2021 (9) TMI 1131 - AT - Customs

Remission / Refund of Customs Duty - pilfered goods - direction to pass a speaking order about applicability of Section 27 of the Act - out of charge order for clearance for home consumption - sole contention is that the noticed pilferage in the given facts and circumstances was the pilferage which had occurred prior the out of charge was given accordingly benefit of remission of duty be given to the appellant - HELD THAT - The common thing for section 13 23 is the time of applicability of these provisions i.e. after the unloading of the imported goods but before the proper Officer makes an order for clearance of imported goods for home consumption. Thus the importer is not liable to pay the duty on the goods if pilfered during this period (as per Section 13). Similarly importer shall be liable for remission of duty for the goods if lost and destroyed during this period but not for the pilfered goods. Since all the goods imported in India and cleared for home consumption or liable to Customs Duty the intention of Legislature from both these provisions is clear that the goods lost or destroyed permanently will never see the market of home consumption but the pilfered goods shall come to the market thus resulting into evasion of such duty. Only with the amendment effected by the Finance Bill 1983 Section 23 (1) of the Act excluded from its purview goods pilfered before their clearance for home consumption being that in respect of pilferage of imported goods Section 13 alone and not Section 23 is applicable. It would be reasonable to infer that prior to the amendment Section 23(1) did not exclude from its purview goods pilfered before their clearance for home consumption - the out of charge order i.e. order for clearance for home consumption was given on 18 May 2011. Pilferage was noticed after the joint survey which was conducted on 23 May 2011 i.e. after the said OOC was passed. It will not Section 23 which deals only with the permanent loss or damage to the goods that too before OOC but section 13 as shall be applicable which deals only with respect to goods pilfered but only if pilferage is noticed prior OOC. None is the fact of the present case. Neither duty exemption under Section 13 of Customs Act nor the remission of duty under Section 23 of Customs Act is available to the appellant. The question of refund of duty paid does not arise. There are no infirmity in the order under challenge when the benefit of remission of duty as applicable under Section 23 has been denied to the appellant while rejecting the refund of duty as was already paid by the appellant for the pilfered goods. Applicability of Section 13 - HELD THAT - It is clearly apparent that Legislature has thought it fit to consider remission of duty held in the Customs area only for the period required for completion of Customs formalities and not beyond that. Appointment of custodian is mainly for the purpose of getting the customs formalities completed. Hence his responsibilities also continued only to the stage when out of charge order for clearance either for home consumption or for depositing in warehouse is passed by the proper officer. Custodian is not suppose to take the custody of goods treating the entire custom area as a warehouse. If the importers still choose to keep the goods in the custom area it is possible only at the importers own risk. Appeal dismissed.

Summary

Issues Involved:
1. Applicability of Section 23 of the Customs Act for remission of duty on pilfered goods.
2. Applicability of Section 13 of the Customs Act for exemption of duty on pilfered goods.
3. Liability of the custodian (CONCOR) for pilfered goods after the out of charge order.

Detailed Analysis:

1. Applicability of Section 23 of the Customs Act:
The appellant claimed a refund under Section 23 of the Customs Act, arguing that the pilferage occurred before the actual clearance of goods for home consumption. The appellant relied on a joint survey conducted on 23.05.2011, which included various authorities, to support this claim. They cited the decision in Hindustan Petroleum Corporation vs. Collector of Customs, which allowed claims under Section 23(1) even after an order for home consumption if physical delivery had not been taken. They argued that the goods remained under the control of Customs Authorities until physical delivery, thus justifying the remission of duty.

However, the judgment clarified that Section 23 pertains to complete loss or destruction of goods, not pilferage. The amendment in 1983 explicitly excluded pilfered goods from the purview of Section 23. The court concluded that Section 23 is not applicable for pilfered goods, and thus, the appellant's claim for remission of duty under this section was not valid.

2. Applicability of Section 13 of the Customs Act:
The respondent argued that remission of duty under Section 23 is not permissible for pilfered goods and that Section 13 should apply. Section 13 exempts duty for pilfered goods only if the pilferage is noticed before the out of charge (OOC) order by the Customs Officer. In this case, the OOC was issued on 18.05.2011, and the pilferage was noticed on 23.05.2011. Thus, the pilferage was identified after the OOC order, making Section 13 inapplicable.

The court emphasized that both Sections 13 and 23 require the loss or pilferage to occur before the clearance order for home consumption. Since the pilferage was noticed after the OOC, neither Section 13 nor Section 23 applied, and the appellant was not entitled to a refund of the duty paid.

3. Liability of the Custodian (CONCOR):
The appellant alternatively argued that the custodian (CONCOR) should be liable for the duty on the pilfered goods since the goods were under their custody even after the OOC order. They cited the case of ITI Ltd. vs. CC, Chennai to support this claim.

The court disagreed, stating that once the OOC order is issued, the customs authorities are no longer responsible for the goods. The responsibility shifts to the importer, and any risk of pilferage after the OOC order is at the importer's own risk. The court referenced the decision in Zenith Bearing Enterprises, which supported this interpretation. The custodian's responsibility is limited to the period required for customs formalities, and any storage beyond that is at the importer's risk.

Conclusion:
The court upheld the order rejecting the appellant's claim for remission of duty under Section 23 and exemption under Section 13 of the Customs Act. The appeal was dismissed, and the appellant was held liable for the duty on the pilfered goods. The court also clarified that the custodian (CONCOR) was not liable for the duty after the OOC order was issued. The judgment emphasized that the legislative intent was to prevent duty evasion by ensuring that pilfered goods, which eventually enter the market, are subject to customs duty.