that stage. Therefore in the facts and circumstances of the case it may be premature for the Court to step in at this stage to determine and adjudicate legality and validity of the seizure - This Court has held more than once that seizure is not an end in itself. The worst possible scenario that can visit the petitioner post issuance of the seizure memorandum is confiscation of the vessel under section 115 of the Customs Act in which event proviso to sub-section (2) shall come into play. Instead of adjudicating on legality or validity of the seizure at this stage it would be more appropriate to deal with the aspect of provisional release of the vessel in terms of section 110-A of the Customs Act. Section 115 more particularly sub-section (2) thereof and the proviso to sub-section (2). If a conveyance is used as a means of transport in the smuggling of any goods it shall be liable to be confiscated. However it will not be confiscated if the owner proves that it was so used without his knowledge or connivance or that of his agent and the person in charge of the conveyance. As per the proviso where such conveyance is used for carriage of goods or passengers on hire the owner of the conveyance has to be given an option to pay fine in lieu of confiscation of the conveyance. The fine shall not exceed the market price of the goods which are sought to be smuggled or the smuggled goods as the case may be. Even from a perusal of the impugned seizure memorandum it is seen that the officer seizing the vessel had recorded that it was not practicable to physically takeover custody of the vessel. Therefore custody of the vessel has been handed over to the master of the vessel with the condition that he shall not remove part with or otherwise deal with the vessel except with the permission of the Special Intelligence and Investigation Branch. It may be mentioned that in the seizure memorandum itself the value of the vessel has been mentioned at Rs. 12, 74, 00, 000.00 approximately - on due consideration and without going into the challenge to the impugned seizure memorandum dated 26.09.2020 we do not find any good reason to decline provisional release of the vessel. It is directed that respondent No.1 to grant provisional release of the vessel MT Global Rani to the petitioner under section 110A of the Customs Act on furnishing a bond of Rs. 12, 74, 00, 000.00 with further deposit of Rs. 25, 00, 000.000 in the form of bank guarantee of a nationalised bank - petition allowed.

Summary

Issues Involved:
1. Legality of the seizure of the vessel.
2. Justification for the refusal of provisional release of the vessel.
3. Validity of Circular No.35/2017-Customs dated 16.08.2017.
4. Applicability of section 110-A of the Customs Act for provisional release.
5. Consideration of previous similar cases involving other vessels.

Detailed Analysis:

1. Legality of the Seizure of the Vessel:
The seizure memorandum dated 26.09.2020 stated that the vessel was carrying cargo with mis-declared country of origin as Iraq and port of loading as Basrah, Iraq, making it liable for confiscation under section 115 of the Customs Act. The Senior Intelligence Officer seized the vessel under section 110(1) of the Customs Act, valuing it at approximately Rs. 12,74,00,000.00. The vessel was handed over to the master of the vessel with specific directions not to remove or deal with the vessel without permission.

2. Justification for the Refusal of Provisional Release of the Vessel:
The order dated 28.10.2020 rejected the request for provisional release on several grounds:
- Locus standi of the agent was doubted due to the absence of ownership and contractual documents.
- The vessel owner should apply for provisional release and execute a bond and bank guarantee equivalent to five times the market value of the vessel.
- The vessel was engaged in repeated offenses, and investigation was not complete.
- The vessel was under detention by the Directorate General of Shipping for being unseaworthy.
- As per Circular No.35/2017-Customs, provisional release shall not be allowed for prohibited goods.
- The offenses were of a grave nature likely to affect trade and friendly relations with the USA, rendering such imports prohibited under section 11 of the Customs Act.

3. Validity of Circular No.35/2017-Customs dated 16.08.2017:
The High Court clarified that section 110-A of the Customs Act does not impose any restriction on provisional release for goods categorized as prohibited under section 2(33). Therefore, reliance on the Board’s circular dated 16.08.2017 was misplaced, and it was unnecessary to examine its vires.

4. Applicability of Section 110-A of the Customs Act for Provisional Release:
Section 110-A allows for provisional release of seized goods, documents, or things pending adjudication upon taking a bond with security and conditions as required by the adjudicating authority. The High Court emphasized that this provision facilitates provisional release while protecting revenue interests. The Court found that the refusal of provisional release based on the vessel being under detention by the Directorate General of Shipping was not a valid ground to preclude the exercise of power under section 110-A.

5. Consideration of Previous Similar Cases Involving Other Vessels:
The petitioner had cited instances of two vessels, MT R-Ocean and MT Clayton, which were similarly placed. MT R-Ocean was allowed to discharge similar cargo without action, while MT Clayton was granted provisional release on furnishing a bond and cash deposit. The Court noted that the respondents’ evasive denial of these instances amounted to an admission.

Conclusion:
The High Court set aside the order dated 28.10.2020 rejecting the provisional release of the vessel. It directed the respondents to grant provisional release of the vessel MT Global Rani upon furnishing a bond of Rs. 12,74,00,000.00 and a bank guarantee of Rs. 25,00,000.00. The provisional release would be subject to necessary formalities, including clearance from the Directorate General of Shipping, and without prejudice to any permissible legal actions by the respondents. The Court kept all contentions open for subsequent stages and allowed the writ petition to the extent discussed, without any order as to costs.