2009 (7) TMI 126 - HC - Customs

Pilfered goods - Duty liability - Duty liability of custodians of imported goods before clearance - held that - Section 45(3) of Customs Act 1962 inserted to provide for recovery of duty from person in charge of imported goods in Customs area - Section 45(3) ibid to be restricted to mean persons approved who have approved warehouses in terms of Sections 9 and 10 ibid and not statutory bodies like Port Trusts - Possession of goods by Port Trust is by virtue of powers conferred under Port Trusts Act - Port Trust neither approved person nor can be notified one hence not liable - Liability only of persons approved by Commissioner of Customs - Port Trust a statutory body under control of G.O.I. - No purpose served by one arm of Govt. imposing duty on another arm which is discharging statutory duties

Issues Involved
1. Liability of the Port Trust to pay customs duty on pilfered goods.
2. Validity of the notification approving the Port Trust as a custodian under the Customs Act.

Detailed Analysis

1. Liability of the Port Trust to Pay Customs Duty on Pilfered Goods

The core issue addressed in this judgment is whether the Port Trust is liable to pay customs duty on goods pilfered while in their possession. The petitioners, a Major Port Trust constituted under the Major Port Trusts Act, 1963, challenged several show cause notices and subsequent assessment orders demanding customs duty for pilfered goods.

The relevant provisions of the Port Trust Act and the Customs Act were examined. Section 42 of the Port Trust Act outlines the services the Board can undertake, including handling and storing goods. Section 43 specifies the Board's responsibility for the loss or damage of goods, aligning it with the liability of a bailee under the Indian Contract Act, 1872.

Section 45 of the Customs Act stipulates that all imported goods in a customs area remain in the custody of an approved person until cleared. Sub-section (3) of Section 45, introduced in 1995, explicitly states that if goods are pilfered while in custody, the custodian must pay the duty.

The petitioners argued that their custody of goods was under the Port Trust Act, not as an approved person under the Customs Act. They cited Section 160(9) of the Customs Act, which preserves the powers of port authorities under other laws. The respondents contended that Section 45(3) clearly imposes liability on any custodian, including the Port Trust.

The court analyzed the scheme of the Customs Act, noting that Section 12 is the charging section for customs duty, and Sections 13 and 23 provide exemptions or remission for pilfered or lost goods. Section 45(3) was introduced to ensure duty recovery from custodians if goods are pilfered.

The court concluded that Section 45(3) applies only to approved custodians under the Customs Act, not to bodies like the Port Trust operating under separate statutory authority. The Port Trust, as a bailee, is liable to compensate the importer for pilfered goods but not to pay customs duty.

2. Validity of the Notification Approving the Port Trust as a Custodian

The petitioners also challenged the notification dated 11th October 2000, which approved the Port Trust as a custodian under Section 45(1) of the Customs Act. The court held that this notification was ultra vires and without jurisdiction because the Port Trust's custody of goods is governed by the Port Trust Act, not the Customs Act.

The court referred to judgments cited by the respondents but found them inapplicable. The cases involved different contexts, such as demurrage for lost goods or liability under the Port Trust Act, and did not address the specific issue of customs duty liability for pilfered goods under Section 45(3).

Conclusion

The court ruled that the Port Trust is not liable to pay customs duty on pilfered goods under Section 45(3) of the Customs Act. The notification approving the Port Trust as a custodian was declared null and void. The petition was allowed, and the impugned orders were set aside.

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