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Appearance Shri Murali, Advocate for the Appellant Shri M.K.A.K. Mohideen, JDR, for the Respondent CORAM Honble Mr. P. G. Chacko, Member (J) Honble Mr. P. Karthikeyan, Member (T) Date of Hearing: 28.04.2008 Date of Decision: 28.04.2008 Final Order No. ____________ Per P. G. CHACKO The appellant had purchased two fishing trawlers of foreign origin from M/s. Kerala State Cooperative Federation for Fisheries Development Ltd. [popularly called Matsyafed], an undertaking of the Govt. of Kerala, on 26.2.1998. Long before that, Matsyafed had imported these deep sea trawlers and cleared the same without payment of Customs duty by claiming the benefit of exemption under Customs Notification No. 262/58 dated 11.10.1958. This Notification was superseded by Customs Notification No. 133/87 dated 19.3.87 which also granted exemption for such vessels. One condition under these Notifications was that the exemption would not be available to such vessels as were imported for the purpose of breaking up. An allied condition was that, if subsequently the vessel was to be broken, duty should be paid thereon as if it was imported for the purpose of breaking. Matsyafed alienated of the vessels through tender/auction proceedings and the appellant purchased the same on payment of an amount of Rs.20.00 lakhs, which amount was said to be inclusive of all taxes, duties, charges etc. that might have been paid by the seller. Shortly after delivery of the vessels was taken by the appellant, the Customs authorities seized the vessels on the reasonable belief that they were liable to confiscation under Section 111(o) of the Customs Act. A statement was recorded from the appellant, wherein they inter alia pleaded ignorance of their liabilities arising out of any breach of conditions of the Notification by Matsyafed. Subsequently, a show-cause notice was issued by the department under Section 124 of the Customs Act for confiscating the vessels under Section 111(o) and imposing penalty on the appellant under Section 112 besides recovering duty from him. These proposals were contested. In adjudication of the dispute, the Collector of Customs passed an order upholding the above proposals. This order was challenged before this Tribunal and the Tribunal remanded the matter to the Commissioner. Pursuant to the remand order, the Commissioner of Customs (vide impugned order) ordered confiscation of the trawlers under Section 111(o) with option to redeem the same on payment of a fine of Rs.1.00 lakh. He also imposed a penalty of Rs.20,000/- on Shri P.A.Sadiq (Proprietor of the appellant-concern) under Section 112. Besides these, duties as applicable were also directed to be paid by the party as the owner of the vessels. The Commissioner exonerated other noticees [owner of the boatyard from where the vessels were seized, and M/s. Matsyafed, the original importer] from penal liability. The present appeal is directed against the Commissioners decision.

2. It also needs mention that, after the first order of adjudication was passed, the party had made payment of Rs.10,000/- towards fine, Rs.1,00,000/- towards penalty and Rs.4,87,600/- towards duty totalling to Rs.5,97,600/-.

3. Today, learned counsel for the appellant has challenged the Commissioners second order on numerous grounds. It is submitted that Customs Notification No. 262/58 (as amended) was superseded by Customs Notification No. 133/87 dated 19.3.1987 and that this Notification was rescinded on 23.7.1996 by Notification No. 47/96-Cus. It is submitted that, since 23.7.1996, the condition attached to the exemption Notification, under which Matsyafed had secured duty-free clearance of the goods, can be considered to be operative and hence the condition is not applicable to the vessels seized from the possession of the appellant on 2.3.1998. The counsel has relied on the provisions of Section 6 of the General Clauses Act in the context of discussing the effect of rescission of Notification No. 133/87. It is also submitted that Matsyafed had disposed of the vessels as they were not seaworthy. Unseaworthy trawlers cannot be considered to be ocean-going vessels so as to attract the relevant Notification. It is further submitted that the liability, if any, arising under the exemption Notification was not on the appellant but on the original importer viz. M/s. Matsyafed. It is submitted that, when the vessels were purchased from Matsyafed, the appellant did not even know that they had been imported. The tender notice of M/s. Matsyafed did not give any indication in this regard. In any case, the price paid by the appellant to the seller was inclusive of all taxes, duties and other charges. The case of the appellant is that, as bonafide purchaser, he is not liable to pay any duty, fine or penalty in relation to the vessels. Counsel has also raised a valuation dispute in relation to the demand of duty.

4. It appears from the records that numerous letters were exchanged between the appellant and M/s. Matsyafed and also between the appellant and the department, one of which is a letter dated 12.12.1998 addressed to the Commissioner of Customs, Cochin, wherein the appellant had requested the Commissioner to allow him to redeem the vessels on payment of a fine of Rs.1.00 lakh and also a penalty. In that letter, the appellant requested the Commissioner for release of the vessels for scrapping. Further, the appellant promised to pay duty on the goods out of sale proceeds of the scrap. In that letter, the appellant also offered to furnish bond or bank guarantee to ensure payment of duty. The offer made by the appellant in the above letter was repeated in subsequent letters dated 13.1.99 and 29.1.99, and the payments mentioned in para (2) of this order were made thereafter.

Importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer (emphasis added) According to the text of para (b) of the condition attached to Notification No. 133/87-Cus., where any vessel imported duty-free under the Notification was subsequently intended to be broken, a fresh Bill of Entry was required to be presented to the Commissioner of Customs for the purpose of payment of duty as if such vessel was entered for home consumption under Section 46 of the Customs Act on the date of presentation of such fresh Bill of Entry for the intended purpose of breaking of the vessel. It would therefore appear that the expression the time when they are cleared for home consumption, used in the definition of importer, includes the time when the vessels are cleared under the fresh Bill of Entry for the purpose of breaking up. Thus, in relation to the period between the original importation of the subject vessels and their clearance under fresh Bill of Entry for the purpose of breaking, Matsyafed as original importer and the appellant as subsequent owner of the vessels get covered by the definition of importer under Section 2(26) of the Act for the respective segments of the said period. In his capacity as importer, so defined, the appellant upon having acquired the vessels from Matsyafed came to be burdened with the liability to file fresh Bill of Entry to the Commissioner of Customs and to observe all the attendant formalities under the Customs Act. Therefore, in our considered view, the appellant cannot resist being burdened with the liability to pay duty of Customs on the vessels. Non-discharge of such liability amounted to breach of the condition attached to the Notification, attracting the provisions of Section 111(o) of the Customs Act also. In this context, we must also add that we have rejected the plea that the said condition ceased to be operative on the date of rescission of the Notification (23.7.96) and hence did not affect the appellant. The liability to file fresh Bill of Entry in respect of the vessels was on the importer as defined under Section 2(26) and, as the appellant as owner came within the coverage of the definition of importer, he was liable to do that. The owner, who intended to break the vessels, was liable to file Bill of Entry for payment of duty and clearance of the vessels for breaking, and the appellants intention to break the vessels was admitted in his own statement wherein he had stated that the vessels had been sent to the boatyard [from where they were seized by Customs authorities] for breaking. When the ownership over the goods passed from Matsyafed to the appellant, the liability under the Notification also passed to the latter as the new owner coming within the definition of importer. The rescinding of the Notification has had no effect of extinguishing this liability thanks to the relevant saving clauses of Section 159A of the Customs Act. [This Section has retrospective effect from 1.2.1963 vide Section 114 of the Finance Act, 2001]. Contextually we may also point out that, where Section 159A of the Customs Act is available, Section 6 of the General Clauses Act (referred to by the counsel) need not be pressed into service.