-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CUSTOMS APPEAL NO.12 OF 2007 The Commissioner of Customs ) (Preventive), Annexe Building, ) New Custom House,Ballard Estate) Mumbai-400 001. )..APPELLANT Versus 1.M/s.Noble Asset Co. Ltd., ) C/o. Price Waterhousde ) Cooper Pvt. Ltd., Tradeworld,) 8th Floor, C-Wing, Kamala ) Mills Compound, Senapati ) Bapat Marg, Lower Parel, ) Mumbai-400 013. ) 2.M/s.Neptune Exploration & ) Inds. Ltd., Keshava Bldg., ) 3rd Floor, Bandra-Kurla ) Commercial Complex,Bandra (E)) Mumbai-400 051. ) 3.Naresh Kumar, Director, ) M/s.Neptune Exploration & ) Inds. Ltd., Keshava Bldg., ) 3rd Floor, Bandra-Kurla ) Commercial Complex,Bandra (E)) Mumbai-400 051. ) 4.R.A. Agarwal, Director, ) M/s.Neptune Exploration & ) -2- Inds. Ltd., Keshava Bldg., ) 3rd Floor, Bandra-Kurla ) Commercial Complex,Bandra (E)) Mumbai-400 051. ) 5.Mohan Ramnathan, Authorised ) Signatory, ) M/s.Neptune Exploration & ) Inds. Ltd., Keshava Bldg., ) 3rd Floor, Bandra-Kurla ) Commercial Complex,Bandra (E)) Mumbai-400 051. ) 6.Modest Shipping Agency Pvt. ) Ltd., Rex Chambers, Walchand ) Hirachand Street, Ballard ) Estate, Mumbai-400 001. ) 7.Kishore D.Gambani, Director,) Modest Shipping Agency Pvt. ) Ltd., Rex Chambers, Walchand ) Hirachand Street, Ballard ) Estate, Mumbai-400 001. ) 8.A.D. Amladi, ) M/s.Essar Oil Ltd., Essar ) House, Mahalaxmi, ) Mumbai-400 034 ) 9.Essar Oil Ltd., Essar House ) Mahalaxmi, Mumbai-400 034. ) 10.N. Ramesh, Chief Executive ) (Enmergy Division) M/s.Essar ) -3- Oil ZLtd., Essar House, ) Mahalaxmi, Mumbai-400 034. ) 11.S.R. Agarwal, ) Executive Director(Energy ) Division),M/s.Essar Oil Ltd.) Essar House,Mahalaxmi, ) Mumbai-400 034. ) 12.Deepinder Singh Bharara, ) Chief Executive Officer, ) J.M. Baxi & Co., 19, Bank ) Street, Fort, Mumbai-400 001) 13.Naresh Kotak, Director, ) J.M.Baxi & Co., 19, Bank ) Street, Fort, Mumbai-400 001) 14.J.M. Baxi & Co., 19, Bank ) Street, Fort, Mumbai-400 001) 15.Siddhartha Roy, ) Chief Executive Officer, ) M/s.Arya Offshore Services ) P.Ltd., 29, Bank Street, ) Fort, Mumbai-400 001. ) 16.V.K. Suvarna, Manager, ) M/s.Arya Offshore Services ) P.Ltd., 29, Bank Street,Fort) Mumbai-400 001. ) 17.Arya Offshore Services Pvt. ) Ltd., M/s,.Arya Offshore ) Services P. Ltd., 29, Bank ) -4- Street, Fort, Mumbai-400 001)..RESPONDENTS Mr. C. Chandrashekharan, Additional Solicitor General with Mr. L.S. Shetty, Mr. C. Pusharna, Mr. S.D. Bhosale and Mr. H.P. Chaturvedi, for the Appellant. Mr. E.P. Bharucha, Senior Counsel with Mr. Bomi Patel i/b. Mulla & Mulla for Respondent No.1. Mr. V. Sridharan, with Mr. Prakash Shah i/b,. P.D. Shah for respondent Nos. 2 to 5. Mr. Vikram Nankani with Mr. Naresh S. Thacker for Respondent Nos. 6 and 7. Mr. Vikram Nankani with Mr. Vipin Jain and Mr. P.K. Shetty and Mr. Uday Shetty for Respondent Nos. 8 to 11. Ms. S. Priya for Respondent Nos. 12 to 17. CORAM: F.I. REBELLO & CORAM: F.I. REBELLO & CORAM: F.I. REBELLO & R.S. MOHITE, JJ. R.S. MOHITE, JJ. R.S. MOHITE, JJ. DATE : 4TH AUGUST, 2008. DATE : 4TH AUGUST, 2008. DATE : 4TH AUGUST, 2008. JUDGMENT: (PER F.I. REBELLO, J.). JUDGMENT: (PER F.I. REBELLO, J.). JUDGMENT: (PER F.I. REBELLO, J.). -5- . Revenue has preferred this appeal against the common order dated 5th April, 2005 passed by CESTAT in the Appeals and Applications which were filed before it. The Appeals were preferred against the common order in original dated 23rd March, 2005 of the Commissioner of Central Customs (Preventive) in the matter arising out of the show cause notice dated 7th August, 2003. The Appeals preferred were allowed, both as to objection as to jurisdiction as also on other points which are set out in para.7 of the impugned order. It is Revenue which has preferred this Appeal. 2. One of the question of law which was urged before the learned CESTAT and which was framed, read as under:- "a) Whether the Commissioner of Customs (Preventive) was the proper officer having jurisdiction to seize the rig in the EEZ and whether he was competent to issue a show cause -6- notice and adjudicate the same to demand duties on goods imported, assessed and cleared on assessment orders of the proper officer of Customs working in the Bombay Customs House." 3. The learned Tribunal after considering the various contentions held that the Commissioner (Preventive) had rejected the objections as to lack of jurisdiction on the ground of certain decisions of the Tribunal which held that the jurisdiction of the Commissioner of Customs (Imports), Mumbai and that of the Commissioner of Customs (Preventive), Mumbai was concurrent and, therefore, whatever the Commissioner of Customs (Imports), Mumbai could do could also be done by Commissioner of Customs (Preventive). The learned Tribunal held that they do not accept this reasoning as the concurrent jurisdiction of Customs (Preventive) and Commissioner of Customs (Imports) would be confined to areas of the Port of Mumbai and districts of Maharashtra as notified, over -7- which both the Commissioner of Customs (Imports) as well as the Commissioner of Customs (Preventive) had jurisdiction. However, in respect of the designated locations in the Exclusive Economic Zone (EEZ), no such concurrent jurisdiction exists or has been conferred as seen from the notification issued under the Customs Act, 1962. The preliminary objection as to want of jurisdiction, therefore, was upheld. The other contentions were considered and disposed off. It is Revenue who has approached this Court against the order of CESTAT. 4. Before this Court the question raised for consideration on the issue of jurisdiction has been framed as under:- "Whether the Commissioner of Customs (Preventive) was the proper officer having jurisdiction to seize the rig in the Exclusive Economic Zone and -8- whether he was competent to issue a show cause notice and adjudicate the same to demand duties on goods imported, assessed and cleared on assessment orders of the proper officer of Customs working in the Bombay Custom House." 5. In support of this submission it is contended on behalf of the Revenue that the Tribunal itself found that the territory of the three Districts (Mumbai, Thane and Raigad) may extend upto 12 nautical miles from the sea coast, that is, only upto Territorial Waters of India. The assessee has not challenged this finding before this Court. If the territory of the district of Thane extends upto 12 nautical miles from the sea coast, there is no valid reason as to why the said territory should not extend beyond territorial waters, that is to say, into the Contiguous Zone and the Continental Shelf, subject to the limitations imposed as per the Maritime Zones Act, 1976 and the notifications issued by the Ministry of -9- External Affairs and the Ministry of Finance. It is submitted placing reliance on the Maharashtra State Gazetteer that the distance to be covered under Territorial Waters, the Contiguous Zone and the Continental Shelf (EEZ) are measured from the base line of the coast of the district of Thane. The entire area where the operations are being carried out by the assessee would fall within Thane District. It is submitted that the Commissioner of Customs (Preventive) has also jurisdiction over the District of Mumbai and that the Government of Maharashtra in exercise of the powers conferred by clause (s) of Section 2 of the Code of Criminal Procedure, 1973 has issued a notification dated 23rd May, 1988 by which Yellowgate Police Station, Brihan Mumbai has been authorized to take all actions in relation to the Designated Area in the EEZ, that is to include all offshore installations of O.N.G.C. within the area of 300 kms. from the limits of Brihan Mumbai. It is submitted that the entire policing of this area is -10- done by the Commissioner (Preventive) who is incharge of the anti-smuggling operations in Mumbai along with Coast Guards and the State Police. Learned Counsel has placed reliance on the Administrative set up of the Mumbai Customs taken from the official web-site which sets out three Customs Zones in the Mumbai Customs, and the Commissioner (Preventive) finds place in the third zone headed by the Chief Commissioner of Customs, Mumbai-III. The functions indicated therein indicate as under:- "(ix) Commissioner of Customs (Preventive), Mumbai Customs House: Anti-smuggling work in the Mumbai, Thane & Raigad districts. The Rummaging & Intelligence Wing of the Commissionerate in Mumbai covers the Docks, Mumbai Harbour, Sahar Airport and Mumbai City. The Marine and Preventive Wing of the Commissionerate covers the 220 Kms. long -11- coastlines in the coastal districts of Thane and Raigad and also carries out joint operations with Navy, Coast Guard and Police." It is submitted that a doubt has been raised about the implication of specific mention of the Designated Area as being within the jurisdiction of the Commissioner of Customs (Imports) and non-specification of the same while referring to the Commissioner of Customs (Preventive). It is submitted that this is obviously because assessment of imported goods cannot be done at Designated Area and have necessarily to be made in the Ports concerned, in the present case, Mumbai Port. As a matter of fact, in the present case, Rig was imported into Indian Waters and was taken to the Bombay Port and a Bill of Entry was filed for assessment before the Commissioner of Customs (Imports) and assessed. It is then pointed out that when the permission was sought by the assessees to take the goods out of the country (for repairs or sale), -12- permission was sought to do so, by an application made before the Commissioner (Preventive) and a Shipping Bill was also filed before the Commissioner (Preventive) on 11th May, 2001 (one day prior to the seizure of the rig). This will indicate that the awareness of the department as well as the assessee as to the functions entrusted with the Commissioner (Imports) and Commissioner (Preventive) and also that the rig was not in international waters when it was seized on 12th May, 2001. It is, therefore, submitted that this practice which is of substantially long duration ought not to be disturbed by this Court, particularly when no specific prejudice is caused to the assessee by the Commissioner (Preventive) exercising the powers of search, seizure and adjudication. Referring to Section 122 of the Customs Act, it is submitted that every case under Chapter 14 dealing with confiscation of goods, etc., in which anything is liable to confiscation or any person is liable to penalty, such confiscation or penalty can be -13- adjudicated without limit by the Commissioner of Customs. It is not the assesee’s case that Commissioner of Customs (Preventive) is not a Commissioner of Customs. Reference is also then made to Section 124 of the Customs Act in the matter of show cause to point out that there is no time limit. 6. On the other hand on behalf of the respondents their learned Counsel submits that the issue is of jurisdiction and whether the Commissioner of Customs (Preventive) was the proper officer having jurisdiction to seize the rig in the exclusive economic zone and whether he was competent to issue notice and adjudicate the same, to demand duties on goods imported, assessed and cleared on assessment orders of the proper officer of Customs in the Bombay Customs House. Reliance is placed on various provisions of the Customs Act, to contend that considering the provisions of the Customs Act,the various notifications issued thereunder as also the provisions of -14- the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act (hereinafter referred to as the Territorial Waters Act) that there is no infirmity in the finding of the learned Tribunal and consequently on this point alone the Appeal is liable to be rejected. 7. At the outset we may point out that we have heard Counsel only on the point of issue of jurisdiction considering the finding recorded by the CESTAT and we propose to deal with that issue as that goes to the root of maintainability of the Appeal itself. 8. The Rig was detained on 12th May, 2001 and a show cause notice dated 7th August, 2003 was served upon the 1st respondent. As per the show cause notice at the time of issuance of the seizure memo, the said rig was located at SI Platform at 19o 38’ 28" N and 71o 17’ 31" E. A few other facts. The Respondent No.1 M/s.Noble Asset Company -15- Limited, incorporated in the Cayman Islands carries on business of owning and operating mobile offshore drilling units. It was the owner of the rig "Noble Jimmy Puckett". On 23rd December, 1996 a Memorandum of Agreement was entered into between the Essar Oil Ltd. and the 1st Respondent for sale of the said rig from Essar Oil Ltd. to the 1st respondent. A commercial invoice of the same date was issued by Essar Oil Ltd., to the 1st respondent for sale of the said Rig. The sale and delivery took place in international waters at IF platform which at the relevant time was not a designated area. The Rig at the relevant time was under contract between Essar and ONGC. The Respondents to enable Essar to complete the contract gave the Rig on a bareboat charter to Essar Oil through an associate concern Noble International Ltd. The contract between Essar Oil and the ONGC was coming to an end on 6th December, 1997. The 1st Respondent intended to keep the Rig operating in the Indian waters upon conclusion of Essar Oil Ltd.’s -16- contract with ONGC. Consequently the 1st Respondents through the bareboat charter of the said Rig to Noble International Limited, entered into an Agreement dated 12th November, 1997 with Neptune Exploration & Industries Ltd., for chartering the said Rig (commencing from the end of the contract with Essar Oil) for carrying out operations under a one-year contract awarded to Neptune Exploration and Industries Ltd., by ONGC. On completion of the contract between Neptune Exploration & Industries Ltd., and ONGC, the 1st respondent filed a Shipping Bill for export of the said Rig. The Customs Authorities, however, detained the said Rig under Section 110 of the Customs Act, 1962 and issued a detention memo dated 12th May, 2001. The Rig was released on the 1st Respondent furnishing a Bank Guarantee of Rs.15.00 crores and a Bond for Rs.97.00 crores. In 2001 the 1st Respondent exported the said Rig to Sharjah. A show cause notice dated 7th August, 2003 was served upon the 1st Respondent. It was decided on various grounds including jurisdiction. The -17- show cause notice was confirmed by order dated 23rd November, 2005 and Appeal was preferred which Appeal was allowed on 5th April, 2006. . Gazette Notifications dated 18th July, 1986 and 19th September, 1996 have been relied upon by the Respondents which list out the different areas which are notified as designated areas by the Government of India under the provisions of the Territorial Waters Act, 1976. It is the submission on behalf of the respondents that on perusal of both the Notifications it will be demonstrated that the location 19o 38’ 28" N and 71o 17’ 31" E is not a designated area. Hence the said Rig when seized was in international waters and as such as it was situated within a non-designated area in the Continental Shelf and EEZ of India, neither the Commissioner of Customs (Imports) had jurisdiction over the designated areas in the Continental Shelf and EEZ of India nor the Commissioner of Customs (preventive) assuming that he has -18- jurisdiction over any part of the EEZ, had jurisdiction to seize the said Rig or to issue show cause notice and decide upon the same. . On this factual aspect on behalf of Revenue, it is sought to be submitted that the Rig was seized from a designated area and it appears to be a mistake showing it in a non-designated area. . We do not propose to answer the said issue as we propose to first dispose of the issue as to whether the Commissioner of Customs (Preventive) had jurisdiction in respect of a designated area in the EEZ. 10. To answer the issue we may firstly refer to some of the provisions of the Customs Act, 1962. Section 2(27) defines "India" to include the territorial waters of India.Section 2(28) defines "Indian customs waters" to mean the waters extending into the sea up to the limit of -19- contiguous zone of India under Section 5 of the Territorial Waters,, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 and including any bay, gulf, harbour, creek or tidal river. Section 2(34) defines "proper officer" in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs. Section 4 sets out Classes of Officers of customs. Section 4 reads as under:- "Appointment of officers of customs.-- (1) The Board may appoint such persons as it thinks fit to be officers of customs. (2) Without prejudice to the provisions of sub-section (1), the Board may authorise a Chief Commissioner of Customs or a Commissioner of Customs or a Joint or Assistant Commissioner of -20- Customs or Deputy Commissioner of Customs to appoint Officers of customs below the rank of Assistant Commissioner of Customs." Section 5 reads as under:- "Powers of the officers of customs.-(1) Subject to such conditions and limitations as the Board may impose, an officer of customs may exercise the powers and discharge the duties conferred or imposed on him under this Act. (2) An officer of customs may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer or customs who is subordinate to him." (3) Notwithstanding anything contained in this section, a Commissioner (Appeals) shall not -21- exercise the powers and discharge the duties conferred or imposed on an officer of customs other than those specified in Chapter XV and section 108." . Under Section 28 when any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Similarly, under sub-section (2) of Section 28 it is the proper officer who has to consider the representation and dispose of the same. . Therefore, considering Sections 2(34), 4 5 and 28 -22- of the Customs Act it is only the proper officer assigned those functions by the Board or Commissioner of Customs who alone can exercise the powers in the matter of confiscation of goods. In other words it is such officers who can exercise jurisdiction. The power has to be exercised in terms of Section 124 by the proper officer of customs by giving a notice in writing with the prior approval of the officer of Customs not below the rank of a Deputy Commissioner of Customs and complying with the other provisions. 11. We may now refer to Notification No.27/97-Cus.(NT) dated 7th July, 1997. This is a Notification issued in exercise of the powers conferred by sub-section (1) of Section 4 of the Customs Act, 1962 whereby the Central Government has appointed officers to be Commissioner of Customs, Deputy Commissioner of Customs and Assistant Commissioner of Customs for the area mentioned in corresponding entry under Column No.2 of Table with -23- effect from the date of publication of the Notification by the Central Government in the Official Gazette. We shall refer to Serial Nos. 1, 2 and 5 of the said Notification. S.No. Area Designation of Officer (1). (2) (3) (4) (5) 1. (a)Port of Mumbai Commissioner Deputy Commi- Assistant Airport of Customs ssioner of Commissioners Santacruz and Mumbai, Sahar Customs, Customs, Sahar Airports) Airport and working under working the area under Sahar Air control of under the jurisdiction of Cargo, the Commiss- the control of the Bombay Jawaharlal -ioners of of the Municipal Corp- Nehru Port. Customs, Commissioner oration, and Mumbai, Sahar Customs, the designated Airport,Sahar Mumbai, areas in the Air Cargo and Sahar Air Continental Jawarharlal -port, Shelf and Nehru Port. Sahar Air Exclusive Cargo, Economic Zone Jawaharlal of India as Nehru Port. declared by the notification of the Govern- ment of India in the Ministry of External Affairs. (b) The Jawah- -arlal Nehru Port and the Taluka of Panvel in the District of Raigad in the State of Maharashtra. (2) Mumbai, Thane Commissioner Deputy Assistant and Raigarh of Customs, Commissioners Commissioner Districts in (Preventive) working under -s Customs the State of Mumbai the control working und- Maharashtra of the er the Commissioner control of -24- of Customs the Commis- (Preventive) -sioner Customs, (Preventive) Mumbai. (5) Port of Chennai Commissioner Deputy Assistant of Customs, Commissioners Commissioner Chennai, of Customs -s of Chennai working under Customs Airport the control working of the Comm- under the -issioners control of of Customs the Commis- Chennai, -sioners of Chennai Customs, Airport. Chennai, Chennai This Notification was superseded by subsequent Notification which came into effect from 1st November, 2002. Even under this Notification it is the Commissioner of Customs (Import), (Export) and other Officers designated under Table III (3) who have been conferred with the powers for the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the Government of India from time to time. In so far as the Mumbai, Thane and Raigad Districts in the State of Maharashtara, it is the Commissioner of Customs (Preventive) Mumbai who is the Commissioner for the area of Mumbai, Thane and Raigad Districts in the State of Maharashtra. In this Notification apart from Commissioner notified under Column (3) of Serial No.3 for the designated areas of the Continent Shelf and Exclusive Economic Zone of India, power has also been conferred on the Commissioner of Customs (Airport & Aircargo) Chennai, Port (Import), Chennai, Port (Export), Chennai for the designated areas in the Continental Shelf and the -25- exclusive economic Zone of India as declared by the Government of India from time to time. It is, therefore, relevant to note that the Commissioners have been notified for the designated areas in the Continental Shelf and Exclusive Economic Zone of India on the East as also the West Coast. 12. Considering the provisions of the Customs Act and the Notifications it would be clear that in so far as designated areas in the EEZ and continental shelf concerned, under Section 4 of the Customs Act the Government of India has appointed Officers for the designated Zones and once proper Officers have been appointed for the designated zone it would mean the exclusion of the power of the other officers who have not been so designated. In Commissioner of Sales Tax U.P. Commissioner of Sales Tax U.P. Commissioner of Sales Tax U.P. vs. Sarjoo Prasad Ram Kumar, (1976) 37 S.T.C. 533 vs. Sarjoo Prasad Ram Kumar, (1976) 37 S.T.C. 533 vs. Sarjoo Prasad Ram Kumar, (1976) 37 S.T.C. 533 the issue was assessment under U.P. Sales Tax Act. The assessee was carrying on business in Sector III for which sector there was a separate Assistant Sales Tax Officer. For the assessment year 1959-60, the Assistant Sales Tax Officer, Sector II, issued to the assessee a notice under Section 21 of the Act and, in due course, made an assessment. One of the contentions raised in Appeal against the order of assessment was that he had no jurisdiction. That contention was upheld by the Appellate Court, the Revisional Authority and the High Court. Before the Supreme Court it was contended that -26- considering the provisions of the Act, all the Assistant Sales Tax Officers in Lucknow Circle had jurisdiction to assess all the dealers in Lucknow Circle. The Supreme Court held that this was unacceptable and observed as under:- "It is for obvious reasons the rule-making authority has empowered the Commissioner to allocate separate areas for separate Assistant