Platinum Investment Services Corp. vs Union of India (UOI)

H.N. Devani, J.—This petition has been filed with the following prayers:

Taking into consideration the above grounds and others that may be urged at the time of hearing, this Hon''ble Court may kindly be pleased:

To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing and setting aside the order dated 12-5-2010 passed by the respondent No. 3 bearing No. MHV/BRK/01/2010-11 by which the respondent No. 3 has called upon the petitioner to deposit Rs. 40,62,907/- being 20% of the provisional duty in terms of Regulation-2 and furnish bank guarantee for Rs. 1,62,51,627/- being balance amount of differential duty which is contrary to the provisions of Sections 18 read with Regulations, as the order of the Respondent No. 3 is not in consonance with the order passed by this Hon''ble Court in SCA No. 5360 of 2010 and further be pleased to modify/amend/clarify the said order passed by the Respondent No. 3 and delete the condition of furnishing bank guarantee as well as payment of differential amount as the petitioners are ready and wiling to furnish bond, undertaking to the satisfaction of this Hon''ble Court AS WELL as to the Customs Dept. and petitioner is ready and wiling to pay the custom duty as per the MOA entered into by petitioner No. 1 with petitioner No. 2 on the basis of which present bill of entry has been filed and permit the petitioner to remove the wreck of D.V. Platinum-II which is sinking in the sea of Gopnath at Sartanpura which has been declared as landing area u/s 8(a) of The Customs Act by order dated 15-3-2010 for the reasons stated in the Memo of Petition and in the interest of justice;

Pending admission, hearing and final disposal of the above Special Civil Application, to direct the Respondent No. 3 not to restrain the petitioner from removing the wreck of D.V. Platinum-II from the sea and to store it at landing area at Sartanpur declared by the Custom Department to prevent further environmental and ecological damage on the condition that the petitioner will not remove or sell or dispose of the wreck till the final disposal of this petition and petitioner will bear the cost of protecting the wreck brought at Sartanpur Port as may be determined by the Custom Department till the issue of furnishing bank guarantee is desired by this Hon''ble Court for the reasons stated in the Memo of Petition.

The Hon''ble Court may kindly be pleased to grant any other appropriate relief as the nature circumstances of the case may require.

To award the cost of this petition.

Earlier the petitioners had approached this Court by way of a writ petition being Special Civil Application No. 5360 of 2010, which came to be disposed of vide judgment and order dated 7-5-2010 in the following terms:

The petition has been preferred praying for following reliefs:

(A) To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, directing the respondent Nos. 2 & 3 to grant permission to remove the wreck of D.V. Platinum-II from the sea at Off Gopnath Port obstructing the grand channel and gate way of the Gulf of Cambay and allow the petitioners to remove and store pieces of wreck of D.V. Platinum-II at the land allotted by Gujarat Maritime Board on 7-1-2010 and declared landing port by Custom Department on 15-3-2010 with appropriate terms and conditions that till the Custom department considers the representation of the petitioners for adjudication of bill of entry as per the MOA, which the petitioners have entered into an undertaking be given by the petitioner that petitioner will not remove the wreck from Port Sartanpar area and bear the cost which may be determined by the Custom Department for supervision of pieces of remove said wreck at Port Saltanpur to prevent ecological and environmental disaster and damage to sea and blockage of grand channel as Monsoon is fast approaching and if the vessel is further grounded and broken into pieces and sunk, it will block the grant channel and the entire traffic will be blocked and therefore in the interest of justice and looking to the alarming situation, before the issue of adjudication of payment of duty is decided, the permission for removal of wreck is required to be granted.

(B) To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing and setting aside the order dated 31-3-2010 issued by the respondent No. 3 by which the Respondent No. 3 has directed to file Bill of Entry on the basis of first MOA which the petitioner has entered into with M/s. Haryana Ship Demolition Pvt. Ltd. which stands cancelled and further be pleased to direct the Respondent No. 3 to assess the Bill of Entry which petitioner No. 2, the intending purchaser of the petitioner has sent by RPAD to the Respondent No. 3 on 22-1-2010 keeping in mind the order passed by the Gujarat Maritime Board declaring D.V. Platinum-II as wreck and price declared by the petitioner in the MOA dated 23-12-2009 for the reasons stated in the Memo of Petition and in the interest of justice; or in the alternative; To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction directing the Respondent No. 3 to assess the Bill of entry considering the value declared in the MOD dated 23-12-2009 for the reasons stated in the Memo of Petition and in the interest of justice;

(C) To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction directing the Respondent No. 3 to decide the representation dated 5-4-2010 and 224-2010 by which the petitioner, its agent and intending purchaser have requested that the petitioner is entitled for abatement u/s 22 of The Customs Act, 1962 on account of the fact that the goods has been adversely affected, damaged and broken into pieces and in view of the D.V. Platinum-II declared by Gujarat Maritime Board and Customs Department and direct the Respondent Nos. 2 & 3 to assess the Bill of Entry filed by the present petitioner on the basis of the value declared in MOD dated 23-12-2009 considering it as wreck for the reasons stated in the Memo of Petition and in the interest of justice.

After hearing learned Senior Advocate appearing on behalf of the petitioners notice was issued by this Court on 3-5-2010 making the same returnable on 6-5-2010. When the matter came up for hearing yesterday, learned Counsel appearing for Respondent Nos. 2 and 3 prayed for time to obtain instructions after the Court had indicated that the condition of the vessel (described as Wreck by the petitioners), required urgent resolution. The Court is happy to note that both the learned Counsel appearing for the respective sides have amicably arrived at a solution to the problem.

Accordingly as stated by learned Senior Advocate, under instructions, the petitioners shall file a Bill of Entry (notwithstanding the earlier dispute as to whether a Bill of Entry had been filed in past or not), on or before 10-5-2010 along with all the relevant documents including the first Memorandum of Agreement relating to the vessel (Wreck).

Learned Counsel appearing for Respondent Nos. 2 and 3 has stated, under instructions, that upon the Bill of Entry being filed and accompanied by relevant documents including first Memorandum of Agreement provisional assessment shall be framed in accordance with the provisions of Section 18 of the Customs Act, 1962 read with Customs (Provisional Duty Assessment) Regulations, 1963.

Upon such statement having been made on behalf of respondent Nos. 2 and 3, learned Senior Advocate appearing for the petitioners has submitted that the petitioners shall pay the duty and furnish security/bond for differential duty as required by the relevant provisions of the Act with Regulations in accordance with law subject to rights and contentions of the parries to agitate in appropriate proceedings, if so warranted.

Upon completion of the aforesaid proceedings, learned Counsel for Respondent Nos. 2 and 3 has informed the Court that the vessel (Wreck) shall be permitted to be taken to the landing place in accordance with law subject to the final assessment being framed in accordance with law.

In light of the aforesaid arrangement worked out by the parties, the Court is not required to deal with the respective contentions on merits leaving it open to the parties to agitate the same in accordance with law in appropriate proceedings, if need be. Respondent Nos. 2 and 3 shall complete the provisional assessment not later than 14-5-2010 and the petitioners are directed to ensure that requisite formalities, including payment of duty and furnishing of security/bond for differential duty is also completed not later than 15-5-2010.

In light of the aforesaid arrangement worked out by the parties remaining prayers are not required to be considered and the petition stands disposed of accordingly with no order as to costs.

Pursuant to the said order, the concerned Assistant Commissioner, in exercise of powers u/s 18 of the Customs Act, 1962 (the Act) read with the Customs (Provisional Duty Assessment) Regulations, 1969 (the Regulations) called upon the petitioner to pay 20% of the provisional duty amounting to Rs. 40,62,907/- in terms of Regulation-2 of the Regulations, to furnish bond of Rs. 2,03,14,534/- being the amount equal to the difference between the duty which may be finally assessed and the provisional duty, and to furnish bank guarantee issued by nationalized bank for the balance amount of differential duty of Rs. 1,62,51,627/-. Being aggrieved, the petitioners have moved the present petition seeking relief noted hereinabove.

On 18-5-2010, the learned vacation Judge had made an order in the following terms:

Notice to the respondents returnable on 21-6-2010.

Notice as to interim relief returnable on the same date.

Heard Mr. Mihir Joshi, learned Senior Counsel appearing with Mr. Bharat T. Rao, learned advocate for the petitioners.

Despite the order passed by this Court, on 7-5-2010 in Special Civil Application No. 5360/2010, directing the respondent Authority to complete provisional assessment not later than 14-5-2010 and also directing the petitioners to ensure the requisite formalities, including payment of duty and furnishing of security/bond for differential duty on or before 15-5-2010, the Assistant Collector, Customs, Bhavnagar has issued communication dated 12-5-2010 directing the petitioners to execute a bond for an amount of Rs. 2,03,14,534/- being the amount equal to the difference between duty that may be finally assessed and provisional duty and further directing the petitioners to deposit a sum of Rs. 40,62,907/- being 20% of the provisional duty in terms of Regulation 2. In terms of Regulations, the petitioners are also directed to furnish the Bank Guarantee issued by the Nationalized Bank for the balance amount of differential duty i.e. Rs. 1,62,51,627/-. This is not in accordance with the directions of this Court. The petitioners are ready and willing to make payment of Rs. 1,71,38,077/- being the duty amount and also to furnish the Bond for the differential amount of Rs. 2,03,14,534/-. By way of security, the petitioners are ready to provide the security in the form of materials worth Rs. 2,03,14,534/-.

In that view of the matter, by way of ad-interim relief, the respondents are directed to permit the clearance on the payment of Rs. 1,71,38,077/- being the amount of duty as well as on furnishing requisite bond for an amount of Rs. 2,03,14,534/- and furnishing security by the petitioners in the form of materials worth Rs. 2,05,00,000/- to the satisfaction of the respondents Authority.

These directions should be complied with by the Authority not later than 21st June, 2010, if the petitioners satisfy the above conditions.

The petitioners are directed to place on record xerox copy as well as typed copy of Bills of Entry along with letter dated 10-5-2010.

Direct Service is permitted.

The said order subsequently came to be amended vide order dated 20-5-2010 which reads thus:

Mr. Bharat T. Rao, learned advocate appearing for the petitioner has filed this note for speaking to minutes. He has submitted that in unnumbered para-5 on page-3 of the order this Court has observed as under:

The respondents are directed to permit the clearance....

He has submitted that the words "clearance of the rack of dead vessel platinum II" be inserted in the order. He has further submitted that these words are missing and hence they are required to be inserted.

Having considered the request of Mr. Rao and looking at the order, the above words are required to be inserted and hence in para - 5 on page - 3 of the order the words "of the rack of dead vessel platinum II" are inserted after the words "clearance".

There is one more mistake in the order in unnumbered para - 6 on page-3 wherein directions were required to be complied with by the authority not latter than 21-6-2010. As a matter of fact, it should be 21-5-2010 and not 21-6-2010. In any case, correction is directed to be made today. The authorities are now required to comply with the above directions not latter than 22-5-2010.

Direct service today is permitted.

Mr. B.T. Rao, learned advocate for the petitioners has submitted that pursuant to the aforesaid interim order made in the petition, the respondent, vide communication dated 28-5-2010, has called upon the petitioners to furnish a provisional assessment bond in terms of the bond produced along with the affidavit-in-rejoinder filed by the petitioners at Page Nos. 334 to 339 of the petition. Inviting attention to certain conditions stipulated in the said bond, it is submitted that the said conditions could not have been imposed by the concerned officer as the same are not envisaged under the form prescribed in relation thereto. It is further submitted that the petitioners are ready and willing to furnish bank guarantee as required by the officer in the initial order, by way of installments.

On the other hand, Ms. Amee Yajnik, learned Senior Standing Counsel for the respondent Customs authorities, has submitted that the conditions specified in the bond have been inserted with a view to protect the interest of the revenue and as such, the same are in accordance with law. It is further submitted that the principal grievance ventilated in the petition is against the demand for bank guarantee by way of security, and that the submissions advanced by the learned advocate for the petitioners as regards the conditions inserted in the bond are beyond the scope of the petition.

As can be seen from the relief claimed in the petition, it is apparent that what is impugned in the petition is the order dated 12-5-2010 whereby the petitioners have been directed by the Assistant Commissioner, Customs, Bhavnagar, to execute a bond in Customs Series Form No. 3 for an amount of Rs. 2,03,14,534/- being the amount equal to the difference between the duty that may be finally assessed and the provisional duty; to deposit by way of challan with the proper officer, the sum of Rs. 40,62,907/- being 20% of the provisional duty in terms of Regulation 2 of the Regulations; and to furnish bank guarantee issued by any nationalized bank for the balance amount of differential duty, that is, Rs. 1,62,51,627/- (Rs. 2,03,14,534/- - Rs. 40,62,907/-) in favour of the President of India, through the said Assistant Commissioner, in terms of Regulation 4 of the said Regulations. The said order is assailed/on the ground that the Regulations provide only for surety or security in the nature of security/bond as well as undertaking and that it is not permissible for the Customs authorities to demand security by way of Bank Guarantee. The controversy before the Court is therefore, as to whether under the Regulations, it is permissible for the concerned officer to demand security by way of bank guarantee.

The controversy has to be considered in light of provision of Section 18 of the Act, which relates to the provisional assessment of duty. Under Sub-section (1) of Section 18 of the Act the statute provides that without prejudice to the provisions contained in Section 4 of the Act, where it is not possible for an importer to produce any document or furnish any information necessary for the assessment of duty on the imported goods; or where the importer having produced all the necessary documents and furnished full information for the assessment of duty, the proper officer deems it necessary to make further enquiry for assessing the duty, it is open to the proper officer to direct that the duty leviable on such goods may be assessed provisionally if the importer furnishes such security as the proper officer deems fit for the payment of deficiency, if any, between the duty finally assessed and duty provisionally assessed.

Under Sub-section (2) of Section 18 of the Act a provision has been made that where the duty finally assessed, either falls short of the amount so paid, or is in excess of the duty finally assessed, the importer shall pay the deficiency or be entitled to a refund, as the case may be. Therefore, the Regulations have to be considered in light of the principal statute where the proper officer has been vested with a discretion to seek such security as the proper officer deems fit. Accordingly Regulation 2 and Regulation 4 of the Regulations have to be read as being in consonance with provisions of Section 18 of the Act and cannot be read divorced therefrom. The Regulations are not independent provisions but are merely procedural adjunct to the principal statute.

Once the statute has vested a discretion in the proper officer, the scope of judicial review by a court is limited to examining as to whether the discretion so vested in the authority has been exercised in accordance with the provisions of the statute. The Court may intervene in a case where the authority refuses to exercise discretion directing such authority to exercise the discretion vested in it. However, while examining as to whether the discretion has been validly exercised or not the court cannot undertake an exercise of substituting its own discretion, except in a case where it is found that the so-called exercise of discretion was either mala fide or coloured by collateral consideration.

In light of the aforesaid legal position if one examines the communication dated 12-5-2010, which is under challenge in the present petition, it becomes clear that the respondent authority has virtually carried out the process stipulated by Section 18 of the Act read with the Regulations when one considers the following extracts from the said communication:

Pending production of original commercial invoice, bill of sale, document evidencing payment of purchase price to the sellers and any other document/information required by the department for proper assessment of duty on the vessel, the E/E shall be provisionally assessed based on the price declared by you in terms of Section 18 read with Customs (Provisional duty assessment) Regulation, 1963, subject to your furnishing bond, bank guarantee as narrated hereinafter.

For the purpose of determining differential duty involved on the vessel under reference due to difference between declared value and the value u/s 14, the Customs Duty is worked out in the Annexure attached to this letter, based on the price of US $ 50,00,000/- prevailing at the time of importation of the vessel at Alang Anchorage + Breaking Charges of US $ 70000 declared in the bill of entry filed which comes to Rs. 3,74,52,611 and the differential duty thus comes to Rs. 2,03,14,534/- (being difference between estimated duty to be finally assessed and provisional duty as per B/E).

In terms of Regulation 2 of the Customs (Provisional duty assessment) Regulations, 1963, it is hereby directed that you shall execute a bond in Customs Series Form No. 3 in an amount of Rs. 20314534/- being the amount equal to the difference between the duty that may be finally assessed and provisional duty. It is further directed that you, shall deposit by way of a challan with the proper officer/the undersigned, the sum of Rs. 40620907/- being 20% of the provisional duty in terms of Regulation 2 ibid.

In terms of Regulation 4 of the said Regulations, it is directed that you shall furnish bank guarantee issued by any nationalized bank for the balance amount of differential duty i.e. Rs. 16251627/- (Rs. 20314534/- Rs. 4062907/- : Rs. 16251627/-) in favour of the President of India through the undersigned."

Regulation 4 of the Regulations reads thus:

Surety or security of the bond. - The proper officer may require that the bond to be executed under these regulations may be with such surety or security, or both, as he deems fit.

Reading the provision of Regulation 4, in the light of the provision of Section 18 of the Act, it is apparent that under the said provision the proper officer may require that the bond executed under the Regulations may be with surety or security or both, as he deems fit. Thus, it is solely within the discretion of the proper officer as to whether he should require execution of the bond with surety or security or both. Bank guarantee also is one of the known modes of security, and if the proper officer has deemed it fit to require the petitioners to furnish security by way of bank guarantee, it cannot be said that the discretion has been exercised improperly, so as to warrant interference.

In view of the above discussion, there being no infirmity in the impugned order dated 12-5-2010 made by Respondent No. 3, the petition fails and is accordingly rejected. Notice is discharged.

It is clarified that the Court is not laying down any time period for the petitioner to comply with the directions for furnishing the bond and the security asked for. However, immediately upon compliance by the petitioner of furnishing of the bond in terms of the form prescribed in consonance with the Regulations accompanied by the security in the form of bank guarantee, the proper officer shall within three working days thereafter finalize the provisional assessment and permit removal of wreck without any further conditions.

At this stage, learned advocate for the petitioners submitted that instead of depositing 20% of the provisional duty, entire amount of the differential duty shall be secured/paid by way a bank guarantee. Regulation 2 of the Regulations specifically permits the proper officer to make an order of depositing 20% of the differential amount provisionally assessed and the Court is, therefore, not inclined to pass any orders on the request made by the learned advocate for the petitioners as the same is contrary to statutory provision.