TaxTMI 
TaxTMI 
2026 (8) TMI 1087
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.... 797 of 1998. 3. Being aggrieved by the Order-in-Original dated 02.12.1997 passed by the Commissioner, Customs, Ahmedabad, Gujarat, the respondents preferred appeals before the CESTAT. The CESTAT has allowed the appeals filed by the respondents, and therefore, the revenue has preferred these appeals which were admitted by this Court on the following substantial questions of law vide common order dated 27.08.2009. The following questions were admitted, however, on perusal of the questions, same would have to be re-framed and accordingly they are re-framed as under: "(i) Whether in the facts and circumstances of the case, the Hon'ble CESTAT is justified and has not committed any substantial error of law in not classifying the imported cars though burnt, damaged which were restricted items of import in view of Serial No. 3 part J for Miscellaneous Items of Negative List of Import under para 156 of the Import and Export Policy 1992-1997. Alternatively, in view of para 29 of the said policy, restricting import of second hand goods as scrap so as to set aside the confiscation thereof under Section 111(d) of the Customs Act,1962? (ii) Whether, in the facts and circums....
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....of the vessel and the cargo on board in favour of the salvor, as a reward for the salvage operations as determined by M/s. SEMCO Salvage Maritime Pvt Ltd., in terms of Articles 13 and 14 of the LOF. 4.3 On 22.12.1994, M/s. SEMCO Salvage Maritime Pvt Ltd., thereafter, entered into an agreement with M/s. ITC Global Pvt Ltd for sale of the vessel for a consideration of US$2,373,448.70, subject to a contractual obligation that the vessel and the cargo thereon would be scrapped only in the presence of a surveyor appointed by M/s. Advent Maritime. The said agreement further stipulated that the seller was required to deliver the vessel at Alang Anchorage, India. 4.4 On 04.01.1995, pursuant to the aforesaid agreement, the vessel M.V. Mangolia was brought to Alang, Gujarat. M/s. ITC Global Pvt Ltd., thereafter, sold the vessel to M/s. Arihant Ship Breakers. However, M/s. ITC Global Pvt Ltd retained ownership of all cargo remaining on board the vessel. 4.5 On 01.02.1995, M/s. Arihant Ship Breakers beached the vessel at the port without obtaining the requisite permission from the Customs Authorities. On 14.03.1995, acting on specific intelligence, the Customs authorities conducted an....
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.... or a valid import license. The Show Cause Notice also proposed confiscation of the vessel under Section 115(2) of the Act and further proposed imposition of penalties under Sections 112(a) and 112(b) of the Act upon the respondents. 4.10 On 02.12.1997, the Adjudicating Authority ordered confiscation of approximately 3,900 burnt and damaged automobiles under Sections 111(d) and 111(h) of the Act and granted an option under Section 125 of the Act to redeem the said automobiles in scrap condition on payment of redemption fine. The Adjudicating Authority further ordered confiscation of the vessel M.V. Mangolia ACE under Section 115(2) of the Act, with an option to redeem the same on payment of redemption fine in terms of the proviso to Section 115(2) of the Act. Penalties were also imposed upon the respondents under Sections 112(a) and 112(b) of the Act. 5. Learned Senior Standing Counsel Mr. Ankit Shah, referred to and relied upon the Show Cause Notice issued by the Adjudicating Authority as well as the Order-in-Original and submitted as under: 5.1. The present proceeding arises out of the importation, at the ship-breaking yard at Alang, of a cargo of approximately 3,929 mot....
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....ed into an agreement with the Salvors categorically providing that no part of the damaged automobiles would be used as spare parts. It was pointed out that the Tribunal has recorded that the agreement further obligated the Salvors to obtain similar undertaking from the first buyers of the vessel and to use best endeavours to secure like undertakings from subsequent buyers. 6.3 It was therefore submitted that in view of the finding of fact recorded by the CESTAT that there was a complete destruction and loss of commercial identity of the cars which were burnt in fire, the cars ceased to be the vehicle in the legal commercial sense and therefore have rightly been considered as scrap and import of scrap in the facts of the case did not attract any requirement of any import license. 6.4 It was submitted that the reliance placed by the Commissioner in the order on the requirement of license for the goods being cars even if burnt and damaged, as per serial No. 3 part J of the Miscellaneous Items of Negative List of Imports under para 156 of the Import & Export Policy 1992-97, would not be applicable as in view of the findings of the surveyors that the burnt cars are not capable of ....
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....herefore submitted that there is no violation of any provision of the Customs Act, 1962 and in absence of unloading or an attempt to unload the goods in contravention of Section 33 or 34 of the Act, the conditions for invoking Section 111(h) were not satisfied, and therefore, the goods were not liable to be confiscated either under Section 111(h) or under Section 115 of the Act. 7. Having heard the learned advocates appearing for the respective parties and considering the facts and submissions canvassed before us, it would be germane to refer to the relevant provisions of the Customs Act, 1962, which are as under: "2. Definitions.-In this Act, unless the context otherwise requires,- *** *** *** (22) "goods" includes- (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property; *** *** *** (29) "land customs station" means any place appointed under clause (b) of section 7 to be a land customs station; *** *** *** (33) "prohibited goods" means any goods the import or export of which is subj....
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....y goods or in the carriage of any smuggled goods shall be liable to confiscation, unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance or animal ***: Provided that where any such conveyance is used for the carriage of goods or passengers for hire, the owner of any conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods, as the case may be. Explanation.-In this section, "market price" means market price at the date when the goods are seized." 7.1 On perusal of the above provisions, it would be therefore necessary to consider as to whether the same have been invoked by the appellant - revenue, Customs Department in the facts of the case or not. 7.2 Before analyzing the applicability of the provisions, it would be necessary to refer to the findings of fact recorded by the CESTAT in the impugned order which is as under regarding the applicability of the provision of Section 111(d) and 111(h....
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....nd it was not felt necessary to exclusively stipulate this condition. The extent of the damage to these cars is also made clear following the survey conducted by M/s Erickson Richards at Alang. The survey report dated 21st, January, 1995 says that "except for the fore castle the entire vessel the shell, cargo of cars, compartments accommodation, wheel house, radio room was found completed damaged by fire. 10. The conduct of the parties also just confirms the view that they considered the cargo not to be cars in serviceable condition. We have already referred to the insurers letter on behalf of the original owner of the cargo. The owner would not have given up to cargo if there was a reasonable chance of salvaging any part of it without disproportionately high expenditure. The agreement between the vessel owner Ms/ Advent Maritime (Panama) S.A. the salvor contains the condition in article 12 that salvor will only sell vessel and cargo for scrap/demolition and will not sell the cargo as spare parts. It also contain stipulation that the salvor shall secure from the first buyer of vessel from him a similar undertaking and shall use its best endeavors to secure a similar undert....
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....d. They were physically unloaded, simultaneously with the breaking up of the ship, subsequently Therefore, when they were unloaded, they were not unloaded by any of the appellants before us but by the department. That act of unloading under clause (h) of section 111 The department representative answers by contending that the act of bringing the good to the port of Aland constitute unloading. It is not possible to accept this proposition. Landing is defined in the concise/Oxford Dictionary as removal (from loaded vehicles etc.). When the ship came on to the foreshore with its cargo, that cargo continued to be on board the ship. This is true. Any cargo on a ship continues to be on board the ship. This is true. Any cargo on a ship continues to be on board that ship till it is physically removed from the ship and placed on the wharf. To accept the departmental representative's contention would be to equate berthing of the ship with unloading of the cargo. These are two distinct and separate act. A vessel can unload cargo without necessarily berthing, as for example, in the case overside disclose of cargo off shore or jettisoning of cargo at midsea. In that that case a ship has unl....
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....ified under section 7 of the Act By notification 62/94 as a port for unloading of imported goods and loading of export goods for any clause of such goods. The Collector of Customs had earlier notified certain areas in Talaja as a landing place for unloading of ships to be broked up for the purpose of scraping. The Collector of customs, by notification 3/93 dated 26.2.1993 notified the foreshore at Alang within the port limits of Talaja of which details were specified for the purpose of ship breaking only This notification was subsequently amended, adding to the geographical areas within such ship breaking could be done. Therefore, there was no objection to the ship itself being brought into that part of Talaja port for being broken up. Indeed, no such objection has been raised. 20. The other provisions of chapter VI of the Act relating to conveyance carrying imported and export goods also do not place any restriction from the entry of such a vessel. No such permission was required. The permission which was asked for by the ship owner and refused by the principal collector therefore was not required to be taken by law. Therefore, the owner of the ship did not contravene any....
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....cars were burnt and reduced to scrap, import license is required as per Serial No. 3 of Part J for Miscellaneous Items of Negative List of imports under Para 1.56 of Import & Export Policy, 1992-97. Serial No. 3 Part J of Miscellaneous Items reads as under: "J. MISCELLANEOUS ITEMS SI.No. Description of Items Nature of restriction 1. Aircraft and helicopters Not permitted to be imported except against a licence or in accordance with a Public Notice issued in this behalf. 2. Ships, trawlers, boats and other water transportation crafts. - do - 3. Commercial and Passenger automobile vehicles, including two wheelers, three wheelers and per-sonal type vehicles. - do -" 7.7 In view of factual findings arrived at by the CESTAT as well as the agreement entered into by the Salvor to the effect that the burnt cars are to be considered to be scrap only, by no stretch of imagination the burnt cars can be said to be commercial and passenger automobile vehicles as sought to be considered by the Commissioner of Customs. 7.8 In view of the factual findings recorded by the CESTAT, it cannot be said that the burnt scrapped cars can be considered as commerc....