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Ram Niwas Chaudhary Vs. Metal Scrap Trade Corporation Ltd., and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtKolkata High Court
Decided On
Case NumberF.M.A.T. Nos. 2502-03 and C.O.T. Nos. 2715-16 of 1984
Judge
Reported in1985(6)ECC165,1986(6)LC138(Calcutta),1986(23)ELT321(Cal)
ActsMerchant Shipping Act, 1958 - Section 42(1); ;Customs Act, 1962 - Section 2, 2(23) and 2(27); ;Constitution of India - Articles 12, 226 and 286(1)
AppellantRam Niwas Chaudhary
RespondentMetal Scrap Trade Corporation Ltd., and ors.
Appellant AdvocateSomnath Chatterjee, ;Ramnath Das and ;Faruk M. Razak, Advs.
Respondent AdvocateR.C. Deb, ;Ashok Sen, ;B.N. Sen and ;Swapan Kr. Dutta, Advs. for Respondent No. 6 and ;D. Pal, ;Samarjit Gupta and ;T.K. Sen, Advs.
Cases ReferredSundaram Textile Ltd. v. Asst. Collector of Customs
Excerpt:
customs act, 1962 sections 2(23), (27); constitution of india, articles 12, 226; import and export 'policy, 1984-85 chap. vi, para 10, chap. 10, para 66; append 5, merchant shipping act, 1958, section 42(1), notfn. no. 262/58-cus, imports & experts control--'import' of ships means entering into territorial waters--'no objection certificate5 from m.s.t.c. is not required for sale of ships for breaking into scrap-jurisdiction of high court does not include imposition of conditions on how government or dg shipping can grant approval-appellant who makes offers for purchase has locus standi to file writ application appeals. - .....contains the list of items, import of which is canalised through public sector agencies including mstc. mstc is the canalising agency in respect of items 42 to 47 of appendix 5. item 47 is as follows :'47. old ships, vessels, etc., for breaking'.para 150 under chapter vi of the handbook of import export procedures, 1984-85 lays down the procedure that will apply to the import and distribution of specified items in appendix 5, part-a. one of the items as specified is old ships, vessels etc. for breaking up and the procedure that has been laid down with regard to that item and some other items is that import and distribution will be made in consultation with the department of steel, new delhi. pursuant to the import and export policy, general guidelines have been issued by the mstc.....
Judgment:

M.M. Dutt, J.

1. These four appeals, two by the writ petitioner Ramniwas Chaudhary and the remaining two by the Metal Scraps Trade Corporation, hereinafter referred to as MSTC have been preferred against the judgment and order dated July 17, 1984 of a learned single Judge of this Court disposing of the writ petitions filed by the appellant, Ramniwas Chaudhary.

2. Shorn of all details, it may be stated that Scindia Steam Navigation Company Limited, hereinafter referred to as the Company, advertised for the sale of two old ships named M.V. Jaltaranga and M.V. Jalagirija for the purpose of plying. As there was no response for the purchase of the vessels for plying, the appellant, Ramniwas Chaudhary, a ship breaker, offered to purchase the same for breaking up and converting the same into scraps at a price of Rs. 80 lakhs and Rs. 70 lakhs respectively. The company by two letters both dated March 15, 1984, asked for the approval of the Director-General of Shipping for the sale of the said two vessels for the purpose of scrapping as required under Section 42(1) of the Merchant Shipping Act, 1958, as both the vessels had lost their sea-worthiness. The Assistant Director-General of Shipping by two separate letters dated April 10, 1984 replied to the company in identical terms. One of such letters is set out below :

'Government of IndiaMinistry of Shipping and TransportDirectorate General of Shipping'Jahar Bhavan' WalchandHirachand MargNo. 7-SDB (11)/84 April, 1984.The Scindia Steam Navigation Co. Ltd., Bombay.

Subject : Permission for sale of M.V. Jalatarang for scrapping. Dear Sirs,

I am to refer to your letter No. OP/Tech/4240, dated 15th March, 1984 on the above subject and to convey the approval of the Director General, in principle, for the sale of your vessel 'Jalatarang' for scrapping in India subject to the following conditions :

(i) Formal sanction as required under Section 42(1) of the M.S. Act, 1958 will be issued on hearing from you the name of the buyer and sale price;

(ii) The vessel should be free from all encumbrances at the time of sale, including satisfactory settlement of wages of officers/crew of the vessel and loans from any financial institutions etc.

(iii) The sale proceeds should be remitted to the SDFC for adjustments against your dues, if any, to them ;

(iv) All documents including Naval should be returned to the authorities concerned before delivering the vessel to scrappers.

You may as usual approach the MSTC for getting their clearance before acting on the sanction.

Yours faithfully,

Sd/-A.P. Ramakrishnan

Asstt. Director General of Shipping

for Dy. Director General of Shipping.'

3. Apart from the four conditions mentioned in the letter, the company was asked to approach the MSTC for getting the clearance before acting on the sanction. The Company accepted the said offer of the appellant on condition that the appellant was to obtain 'no objection certificates' from MSTC. The appellant tried to get 'no objection certificates' from the MSTC, but the latter did not grant any such certificates. Although in the letter dt. April 10, 1984, the obtaining of 'no objection certificates' from the MSTC was not one of the conditions to be fulfilled by the company for the grant of sanction of the Central Government, yet the company and the appellant were under the belief that unless such certificates were granted by the MSTC, the Central Government would not grant approval to the transfer of the said vessels by the company to the appellant for scrapping purpose. Accordingly, the appellant filed two writ applications in respect of the said two vessels M.V. Jaltaranga and M.V. Jalagirija.

4. At this stage, it may be noticed that one M/s S.S. Jain & Co. a ship breaker, filed applications for being added a party to the writ applications of the appellant. He also filed two writ applications, inter alia, praying for restraining the MSTC from issuing 'no objection certificates' to the company for the sale of the two ships to the appellant. Two other writ applications were also filed before the learned Judge by one P.L. Tikmany, making similar prayers. M/s S.S. Jain & Co. ultimately, expressed their unwillingness to purchase the said vessels. At the hearing of these appeals, the learned Counsel appearing on behalf of P.L. Tikmany withdrew its offer to purchase the ships and also the writ applications which were dismissed as withdrawn by our order dt. Sept. 19, 1984. So the said two ship breakers are out of the picture and it is not necessary for us to consider their contentions and/or offers made by them.

5. It is not in dispute that M.V. Jaltaranga and M.V. Jalagirija which are foreign vessels were manufactured in 1963. They were purchased by the company in 1969 with the permission of the Reserve Bank of India. They were brought to India also in 1969. The first port of call in India was Madras in the case of M.V. Jaltaranga and Bombay in the case of M.V. Jalagirija. Thereafter, they were registered under the Merchant Shipping Act as Indian flag ships.

6. After the ships were purchased and brought to India and registered as Indian flag vessels, the MSTC was constituted by the Central Government as a canalising agency under the Import and Export Policy. Appendix 5 to the Import and Export Policy, 1984-85 contains the list of items, import of which is canalised through public sector agencies including MSTC. MSTC is the canalising agency in respect of items 42 to 47 of Appendix 5. Item 47 is as follows :

'47. Old ships, vessels, etc., for breaking'.

Para 150 under Chapter VI of the Handbook of Import Export Procedures, 1984-85 lays down the procedure that will apply to the import and distribution of specified items in Appendix 5, Part-A. One of the items as specified is old ships, vessels etc. for breaking up and the procedure that has been laid down with regard to that item and some other items is that import and distribution will be made in consultation with the department of Steel, New Delhi. Pursuant to the Import and Export Policy, general guidelines have been issued by the MSTC regarding the import and distribution of old ships, vessels etc. for breaking up with the consent and approval of the Government of India. The guidelines provide, inter alia, that only those ships/vessels for which permission has been given in writing by the Director-General of Shipping for sale of the vessels for scrapping, would be considered for import by MSTC. Thereafter, the guidelines relate to the disposal of the vessels, invitation of tenders from among bona-fide ship-breaking units and payment of service charge of 4% of the purchase price to MSTC. in other words, notice inviting tenders for sale of such vessels has to be issued and the sale will have to be made in accordance with the guidelines laid down by the MSTC. Admittedly, the company did not conform to the guidelines of MSTC and, accordingly, MSTC also refused to issue 'no objection certificates' to the company or to the appellant.

7. At the hearing of the writ applications, it was contended on behalf of the appellant that as the vessels were imported into India and registered at the instance of the company in 1969 when MSTC was not canalising agency, the guidelines laid down by MSTC were not applicable to the company or to the appellant in respect of the two vessels in question. The learned Judge has upheld the contention and held that MSTC was not the canalising agent in respect of the two vessels which were imported into India in 1969 and, as such the Central Government cannot insist on 'no objection certificates' from MSTC as a condition for the sanction of the transfer of the vessels. Although, the learned Judge held as above, yet the learned Judge took the view that there was no proper advertisement for sale of the two vessels for the purpose of scrapping and, so, it would be just and proper that appropriate directions should be given to the company so that all interested ship breakers would get an opportunity to participate in the tender and a fair price could be obtained by the company. Accordingly, the learned Judge directed the company to issue fresh advertisements giving details of the ships as per model tender form mentioned in the guidelines of MSTC, and that such advertisements should be issued once in Calcutta, once in Madras and once in Bombay. The company was directed not to accept any offer below Rs. 85 lakhs for M.V. Jalataranga and Rs. 73 lakhs for M.V. Jalagirija. Further, the learned Judge directed the Director General of Shipping that before granting permission under Section 42(1) of the Merchant Snipping Act, he should consider whether the price obtained by the company for the two vessels was fair and reasonable. The writ applications were disposed of accordingly.

8. It has been already stated that four appeals have been preferred against the judgment of the learned Judge two by the appellant and the other two by the MSTC. While the appeals filed by the appellant are directed against the above directions given by the learned Judge, those filed by MSTC are directed against the finding of the learned Judge that at the time the ships were imported into India, MSTC was not canalising agency and, as such, the Central Government cannot insist on the production of 'no objection certificates' by the company from MSTC.

9. The first question that requires consideration is whether the vessels were imported in 1968. In this connection, our attention has been drawn to the exemption notification No. 262-Cus., dt. October 11, 1958 issued by the Central Government. The notification reads as follows :

'Exemption to ocean going vessels other than vessels imported to be broken up-Ocean going vessels imported to be broken up, are exempt from the payment of customs duty leviable therein :

Provided that any such vessel subsequently broken up shall be chargeable with the duty which would be payable on her if she were imported to be broken up.'

10. Under the Import and Export Policy of the Government of India imports of certain items of goods have been canalised. Para 66 of Chapter 10 of the Import and Export Policy, 1984-85 provides as follows :

'66. The items canalised for import through designated public sector agencies are listed in Appendix 5. The concerned agency will import them under Open General Licence. It shall be open to the canalising agency concerned to sell the goods before their importation into India. In such cases, the clearance of imported .goods through the customs may be claimed by the purchaser on the basis of an authorisation issued by the agency concerned to that officer.'

11. Item No. 47 of Appendix 5 relates to old ships, vessels, etc. for breaking. MSTC is the canalising agent of the Central Government in respect of such vessels as mentioned in Item No. 47. There is no dispute that MSTC is not a canalising agent relating to ocean going vessels imported into India not for breaking. The disputed vessels were brought to India in 1968 when MSTC was not made the canalising agency of the Government. Further, as the vessels in question were not imported for the purpose of breaking, there could be no question of importation of the vessels through the canalising agency. It is, accordingly,' contended by Mr. Somnath Chatterjee, learned Counsel appearing on behalf of the appellant, Ram Nivas Chaudhary, that as MSTC was riot arid could not be the canalising agent for the two ocean going vessels which were imported not for the purpose of breaking but for plying, the Central Government was not justified in referring the company to MSTC for obtaining 'no objection certificates' to be issued by MSTC as a condition for the grant of sanction under Section 42(1) of the Merchant Shipping Act. Counsel submits that the guidelines framed by MSTC are also inapplicable to the company, and the learned Judge acted in excess of his jurisdiction in giving the aforesaid directions which are in conformity with the guidelines of MSTC. Moreover, Counsel submits, the learned Judge having himself noticed that the company is not an authority within the meaning of Article 12 of the Constitution, should not have given such directions to the company.

12. On the other hand, it is urged by Dr. Pal, learned Counsel appearing on behalf of MSTC that in terms of the said exemption notification set out above, when a foreign ocean going vessel comes to an Indian port, there is no importation of such vessel as it does not cross the customs barrier, although it may become Indian property and an Indian Flag vessel. The importation would' take place -only after the vessel loses its sea worthiness and is broken up and Converted into scraps, for, in that case, the scraps would be taken out of live customs barrier and get mixed up with other Indian goods. So it is submitted on behalf of MSTC that the fact that it was not a canalising agency in 1968 is immaterial as there, was no import of the vessels concerned. Now the question of importation has arisen as the vessels are going to be sold for breaking up, and such sale has to be made through MSTC in accordance with its guidelines. It is the contention of MSTC that the sale of the vessels for breaking up should be deemed to be importation, otherwise the Central Government would lose a considerable amount of duty.

13. 'We regret, we are unable to accept the contention of MSTC that there was no importation of the two ships when they were brought to India in 1968 as they did not cross the customs barrier. The contention is absurd on the face of the definition of the word 'import' as given in cl. (23) of Section 2 of the Customs Act, 1962. Under Cl. (23) 'import' with its grammatical variations and cognate expressions means bringing into India from a place outside India. Under cl. (27) of Section 2, 'India' includes the territorial waters of India.' The combined effect of cl. (23) and cl. (27) of Section 2 of the Customs Act is that when a ship or vessel is acquired and brought into the territorial waters of India, the ship or vessel can be said to have been imported into India. In view of the definition of the word ''impart' read with the definition of the word 'India', there cannot be any doubt whatsoever that the two ships were imported into India in 1968 when MSTC was not the canalising agent, Apart from the said definitions, the exemption, notification dt. October 11, 1958 also does not support the contention made on behalf of MSTC. It is apparent from the said notification which has been set out above that a distinction has been made between an ocean going vessel imported for breaking up and an ocean going vessel imported other than for breaking up. In this connection, we may refer to the decision of a Division Bench of this Court in Union of India v. Ramniwas Chaudhary-(1983) I Cal. HN 6. In that case, it has been held that the date of importation of a vessel is very much relevant for the purpose of collection of the customs duty. If a vessel is subsequently broken up the exemption from duty is lost and the duty will be payable on the vessel at the rate in force on the date of importation of the vessel. Moreover, it is curious that a ship or a vessel will be treated as an Indian flag ship or vessel, but it cannot be said that it has been imported into India. We have no hesitation in rejecting the contention of MSTC that unless a ship is broken up and converted into scrap and taken out of the customs barrier, there is no importation of the ship. The decision of the Madras High Court in K.R. Ahmed Shah v. Addl. Collector of Customs, Madras- 1981 E.L.T. 153, which has been relied on by MSTC, is not applicable to the facts and circumstances of the instant case. In that case, the question related to imposition of terminal tax as was in the case of the Supreme Court in Express Mills v. Municipal Committee, : [1958]1SCR1102 . The two other Supreme Court decisions relied on by MSTC, namely, State of Travancore-Cochin v. S.V.C. Factory : [1954]1SCR53 and J.V. Gokal & Co. (P) Ltd. v. Asst. Collector of Sales Tax : [1960]2SCR852 also do not help the contention of MSTC inasmuch as the Supreme Court in both the cases was concerned with the question of interpretation of the words'in the course of the import of the goods' or 'in the course of the export of the goods' occurring in Article 286(1) of the Constitution.

14. On the other hand, a Division Bench of the Bombay High Court in M.S. Shawhney v. Sylvania and Laxman Ltd. (1978) 77 Bom. L.R. 380 has held that by the combined effect of the definition of the words 'import' and 'India' under Sections 2(23) and 2(27) of the Customs Act, import takes place when goods are brought into the territorial waters of India. The learned single Judge of the Madras High Court in Sundaram Textile Ltd. v. Asst. Collector of Customs, Madras-1983 E.L.T. 909, preceeded on the footing that the goods are imported into India on the date of its entry within the territorial waters and the customs barrier. In our opinion, when the Custom's Act has defined the term 'import', Court should not try to ascribe to the said word a different meaning particularly, when such meaning is absurd on the face of it in respect of certain goods like ships or vessels. So, we have no hesitation in holding that when a foreign ship or vessel is acquired and brought into territorial waters of India, such ship or vessel must be said to have been imported into India.

15. It is next contended by Dr. Pal for MSTC that even assuming that the two ships were imported in 1968, yet in view of para 150 under Chapter VI of the Handbook of Import Export Procedures 1984-85, laying down the procedure regarding import and distribution will apply. The procedure that has been laid down under para 150 in respect of item (16) thereof relating to old ships, vessels, etc. for breaking up, is that import and distribution will be made in consultation with the department of Steel, New Delhi. On the assumption that the two ships were imported, it is submitted that as no distribution had taken place after the importation of the two ships in 1968, para 150 was not applicable. But when the question of distribution has arisen it will have to be made in accordance with the said procedure. We are unable to accept this contention. In the instant case, the two ships in question were not imported for the purpose of breaking up, nor were they imported through the canalising agency of MSTC. Accordingly, para 150 will have no manner of application. In other words, neither the Central Government nor MSTC can compel the company or the appellant to comply with the guidelines prescribed by MSTC in regard to the disposal of the two ships for being scrapped. The learned Judge, in our opinion, was perfectly justified in holding that MSTC was not the canalising agency of the Government in regard to the two ships in question which were imported in 1968 and, as such, the Central Government cannot insist on the production of'no objection certific'Ues' from MSTC for the purpose of grant of approval under Section 42(1) of the Merchant Shipping Act.

16. We are now to consider whether and how far the learned Judge was justified in directing the publication of advertisements in certain Newspapers inviting offers for the sale of the said two ships for the purpose of scrapping. The learned Judge also directed that the two ships should not be sold below certain amounts as fixed by the learned Judge. Under Section 42(1) it is the concern of the Central Government to grant approval for the transfer or acquisition of any Indian ship or any share or interest therein. It has been already pointed out that the Director General of Shipping in his letter dt. April 10, 1984, which has been set out above, has laid down the conditions for granting approval for the sale of the two vessels in question for scrapping. It has been already noticed that although four conditions have been mentioned in the said letter, yet it was stated that the company should approach MSTC for getting their clearance before acting on the sanction. It has been already held that the Central Government has no authority to direct the appellant to get a clearance from MSTC. No complaint has been made to us in regard to the four conditions which are to be fulfilled as required in the said letter. The conditions do not include a fresh invitation for tender. It is for the Director General of Shipping to consider whether the prices that have been agreed upon between the parties for the two vessels are adequate or not. This Court, in our opinion, has no jurisdiction to lay down the conditions on the basis of which sanction or approval would be granted by the Central Government or the Director General of Shipping, as the case may be. All that this Court can consider on the writ applications that have been filed is the validity of the conditions, but it cannot impose any condition on the fulfilment of which the approval will be granted under Section 42(1) of the Merchant Shipping Act. In the circumstances, we are of the view that the company and the appellant, Ramniwas Chaudhary, have a legitimate grievance against the directions which have been given by the learned Judge. Such directions, in our opinion, cannot be given by this Court in exercise of its jurisdiction under Article 226 of the Constitution, particularly when it has been found by the learned Judge and that rightly, that the company is not an authority within the meaning of Article 12 of the Constitution.

17. Before parting with the case, we may dispose of an objection raised by MSTC as to the locus standi of the appellant Ramniwas Chaudhary, to file the appeal. It is submitted on behalf of MSTC that as there is no concluded contract between the appellant and the company, the appellant has no locus standi to file a writ petition or to file the instant appeal. This contention is without any substance. The appellant has made certain offers for the purchase of the two ships for scrapping and the appellant still maintains the said offers. In case any fresh advertisement is made inviting offers, the appellant will be prejudiced. Moreover, it is for the Central Government or the Director General of Shipping to consider whether the prices that have been offered by the appellant are fair and reasonable. Accordingly, we are of the view that the appellant has locus standi to file the writ applications and to prefer the appeals.

18. For the reasons aforesaid, we set aside the judgment and order of the learned Judge in so far as it directs the company to issue a fresh advertisement inviting tenders for sale of the two vessels for the purpose of scrapping. The Director General of Shipping Will now consider the question as to the grant of approval to the company for the sale of the two vessels M.V. Jaltaranga and M.V. Jalagirija under Section 42(1) of the Merchant Shipping Act.

19. The appeals filed by the appellant, Ramniwas Chaudhary are, accordingly, allowed to the extent indicated above, and those filed by MSTC are dismissed. There will, however, be no order as to costs in any of these appeals.


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