Oldfjell Tankers Vs. Commissioner of Customs - Court Judgment

Excerpt:
1. m/s. oldfjell tankers (appeal 765/98) is the owners of vessels mt bow sea and mt owl trader, gunnersen ragnar and g. blevrakis are the masters of bow sea (c/761/98) and owl trader (c/756/98). intra trade pvt. ltd. (c/764/98) and south india corporation (agencies) ltd. (c/763/98) respectively are the steamer agent for the vessels at kandla and sikka ports. r.c. reddy (c/760/98) and binod kuriakose (c/762/98) respectively are employees of intra trade pvt. ltd. and south india corporation (agencies) ltd. 2. in the impugned order, the commissioner has imposed penalties under section 112 of rs. 35.00 lacs on the first appellant, rs. 25.00 lacs on the second appellant, rs. 20.00 lacs on third appellants, rs. 25.00 lacs on the fourth appellant, rs. 20.00 lacs each on the fifth and seventh appellants and rs. 25.00 lacs on the sixth appellant. he has ordered confiscation of bow sea and owl trader with option to redeem them on payment of fine of rs. 10.00 crores and rs. 5.00 crores respectively. he has ordered confiscation of goods carried on both the vessels with an option to redeem them on payment of fine of rs. 3.00 crores for vessel mt bow sea and rs. 2.00 crores in respect of vessel mt owl trader. he has also ordered confiscation of goods carried on board bow sea intended for discharge at jebel ali in united arab emirates with an option to redeem them on payment of fine of rs. 5.50 crores. bow sea a tanker carrying various quantities of chemicals consigned for jebel ali, kandla, karachi and sikka ports was proceeding to karachi. it was learnt that there was considerable delay in karachi and kandla. in order to avoid detention of the ship in these ports the vessels' owners decided to transfer karachi and kandla cargo to owl. trader, which because of its small draught could more easily find berth in these ports. therefore, intra trade pvt. ltd. agent at kandla filed an application to the assistant commissioner at kandla requesting transhipment of these cargoes from bow sea to owl trader. this application was allowed by the assistant commissioner. bow sea then transferred these cargos to owl trader proceeded to sikka and discharged cargo and went on to jebel ali. owl trader proceeded to kandla, discharged the cargo and then to karachi.4. the discharge was directly from one ship to another, the cargo being bulk. the customs discovered that the actual point at sea where discharge has taken place at n 22-45" and e 70-05' was not within the jurisdiction of kandla port. its precise location is not mentioned in the notice nor in the order. it is stated to be within the indian customs waters and near jordia port under the jurisdiction of jamnagar customs. in any case, it was about 1.5 nautical mile south of the southern limits of kandla port. it was also discovered that the manifest filed for bow sea for sikka did not include the cargo carried on the ship for unloading at jebel ali. a shortage was discovered between the quantities of some of the goods carried on board the owl trader and what was actually discharged at kandla. notice was issued proposing confiscation of the goods, ships and penalties on the owners, masters of the vessels, the steamer agent and their employees on these accounts. this has resulted in the passing of the impugned order.5. we shall first consider the case of transhipment. the commissioner has held that since transhipment did not take place within kandla, the permission granted by the assistant commissioner at kandla for such transhipment was not valid and therefore transfer of the goods from one ship to another was unauthorised, and the goods became liable to confiscation under clause (d) of section 111. it is not disputed that the transhipment did take place at the point outside the limit of kandla. this information in fact has been furnished by the master of bow sea. technically perhaps it can be said that there has been a contravention. however, the fact remains that the vessel owners had asked for permission from kandla customs for the transhipment which was given. if the transfer had taken place 1.5 nautical miles north, there would be no case. the point of transfer has apparently been erroneously considered by all concerned to be within the limits of kandla port. the fact of entry in its record by the master of bow sea of the point of transfer shows that there was no intention, knowing the limits of kandla port to conduct outside. the transfer itself, we were told, took ten hours. it is clear that in good faith the appellants had asked for permission for transhipment believing that they were required and it was equally in good faith the assistant commissioner granted such permission. neither the notice nor the impugned order mentions within whose jurisdiction the transfer taken place. neither side was unable to determine this jurisdiction. there is no doubt that if the proper officer has been approached, permission would have been granted. such transhipments are a matter of common occurence. in the absence of any mala fides, as in this case, the permission would not have been refused. the contravention therefore would become purely technical.6. the departmental representative is at pains to emphasise that even if the appellant believed that the position of the ship was in the limits of kandla, it is section 8 and not section 54 of the act that would apply, because that would not be a place approved by the commissioner for unloading or loading of any goods. that may be true.however, this is a point that ought to have been considered by the assistant commissioner. the application made to him asked for permission for transhipment at deep sea outside the port limits. if despite this clearly worded application, the assistant commissioner chose to grant the permission and not forward it to his superior, it is difficult to see why the appellant could not have acted on the permission granted. the contravention therefore is at the most technical and not the one involving mala fides, loss of revenue or loss of cargo.7. it is not denied by the appellant that the master of bow sea did not declare at sikka port the cargo meant for jebel ali. it is however contended that this was not a mala fide omission and that the cargo had been carried to jebel ali and discharged there in full. evidence in the form of landing certificate from jebel ali port authorities has been produced in support. here again, although there has been a contravention of clause (c) of section 111, considerable leniency is called for in the light of this fact.8. the third issue relates to shortage found in certain quantities discharged at kandla port as against the quantities manifested. the commissioner refers to this as transhipment loss. duty is demanded on 11.237 metric tonne of cyclohexane, 3.199 metric tonne of orthoxylene, 18.099 metric tonne of carbon tetrachloride and 3.764 metric tonne of chloroform. prior to issue of notice, the assistant commissioner of customs, kandla had already demanded duties on identical quantities of these goods on the ground that there was a difference between the quantities carried on board bow sea and owl trader and duty had been demanded thereon. since the matter had therefore already been adjudicated and the duty also paid, the commissioner's order in this regard therefore cannot be sustained.9. no reasons are advanced in the notice for imposition on penalties on the agents at kandla and sikka and on their employees. these agents and the employees had filed applications for transhipment, import general manifest etc. since the penalties on this account has been imposed on the master, it is difficult to see why penalty has been imposed on the agent and their employees without any specific reason.10. in the light of these discussions, we modify the order of the commissioner as below, (i) redemption fine for the cargo carried on board vessel mt bow sea for jebel ali and karachi of rs. 3.00 crores is reduced to rs. 5.00 lacs, (ii) order of confiscation of the cargo unauthorisedly transhipped cannot be sustained for the reason that cargo itself was not available having been cleared by the importers.such confiscation is set aside, (iv) we do not consider that the facts of this case and the contravention involved are so grave or serious as to justify confiscation of the ships and set aside such confiscation, (v) while we have held that the offences are technical, the fact remains that the situation could have been handled with greater care by the masters of the vessels.11. we are unable to perceive the reason for penalties on the ship owners, in addition to penalties imposed on the masters. the penalty was imposed on the master under section 112. he is the person who by his act or omission has rendered the goods liable to confiscation and hence rendered himself liable to penalty. therefore, unless it can be shown that the owner carried out some other acts independently those of the master there would be no basis for imposition of penalty on the owners. the fact that section 115 speaks of precautions to be taken by the owner which might not have been taken would not justify imposition of penalty on the owner; it would only justify confiscation of the vessel which the matter therefore dealt with separately. we therefore set aside the imposition of penalty on the owner. we are however of the view that the masters of the vessels cannot be entirely exonerated although the contraventions are both procedural. having regard to the nature of the contravention and the absence of mala fide intentions behind them and the fact there was no loss of duty either attempted or caused, we reduce the penalties imposed on appellants gunnersen ragnar and g. blevrakis from rs. 20.00 lacs to rs. 4.00 lacs on each of them.12. appeals c/760/98, c/762/98, c/763/98, c/764/98 and c/765/98 allowed. other two appeals allowed in part. consequential relief.

Judgment:
1. M/s. Oldfjell Tankers (Appeal 765/98) is the owners of vessels MT Bow Sea and MT Owl Trader, Gunnersen Ragnar and G. Blevrakis are the Masters of Bow Sea (C/761/98) and Owl Trader (C/756/98). Intra Trade Pvt. Ltd. (C/764/98) and South India Corporation (Agencies) Ltd. (C/763/98) respectively are the steamer agent for the vessels at Kandla and Sikka ports. R.C. Reddy (C/760/98) and Binod Kuriakose (C/762/98) respectively are employees of Intra Trade Pvt. Ltd. and South India Corporation (Agencies) Ltd. 2. In the impugned order, the Commissioner has imposed penalties under Section 112 of Rs. 35.00 lacs on the first appellant, Rs. 25.00 lacs on the second appellant, Rs. 20.00 lacs on third appellants, Rs. 25.00 lacs on the fourth appellant, Rs. 20.00 lacs each on the fifth and seventh appellants and Rs. 25.00 lacs on the sixth appellant. He has ordered confiscation of Bow Sea and Owl Trader with option to redeem them on payment of fine of Rs. 10.00 crores and Rs. 5.00 crores respectively. He has ordered confiscation of goods carried on both the vessels with an option to redeem them on payment of fine of Rs. 3.00 crores for vessel MT Bow Sea and Rs. 2.00 crores in respect of vessel MT Owl Trader. He has also ordered confiscation of goods carried on board Bow Sea intended for discharge at Jebel Ali in United Arab Emirates with an option to redeem them on payment of fine of Rs. 5.50 crores.

Bow Sea a tanker carrying various quantities of chemicals consigned for Jebel Ali, Kandla, Karachi and Sikka ports was proceeding to Karachi. It was learnt that there was considerable delay in Karachi and Kandla. In order to avoid detention of the ship in these ports the vessels' owners decided to transfer Karachi and Kandla cargo to Owl. Trader, which because of its small draught could more easily find berth in these ports. Therefore, Intra Trade Pvt. Ltd. agent at Kandla filed an application to the Assistant Commissioner at Kandla requesting transhipment of these cargoes from Bow Sea to Owl Trader.

This application was allowed by the Assistant Commissioner. Bow Sea then transferred these cargos to Owl Trader proceeded to Sikka and discharged cargo and went on to Jebel Ali. Owl Trader proceeded to Kandla, discharged the cargo and then to Karachi.

4. The discharge was directly from one ship to another, the cargo being bulk. The Customs discovered that the actual point at sea where discharge has taken place at N 22-45" and E 70-05' was not within the jurisdiction of Kandla port. Its precise location is not mentioned in the notice nor in the order. It is stated to be within the Indian Customs waters and near Jordia port under the jurisdiction of Jamnagar Customs. In any case, it was about 1.5 nautical mile south of the southern limits of Kandla port. It was also discovered that the manifest filed for Bow Sea for Sikka did not include the cargo carried on the ship for unloading at Jebel Ali. A shortage was discovered between the quantities of some of the goods carried on board the Owl Trader and what was actually discharged at Kandla. Notice was issued proposing confiscation of the goods, ships and penalties on the owners, masters of the vessels, the steamer agent and their employees on these accounts. This has resulted in the passing of the impugned order.

5. We shall first consider the case of transhipment. The Commissioner has held that since transhipment did not take place within Kandla, the permission granted by the Assistant Commissioner at Kandla for such transhipment was not valid and therefore transfer of the goods from one ship to another was unauthorised, and the goods became liable to confiscation under Clause (d) of Section 111. It is not disputed that the transhipment did take place at the point outside the limit of Kandla. This information in fact has been furnished by the master of Bow Sea. Technically perhaps it can be said that there has been a contravention. However, the fact remains that the vessel owners had asked for permission from Kandla Customs for the transhipment which was given. If the transfer had taken place 1.5 nautical miles north, there would be no case. The point of transfer has apparently been erroneously considered by all concerned to be within the limits of Kandla port. The fact of entry in its record by the master of Bow Sea of the point of transfer shows that there was no intention, knowing the limits of Kandla port to conduct outside. The transfer itself, we were told, took ten hours. It is clear that in good faith the appellants had asked for permission for transhipment believing that they were required and it was equally in good faith the Assistant Commissioner granted such permission. Neither the notice nor the impugned order mentions within whose jurisdiction the transfer taken place. Neither side was unable to determine this jurisdiction. There is no doubt that if the proper officer has been approached, permission would have been granted. Such transhipments are a matter of common occurence. In the absence of any mala fides, as in this case, the permission would not have been refused. The contravention therefore would become purely technical.

6. The departmental representative is at pains to emphasise that even if the appellant believed that the position of the ship was in the limits of Kandla, it is Section 8 and not Section 54 of the Act that would apply, because that would not be a place approved by the Commissioner for unloading or loading of any goods. That may be true.

However, this is a point that ought to have been considered by the Assistant Commissioner. The application made to him asked for permission for transhipment at deep sea outside the port limits. If despite this clearly worded application, the Assistant Commissioner chose to grant the permission and not forward it to his superior, it is difficult to see why the appellant could not have acted on the permission granted. The contravention therefore is at the most technical and not the one involving mala fides, loss of revenue or loss of cargo.

7. It is not denied by the appellant that the master of Bow Sea did not declare at Sikka port the cargo meant for Jebel Ali. It is however contended that this was not a mala fide omission and that the cargo had been carried to Jebel Ali and discharged there in full. Evidence in the form of landing certificate from Jebel Ali Port authorities has been produced in support. Here again, although there has been a contravention of Clause (c) of Section 111, considerable leniency is called for in the light of this fact.

8. The third issue relates to shortage found in certain quantities discharged at Kandla port as against the quantities manifested. The Commissioner refers to this as transhipment loss. Duty is demanded on 11.237 metric tonne of cyclohexane, 3.199 metric tonne of orthoxylene, 18.099 metric tonne of carbon tetrachloride and 3.764 metric tonne of chloroform. Prior to issue of notice, the Assistant Commissioner of Customs, Kandla had already demanded duties on identical quantities of these goods on the ground that there was a difference between the quantities carried on board Bow Sea and Owl Trader and duty had been demanded thereon. Since the matter had therefore already been adjudicated and the duty also paid, the Commissioner's order in this regard therefore cannot be sustained.

9. No reasons are advanced in the notice for imposition on penalties on the agents at Kandla and Sikka and on their employees. These agents and the employees had filed applications for transhipment, import general manifest etc. Since the penalties on this account has been imposed on the master, it is difficult to see why penalty has been imposed on the agent and their employees without any specific reason.

10. In the light of these discussions, we modify the order of the Commissioner as below, (i) Redemption fine for the cargo carried on board vessel MT Bow Sea for Jebel Ali and Karachi of Rs. 3.00 crores is reduced to Rs. 5.00 lacs, (ii) Order of confiscation of the cargo unauthorisedly transhipped cannot be sustained for the reason that cargo itself was not available having been cleared by the importers.

Such confiscation is set aside, (iv) We do not consider that the facts of this case and the contravention involved are so grave or serious as to justify confiscation of the ships and set aside such confiscation, (v) While we have held that the offences are technical, the fact remains that the situation could have been handled with greater care by the masters of the vessels.

11. We are unable to perceive the reason for penalties on the ship owners, in addition to penalties imposed on the masters. The penalty was imposed on the master under Section 112. He is the person who by his act or omission has rendered the goods liable to confiscation and hence rendered himself liable to penalty. Therefore, unless it can be shown that the owner carried out some other acts independently those of the master there would be no basis for imposition of penalty on the owners. The fact that Section 115 speaks of precautions to be taken by the owner which might not have been taken would not justify imposition of penalty on the owner; it would only justify confiscation of the vessel which the matter therefore dealt with separately. We therefore set aside the imposition of penalty on the owner. We are however of the view that the masters of the vessels cannot be entirely exonerated although the contraventions are both procedural. Having regard to the nature of the contravention and the absence of mala fide intentions behind them and the fact there was no loss of duty either attempted or caused, we reduce the penalties imposed on appellants Gunnersen Ragnar and G. Blevrakis from Rs. 20.00 lacs to Rs. 4.00 lacs on each of them.

12. Appeals C/760/98, C/762/98, C/763/98, C/764/98 and C/765/98 allowed. Other two appeals allowed in part. Consequential relief.