Larsen and Toubro Limited vs Union of India

J.P. Devadhar, J.—Rule. Rule is made returnable forthwith. By consent, the petition is taken up for final hearing.

The petitioners are aggrieved by the seizure memo issued by the Customs Authorities on 7-4-2011, whereby the Heavy Lift & Pipelay Vessel (''vessel'' for short) imported by the petitioner No. 2 and cleared by the Customs Authorities on provisional basis has been seized.

Pursuant to a contract entered into by and between the Oil and Natural Gas Corporation ("ONGC" for short) and the petitioner No. 1, the petitioner No. 1 were to install jackets and other items at the Mumbai High Seas for a petroleum project. The vessel in question required for executing the above work could be imported duty free, if Essentiality Certificate is issued by the Directorate General of Hydrocarbons (''DG, Hydrocarbons'' for short).

In the present case, ONGC applied to the DG, Hydrocarbons seeking essentiality certificate in respect of the vessel in question, specifically stating therein that the petitioner No. 1 is the sub-contractor of ONGC and the petitioner No. 2, a subsidiary company of petitioner No. 1, is a sub-contractor of petitioner No. 1, who would be importing the vessel in question. Accordingly, essentiality certificate was issued by the DG, Hydrocarbons on 6-12-2010.

On arrival of the vessel in question, the petitioner No. 2 filed a Bill of Entry (''B/E'' for short) for clearance of the vessel in question. Along with the B/E, the petitioner No. 2 filed essentiality certificate dated 6-12-2010. An affidavit and undertaking of ONGC to the effect that the petitioner No. 2 is the subcontractor of petitioner No. 1 and that the vessel in question is to be used for the petroleum project was filed before the Customs Authorities.

As the vessel in question was not released, Writ Petition No. 10240 of 2010 was filed, wherein an order was passed on 23-12-2010 to the effect that the Customs would allow provisional release of the vessel in question. Accordingly, the vessel was released provisionally on 26-12-2010 on furnishing a bank guarantee for Rs. 15 crores, cash payment of Rs. 5 crores and a Bond for the full value of the vessel. It is not in dispute that on provisional release, the vessel is used for the petroleum project as per the contract between the ONGC and petitioner No. 1.

By the impugned seizure memo dated 7-4-2011, the vessel in question has been seized solely on the ground that the DG, Hydrocarbons who had issued the essentiality certificate on 6-12-2010 had cancelled the said certificate vide their letter dated 6-4-2011 and, therefore, the vessel in question is liable to be confiscated u/s 111(h), (m) and (o) of the Customs Act, 1962.

Perusal of the letter of DG, Hydrocarbons dated 6-4-2011 shows that the said letter has been issued at the instance of the Customs Authorities, without hearing the petitioners and without considering the case put forth by the petitioners. The sole ground for cancelling the essentiality certificate is that the ONGC could not confirm as to whether they have approved the petitioner No. 2 as the sub-contractor. Mr. Jetley, learned counsel for the Customs Authorities vehemently argued that the ONGC has evaluated the petitioner No. 1 as the subcontractor and has not evaluated the petitioner No. 2 as sub-contractor. Therefore, in the absence of evaluation by ONGC regarding the capability of petitioner No. 2 in handling the vessel in question, the DG, Hydrocarbon was justified in cancelling the essentiality certificate and consequently the Customs Authorities were justified in seizing the vessel as the provisional release of the vessel was obtained by misrepresentation.

We see no merit in the above contention because, firstly, it is nobody''s case that the vessel in question is not required for petroleum project. If the vessel is required for the petroleum project, then issuance of the essentiality certificate by DG, Hydrocarbons could not be faulted. Secondly, the DG, Hydrocarbons could not have cancelled the essentiality certificate without hearing the petitioners and without considering the case of the petitioners. Thirdly, before the Customs Authorities the ONGC had filed an affidavit/undertaking to the effect that the vessel would be used for petroleum project and in fact the vessel has been used for the petroleum project since the date of provisional release. Fourthly, as per Notification dated 1-3-2002, the vessel in question could be cleared at ''nil'' rate of duty subject to furnishing a certificate from DG, Hydrocarbon to the effect that the imported goods are required for petroleum operations. The fact that the vessel in question has been used for petroleum operations since last four months is not in dispute. Fifthly, for the purposes of Customs Act, what is relevant is whether the vessel is essential for the petroleum project and it is not relevant as to who is the contractor executing the work on behalf of ONGC. Sixthly, when the vessel is provisionally released, the question of confiscating the vessel under the provisions of the Customs Act, even before adjudication does not arise.

In these circumstances, in our opinion, the Customs Authorities were not justified in seizing the vessel even before completion of investigations. Accordingly, the seizure memo dated 7-4-2011 is quashed and set aside and the Customs Authorities are directed to release the vessel forthwith. It is made clear that the observations made herein are prima facie observations and the Customs Authorities on completion of investigation, are at liberty to finalize the assessment without being influenced by the observations made in this order. Similarly, the petitioners till the adjudication is complete, shall not use the vessel except for the purpose of executing the contract between the ONGC and the petitioner No. 1 and shall not re-export the vessel, except with the permission of the Customs Authorities.

Rule is made absolute in the above terms with no order as to costs.