Legal principle

Burnt cars reduced to scrap are neither restricted 'commercial and passenger automobile vehicles' under the Negative List nor 'second hand goods', so their import is not liable to confiscation under Section 111(d), and where the landing/ship-breaking place is notified under Section 7, confiscation under Section 111(h) and vessel confiscation under Section 115(2) for breach of Sections 8 and 33 cannot be sustained.

Court decision

The High Court answered substantial questions 1, 2, 3 and 5 in favour of the assessee (respondents) and against the Revenue, upholding the CESTAT order that Sections 111(d), 111(h) and 115 of the Customs Act were not applicable; question 4 (the refusal of a reference under Section 130(1) read with Rule 8(1)) was declined as academic since the appeals had been admitted by the Court. The appeals were disposed of with no order as to costs.

Facts

The vessel M.V. Mangolia ACE, carrying approximately 3,900 Japanese-manufactured cars for export to Europe, caught fire on 11.11.1994 in the high seas off the Sri Lankan coast while sailing from Colombo. After salvage, the salvor sold the vessel to M/s. ITC Global Pvt Ltd with a contractual obligation that the vessel and burnt cargo would be scrapped only in the presence of a surveyor, and the vessel was brought to India (Alang/Talaja, Gujarat) in January 1995; ITC Global sold the vessel to M/s. Arihant Ship Breakers but retained ownership of the cargo of burnt cars. The vessel was beached on 01.02.1995 without requisite customs permission, and on 14.03.1995 Customs seized the cargo under Section 110 and the vessel under Section 115. The Department issued a show cause notice proposing confiscation of the burnt cars under Sections 111(d) and 111(h) (import without valid licence and unloading at a place not notified under Section 8, breaching Section 33), confiscation of the vessel under Section 115(2), and penalties under Sections 112(a) and 112(b). By Order-in-Original dated 02.12.1997 the Commissioner ordered confiscation with redemption options under Section 125 and imposed penalties; CESTAT allowed the respondents' appeals, and the Revenue challenged the CESTAT order before the Gujarat High Court under Section 130 of the Customs Act, 1962.

Key provisions

• Section 33, Customs Act, 1962 — Unloading and loading of goods at approved places only
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 8, Customs Act, 1962 — Power to approve landing places and specify limits of customs area
• Section 115, Customs Act, 1962 — Confiscation of conveyances
• Section 130, Customs Act, 1962 —  Appeal to High Court