2025 (10) TMI 75 - HC - Customs

Consignment in flexi-bags transferred into containers under PESO supervision per Petroleum Act 1934; release within two weeks

M/s. Avalanche Overseas Pvt. Ltd. Versus Union Of India & Ors.

HC directed that the consignment in flexi-bags may be transferred into containers under PESO supervision in accordance with the Petroleum Act, 1934 and ... Prayer for release of the consignment of Industrial Oil contained in 12 containers which are retained under the Bill of Lading - release of the containers not permitted on the ground that the goods in question imported by the petitioner were in Flexi-bags which is not permitted as per the public notice dated 27.09.2024 - HELD THAT:- The respondent-authorities permitted the petitioner to transfer the goods in question from Flexi-bags to the container under the supervision and guidance of the officers of the PESO in the tanker in accordance with the Petroleum Act and the Rules made therein, as requested by the petitioner in the representation dated 12.06.2025. The petitioner shall file an undertaking before this Court to abide by all the rules and directions to be issued by the concerned officer of the PESO and once the goods are transferred in a container according to the directions of PESO officer in consonance with the provisions of the Petroleum Act,1934 and allied Rules framed therein, respondent No. 2-Custom Officer is directed to release the goods after following the due process in accordance with law. Such exercise shall be completed within a period of two weeks from today. As these directions are to be issued at the request of respondent Nos. 2 and 3, the cost of transfer of the material by the petitioner, from Flexi-bags to the containers as specified in the Petroleum Act, 1934 and allied Rules, shall be borne by respondent Nos. 2 and 3. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the Customs authority lawfully refused release of imported mineral/industrial oil contained in Flexi-bags on the basis of a Public Notice dated 27.09.2024 relying on a clarification by the Petroleum and Explosives Safety Organization (PESO). 2. Whether the Public Notice and PESO clarification could validly exclude Flexi-bags fitted within general purpose 20-feet containers from the statutory definition of 'container' under the Petroleum Rules, 2002 and thereby prohibit import/clearance. 3. Whether, in the circumstances where orders were placed and full payment made prior to the Public Notice, the importer is entitled to relief permitting transfer of the petroleum product from Flexi-bags into certified containers under supervisory directions of PESO and consequent release by Customs. 4. Whether the Court may direct the transferral procedure, supervision by PESO officers, and allocation of costs for such transfer to the respondent authorities. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Lawfulness of Customs refusal to release goods based on Public Notice relying on PESO clarification Legal framework: The petition invoked writ jurisdiction under Articles 226 and 227 of the Constitution. Relevant statutory regime includes the Petroleum Act, 1934 and the Petroleum Rules, 2002; Customs procedures (Bill of Entry, self-assessment, duty payment) are also engaged. PESO issues safety-related clarifications and the Customs authority may issue Public Notices/Facility Notices for operational compliance. Precedent treatment: The Court considered statutory allocation of authority under the Petroleum Rules, 2002 (noting Rules 3-5 and the role of the Chief Controller in approving container specifications) and treated PESO's role as safety-supervisory rather than enabling unilateral redefinition of statutory terms by the Customs authority. Interpretation and reasoning: The Court observed that the authority to approve specifications of containers for petroleum products rests with the Chief Controller under the Petroleum Rules, 2002. The Public Notice of Customs dated 27.09.2024 was based on a PESO clarification that Flexi-bags fitted in general purpose 20-foot containers are not covered by the statutory definition of 'container.' The Court reasoned that respondent No. 2 could not, by administrative public notice alone, displace the statutory scheme or exercise powers inconsistent with the delegated authority under the Petroleum Rules; therefore the blanket non-release based solely on that Public Notice required closer supervisory regulation consistent with statutory processes and PESO supervision. Ratio vs. Obiter: Ratio - Administrative restriction on release based solely on a Public Notice grounded on PESO clarification cannot override the regulatory scheme that vests specification-approval authority in PESO/Chief Controller; Customs must act in conformity with statutory roles and allow safety-compliant remediation where appropriate. Obiter - Observations recognizing public safety as a legitimate aim of the Public Notice and that other importers sought re-export after the Notice. Conclusion: The Customs refusal to release the consignment warranted judicial oversight to ensure that any safety-based restriction be implemented consistent with statutory powers and with PESO supervision rather than by unilateral administrative exclusion. Issue 2 - Validity of excluding Flexi-bags from the definition of 'container' under the Petroleum Rules, 2002 Legal framework: Definition of 'container' in Rule 2A(viii) of the Petroleum Rules, 2002, and the statutory scheme empowering the Chief Controller to approve container specifications; PESO's role in safety regulation under the Petroleum Act and Rules. Precedent treatment: The Court treated the statutory definition and the Rule-based approval mechanism as determinative for container specifications. PESO's clarifications are influential on safety compliance but do not amount to a free-standing power permitting redefinition of statutory terms by third-party administrative notices without following statutory approval processes. Interpretation and reasoning: The Court noted that Rule 2A(viii) defines 'container' as a receptacle for petroleum not exceeding 1000 litres in capacity; that definition does not expressly encompass Flexi-bags fitted inside a 20-foot container. However, rather than accepting an absolute administrative exclusion, the Court emphasized that the appropriate course is supervised compliance: if transfer into certified containers conforming with the Petroleum Act and Rules can be effected under PESO oversight, the statutory object of safety can be secured without a categorical bar to import clearance. Ratio vs. Obiter: Ratio - The statutory definition and approval mechanism must be respected; administrative clarification cannot be used to create a blanket prohibition where supervised remedial measures consistent with statutory requirements are available. Obiter - Technical distinctions as to whether Flexi-bags per se fall within the definition were discussed in context of pragmatic supervisory steps. Conclusion: The Public Notice's practical effect of excluding Flexi-bag imports required application of statutory procedures and PESO supervision; exclusion could not operate to permanently bar remediation or clearance without PESO-directed corrective action. Issue 3 - Entitlement to transfer goods from Flexi-bags to certified containers and release upon compliance where orders/payment predate the Public Notice Legal framework: Principles of fairness in administrative action and writ jurisdiction to ensure lawful exercise of statutory powers; Customs' operational authority over imported goods subject to compliance with statutory safety norms and PESO supervision; Facility Notices may be construed for operational harmonization but should not deprive parties of lawful remedies. Precedent treatment: The Court relied on equitable supervisory powers under Articles 226/227 to fashion a remedy balancing public safety and the importer's vested transactional position (order placement and full payment prior to the Public Notice), treating Facility Notice applicability as a matter the authority should have calibrated to such pre-existing transactions. Interpretation and reasoning: The petitioner's factual position (order placed 04.07.2024 and full payment 29.07.2024) was noted; the Court found it appropriate to permit transfer of the petroleum product from Flexi-bags to certified containers under PESO supervision as a lawful remedial procedure to enable release, subject to the petitioner's undertaking to abide by PESO directions and to complete transfer in conformity with the Petroleum Act and Rules within a specified timeframe. Ratio vs. Obiter: Ratio - Where safety-compliant remediation is feasible under statutory supervision, the Court can direct such remediation and consequent release rather than permit an absolute administrative bar, particularly where the transaction predated the administrative prohibition. Obiter - Observations on the desirability that Facility Notices should, where feasible, accommodate pre-existing contracts and payments. Conclusion: The Court directed that transfer be permitted under PESO supervision, on petitioner's undertaking, and that Customs release goods after due process upon completion-thus securing both safety compliance and relief for the importer whose order/payment preceded the Public Notice. Issue 4 - Authority to direct supervision, timeframe, and allocation of costs for transfer Legal framework: Court's power to issue directions under Articles 226/227 to ensure lawful and orderly implementation of statutory schemes; PESO's supervisory role under the Petroleum Act and Rules; principles of fairness and causation in awarding costs. Precedent treatment: The Court exercised its equitable and supervisory jurisdiction to prescribe the manner, timeframe (two weeks), and supervisory oversight (PESO officers) for the transfer. The Court also allocated costs of the transfer to the respondent authorities because the directions were to be issued at their request and consequent to their administrative action (Public Notice). Interpretation and reasoning: Given respondents' willingness to permit transfer upon Court direction and PESO supervision, the Court ordered transfer under PESO guidance in accordance with statutory rules, specified completion within two weeks, required an undertaking by the petitioner to follow PESO directions, and directed respondents to reimburse actual transfer costs on production of proof (estimated at Rs.1.5 lakh but subject to proof). Ratio vs. Obiter: Ratio - The Court can and will prescribe supervised remedial measures, a limited timeframe, and cost allocation where administrative action necessitates judicially-ordered remediation; costs may be awarded against authorities when directions flow from their measures. Obiter - Practicalities of cost estimation and method of reimbursement were noted as administrative matters to be proved. Conclusion: The Court directed supervised transfer under PESO, mandated completion within two weeks, required petitioner's undertaking, and ordered respondents to bear and reimburse actual transfer costs upon proof; those directions resolved the conflict between safety regulation and the importer's rights while preserving statutory supervisory control.