1986 (4) TMI 73 - HC - Customs

Summary

Issues Involved:
1. Imposition of penalty for shortlanding of goods.
2. Adherence to customs and port trust procedures.
3. Responsibility for maintaining records of imported goods.
4. Legality of imposing penalties under Section 116 of the Customs Act, 1962.
5. Judicial discretion in imposing penalties.

Issue-Wise Detailed Analysis:

1. Imposition of Penalty for Shortlanding of Goods:
The petitioner, a shipping company, challenged the order of the Central Government confirming a penalty of Rs. 45,007.00 for shortlanding goods. The penalty was initially imposed by the Assistant Collector of Customs and later reduced by the Central Board of Excise and Customs. The petitioner argued that the shortlanding was due to the unauthorized clearance of defence cargo by the Embarkation Commandant without proper documentation.

2. Adherence to Customs and Port Trust Procedures:
The petitioner contended that the Bombay Port Trust and Customs Authorities allowed the Embarkation Commandant to clear defence cargo without following the usual customs and port trust formalities. This led to discrepancies in the out-turn reports, showing shortlanded packages. Meetings between the shippers, customs, and port trust officials confirmed that proper documentation was not maintained, and packages were cleared immediately upon landing.

3. Responsibility for Maintaining Records of Imported Goods:
Under Section 45 of the Customs Act, 1962, all imported goods unloaded in a customs area must remain in the custody of an approved person until cleared for home consumption, and a complete record must be maintained. The Port Authority was responsible for maintaining these records. However, due to orders under the Defence of India Rules, the Port Authority allowed the Embarkation Commandant to remove cargo without proper documentation.

4. Legality of Imposing Penalties Under Section 116 of the Customs Act, 1962:
Section 116 of the Customs Act mandates penalties for not accounting for goods. The respondents argued that the out-turn report indicated shortlanding, making it obligatory to impose penalties on the carrier. However, the petitioner argued that the Commandant had informed about the tallying of certain goods, but the Port Authority did not amend the out-turn report due to a lack of proper documents.

5. Judicial Discretion in Imposing Penalties:
The court referred to the Supreme Court judgment in M/s. Hindustan Steel Ltd v. State of Orissa, which stated that penalties should not be imposed merely because it is lawful to do so. Penalties should be imposed only if the party acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct. The court found that the carrier acted bona fide and the responsibility for preparing necessary documents lay with the Port Authority.

Conclusion:
The court quashed the impugned orders imposing the penalty, including the orders in appeal and revision, and ruled that the petitioner and other carriers were not responsible for the shortlanding due to the lack of proper documentation by the Port Authority and the Embarkation Commandant. The rule was made absolute, and each party was left to bear its own costs.