ORDER
S.S. Sekhon, Member (T)
1. Heard both sides. Revenue has filed this appeal against the order of the CommissionA vessel appears to have been imported for breaking which was beached at designated plot at Alang Port, Bhavnagar on 21.12.1996. Thereafter a Bill of Entry dated 9.1.1997 for clearance and payment of duty on the said vessel was filed. It is the Revenue’s case that the officers of the department gathered intelligence that the assessee importer had started breaking the vessel without paying the Customs duty thereon. When they visited the subject plot belonging to the assessee importer, where the vessel was barged, they found that the breaking of the vessel was in progress and pipelines on deck side had been dismantled and equipments of wireless & radio rooms had been removed. The Pancha Nama was drawn dated 14.1.1997 indicating the facts as observed on that date. A joint survey was conducted on 15.1.1997 wherein it was concluded that the breaking activities of the vessel without payment of Customs duty and without obtaining out of Customs charge order under Section 47 of the Customs Act, 1962 had commenced. The said vessel was seized on 16.1.1997 and proceedings were initiated, which was provisionally released on 30.1.1997 on execution of a bond. Statements were recorded and thereafter a Show Cause Notice was issued asking the importer assessee to show cause as to why:
(i) the vessel seized under Pancha Name dated 16.1.1997 should not be confiscated under Section 111(g)(h)(j) and (1) of Section 15 of the Customs Act, 1962 and the bond executed at he time of provisional release should not be forfeited;
(ii) Customs duty amounting to Rs. 13,83,5437- on 174.900 MT of Sludge/Sediments should not be recovered from them under the proviso to Sub-section (1) of Section 28 of the Customs Act. 1962; and
(iii) Penalty should not be imposed on them under sub section (ii) read with Clause (a) and (b) of Section 112 of the Customs act, 1962.
In the same Show Cause Notice Shri Sanjay Mehta, Managing Director of the assessee importer was also asked to show cause as to why penalty should not be imposed on him under Sub-section (ii) read with Clauses (a) and (b) of Section 112 of the Customs Act 1962.
2. The adjudicating authority on his finding held that:
(i) breaking & dismantling activities in respect of the vessel had commenced without seeking proper clearance under the provisions of Section 47 of the Customs act;
(ii) there was suppression of the fact of the existence of cargo in the tank No. 8 (port side) and no steps were taken to file an IGM for clearing the said goods which have been cleared as unmanifested cargo and the vessel was therefore held to be used for carrying goods liable for confiscation.
(iii) As regards evasion of Customs duty on Sludge/Sediments, the same was held to be classified under sub heading 2710.00 of the Schedule to the Customs Tariff Act, 1975 and since the assessee did not supply any information with regard to commercial value, the assessable value of Rs. 26,70,933/- was arrived at by adopting Rs. 420/- per MT which was claimed to be cleared without payment of duty amounting to Rs. 13,84,543/- and the same was determined as recoverable under Section 28(1) of the Customs Act, 1962.
(iv) Shri Sanjay Mehta was found liable to penalty along with the assessee importer.
(v) The vessel was to be ordered confiscated and was offered to be released on payment of fine.
3. (a) Revenue has come in appeal. After examining this order to be not legal and proper, in view of the fact that the order portion did not say so, even though in the last sentence of the findings, the Commissioner has come to a possible finding regarding the liability to pay Customs duty of Rs. 13,84,543/-.
(b) The assessee in the cross objection filed has submitted:
(i) the pipe lines on duck were cut due to damage to the bow of the vessel and consequential surveys/repairs at Dubai before the voyage to Alang, Bhavnagar.
(ii) Regarding breaking of wireless equipments & radio room, the same were broken by the Alang Customs staff after beaching of the vessel, in view of following authorities viz (a) letter No. VIII/48-154/Cus-T/83 dated 26.5.1984 of Collector of Customs, Rajkot; letter dated 15.10.1993 & 27.7.1995 of Wireless Monitoring Station, Ahmedabad. The Respondent also requested the Alang Custom staff to provide copy of Panchnama having broken the Wireless equipments and Radio-Room, which was replied by the Assistant Commissioner of Customs, Bhavnagar saying that procedure for drawing the panchnama for having broken the Wireless equipments and Radio-Room started only after 1.9.97 and prior to this date no panchnama was drawn and confirmed vide his letter dated 29.7.00 that one Inspector was deputed for examination of the vessel, who at that time was also attending the work regarding destruction of Radio-Room and Wireless equipments.
(iii) As regards the allegation that Shri Sanjay Mehra, Managing Director gave instruction to break the Wireless equipments and Radio-Room, it was submitted that Shri Sanjay Mehta only gave them okay to go ahead and break and had not permitted or and ordered any breaking of the said equipment by the officers.
(iv) Regarding Sludge/Sediments (Slops) in Tank No. 8 (port side), it was submitted that oil, after circulating and use in machinery and engines, accumulates in separate tank, which is useless, non commercial and non-marketable is to be destroyed and thrown away and therefore the said oil remain and was not declared in the Master’s declaration dated 5.12.1996, which was in any case declared in Gas Free Certificate for Hot Work and also certificate No. 3945 dt 27.11.96. It was submitted that as per Survey Report dated 27.11.1997 they offered comments that sludge/sediments is not considered as cargo and as per I.O.P.P. Rules cannot pump out in the open or protected sea water as such it was retained onboard, which has no commercial use and therefore cannot be considered as cargo.
(v) It was further submitted that on 4.12.96 vessel arrived at Alang Anchorage point at sea and on 11.12.1996 the vessel beached on permission granted and on 9.1.97 Bill of Entry for payment of total duty of Customs Rs. 7,95,78,036 was filed. On 16.1.1997 Bill of Entry was assessed and on 21.1.1997 duty on the vessel as determined was paid and on 22.1.1997 customs out of charge was granted on the Bill of Entry.
5. On consideration of the rival submissions, we find that there is no finding thereof that the area where the vessel was permitted to be beached is not declared by the Customs as Customs Area. Therefore, the vessel cannot be said to have been removed from Customs Area before the out of charge order was given. The wireless equipment and Radio room were required to be broken to avoid misuse, as per instructions on the subject, and this was carried out by the officers of Customs in compliance to Board’s instructions. The liability to confiscation under Section 111(j) of the Customs Act, 1962 therefore cannot be upheld.
6. In this view of the matter, when no conclusive evidence would be available for upholding the confiscation under Section 111(j) as regards the liability to duty of sludge/sediments, the marketability of the said item & use, has to be established and duty can be determined once it is found to be commercial quantity and was not manifested and not declared, then liability to confiscation of the vessel and the goods could be determined along with duty on such sludge/sediments. For this purpose, the orders are set aside and the matter is remitted back to determine the liability to duty and consequent confiscation and penalty on the two appellants could be determined. In this view of the matter, the order is set aside and the matter remitted back to redetermine the issue of liability from the sludge/sediments as arrived at thereon above and thereafter the question of confiscation and penalty to be determined after hearing the assessee importer.
(vi) Appeals allowed as remand in above terms.
(Pronounced in Court.)