1. Both these petitions can be conveniently disposed of by a common judgment as the order under challenge in the two petitions is one passed by the Additional Collector of Customs (Preventive), New Custom House, Bombay, on August 31, 1979.
2. The facts leading to the filing of these petitions are as follows : On January 23, 1979, the Officers of the Rummaging Division boarded the vessel m.v. 'RISHI VISHWAMITRA' which had arrived at the Port of Bombay from Gulf Port. During the course of search, nine gunny packages were found tied to the ceiling brackets at the fresh water tank situated in the steering gear from room at the after of the vessel. The goods of foreign origin totally valued at Rs. 63,445/- J 180 were recovered. On January 24, 1979, during the further search, goods of foreign origin valued at Rs. 80,563/- were found. Again on January 27, 1979, the vessel was searched and the goods of foreign origin of the value of Rs. 53,410/- were recovered. The goods were seized as unclaimed and were confiscated under the provisions of the Customs Act. During the course of the investigation, statements of Master, Chief Engineer, 2nd Engineer, etc. were recorded and thereafter a show cause notice dated June 5, 1979 was issued to the Master of the vessel and the 4th Engineer and M/s. Garware Shipping Corporation - owner of the vessel - to show cause why the ship should not be confiscated and personal penalty should not be imposed.
3. The owner and the Master of the ship resisted the proceedings, inter alia, claiming that they were not aware of the foreign goods being stored on the ship and they had not connived in any manner in secreting of the goods. The owner and the Master also claimed that they had taken requisite precaution to prevent the smuggling of any goods of foreign origin. The Additional Collector of Customs by the impugned order confiscated the goods which were seized on three occasions from the ship. The Officer also directed confiscation of the ship under Section 115(2) of the Customs Act but permitted redemption on payment of fine of Rs. 2,00,000/-. Personal penalty of Rs. 5,000/- was imposed on the owners and Rs. 10,000/- on the Master and Rs. 200/- on the 4th Engineer, under Section 112 of the Customs Act. The order of the Additional Collector of Customs is challenged by the owners in Miscellaneous Petition No. 1984 of 1979 and by the Master and the 4th Engineer in Miscellaneous Petition No. 2048 of 1979.
4. Shri Venkateshwaran, learned counsel appearing on behalf of the petitioners in the two petitions, at the outset mentioned that the petitioners do not desire to challenge the personal penalty imposed on the 4th Engineer and the challenge in the two petitions was restricted only to the order of confiscation of the vessel and the personal penalty imposed on the owners and the Master. The learned counsel urged that the Additional Collector has recorded a clear-cut finding that the evidence does not indicate that the Master or the owners had prior knowledge of the goods being secreted on board or they had connived in any manner in the secreting of the goods. The Additional Collector of Customs, after recording this finding, proceeded to order confiscation of the ship under Section 115(2) of the Customs Act on the ground that the owners and the Master have not taken any precaution as envisaged under Section 115(2) of the Act. Section 115(2) of the Act reads as under :-
'(2) Any conveyance or animal used as a means of transport in the smuggling of any goods or in the carriage of any smuggled goods shall be liable to confiscation, unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance or animal and that each of them had taken all such precautions against such use as are for the time being specified in the rules.'
The plain reading of this sub-section indicates that the owner of the conveyance and the Master in charge of the conveyance are required to take all precautions against the use of the conveyance for smuggling of goods and the precautions required are those specified in the rules. It is not in dispute that the Customs authorities had not framed any rules providing for precautions which are necessary to be taken by the owner and the Master of the conveyance for prevention of the smuggling of the goods. In absence of any rules, it is impossible for the Additional Collector to conclude that the owner or the Master had failed to take requisite precautions in accordance with the rules. The Additional Collector observed in his order that the Master failed to take all such precautions before the vessel entered the Indian territorial waters. In my judgment, in absence of any rules providing for certain set of precautions, it is impossible to direct confiscation of the vessel under sub-section (2) of Section 115 of the Customs Act, 1962 and the order of confiscation, therefore, requires to be set aside.
5. Shri Venkateshwaran then submitted that the personal penalty imposed on the owners and the Master is misconceived and cannot be sustained. The personal penalty has been imposed in exercise of the powers conferred under Section 112 of the Customs Act and that section, inter alia, provides that any person who does or omits to do any act, which act or omission would render such goods liable to confiscation under Section 111 of the Act shall be liable to pay personal penalty. Shri Venkateshwaran urges that the Additional Collector has recorded a finding that there is no evidence whatsoever to establish that either the owners of the Master had prior knowledge of the goods being secreted on board or connived at the smuggling of the goods on the vessel. It was urged that in the face of this finding, it is impossible to conclude that either the owner or the Master had done any act or omitted to do any act which would warrant penalty under Section 112 of the Act. The submission is correct and deserves acceptance. Shri Pochkhanawala, learned counsel appearing on behalf of the Department, submitted that Section 111(f) of the Act requires that the goods brought from a place outside India are liable to confiscation if any dutiable or prohibited goods required to be mentioned under the regulations in any import manifest or import report are no mentioned. Shri Pochkhanawala submits that the goods which were seized from the vessel were not mentioned in the import manifest in accordance with the regulation, nor any attempt was done to amend the manifest in accordance with the provisions of sub-section (3) of Section 30 of the Act. Sub-section (3) of Section 30 inter alia, provides that any import manifest or import report can be amended or supplemented with the permission of the Officer provided the earlier incorrect or incomplete report was filed without any fraudulent intention. Relying on these provisions, it was urged that the provisions of Section 112 of the Act would be attracted and penalty can be imposed even though the owner and the Master had no knowledge of the smuggling of the goods on the vessel. It is impossible to accede to this submission. The plain reading of Section 112 of the Act makes it clear that personal penalty can be imposed provided the owner or the Master of the ship does any act or omits to do any act with the knowledge that their act or omission would render confiscation of the goods under Section 111 of the Act. The Section presupposes that act or failure on the part of any person is with prior knowledge of the existence of the goods on the vessel. In absence of any knowledge of the existence of the goods, it is impossible to imagine that the owner or the Master were required to file any import manifest or import report setting out the list of such goods. In my judgment, the imposition of personal penalty on the owner and the Master under Section 112 of the Act cannot be sustained and requires to be set aside.
6. Accordingly, both the petitions succeed and the order passed by the Additional Collector of Customs (Preventive), Bombay on August 31, 1979 confiscating the vessel m.v. 'Rishi Vishwamitra' is set aside. The personal penalty imposed on the Master and the owner of the ship under Section 112 of the Customs Act is also set aside. The order of imposition of personal penalty on the 4th Engineer is confirmed. The rest of the order is not disturbed. The rule in both the petitions is made absolute accordingly. In the circumstances of the case, there will be no order as to costs. The amount deposited by the owners of the vehicle in this Court, in accordance with the interim order passed at the stage of admission, should be refunded. The Bank guarantees furnished by the owners and the Master of the vessel stands discharged. The Department can proceed to enforce the Bank guarantee furnished by the 4th Engineer for the purpose of recovering the penalty amount.