1985 (5) TMI 62 - AT - Customs

Issues Involved:
1. Applicability of Section 23 of the Customs Act, 1962.
2. Interpretation of transit losses and their coverage under Section 23.
3. Conditions imposed by the Assistant Collector regarding transit losses.
4. Arguments on whether the goods in transit are considered warehoused goods.
5. Relevance and interpretation of Sections 13, 67, 70, and 72 of the Customs Act.
6. Impact of the bond executed by the importer on the liability for duty on short-received goods.
7. Precedent cases and their applicability to the current case.
8. Effect of the amendment to Section 23 by the Finance Bill, 1983.

Detailed Analysis:

1. Applicability of Section 23 of the Customs Act, 1962:
The Tribunal examined whether Section 23(1) of the Customs Act, 1962, which allows for remission of duty on goods lost or destroyed before clearance for home consumption, applies to the case of transit losses of warehoused goods. It was determined that Section 23(1) is not confined to goods cleared directly for home consumption but also extends to warehoused goods.

2. Interpretation of Transit Losses and Their Coverage Under Section 23:
The Tribunal noted that the expression "lost or destroyed" in Section 23 is used in a broad sense, covering losses due to various reasons, including evaporation during transit. The Tribunal referenced the Delhi High Court's decision in the Sialkot Industrial Corporation case, which held that the term "lost or destroyed" encompasses losses from theft, fire, accident, and pilferage.

3. Conditions Imposed by the Assistant Collector Regarding Transit Losses:
The Assistant Collector had granted permission for in-bond removals on the condition that no wastage or evaporation allowance would be claimed, and duty would be paid on such transit losses. The Tribunal found that despite this condition, Section 23(1) still applies, and the bond cannot negate the statutory provision allowing remission of duty.

4. Arguments on Whether the Goods in Transit are Considered Warehoused Goods:
The Tribunal rejected the argument that goods in transit between warehouses are not warehoused goods. It held that goods continue to be warehoused until they are cleared for home consumption, as per the scheme of the Customs Act.

5. Relevance and Interpretation of Sections 13, 67, 70, and 72 of the Customs Act:
- Section 13: Applies to pilferage before the order for clearance for home consumption.
- Section 67: Allows removal of warehoused goods to another warehouse without payment of duty, subject to conditions.
- Section 70: Provides for remission of duty on warehoused goods found deficient due to natural loss, applicable to storage losses.
- Section 72: Relates to the accountability of warehoused goods and deficiencies.

The Tribunal clarified that Section 23(1) applies to all losses before clearance for home consumption, and its scope is not limited by Sections 13 and 70.

6. Impact of the Bond Executed by the Importer on the Liability for Duty on Short-Received Goods:
The Tribunal held that the bond executed by the importer, which required payment of duty on short-received goods, cannot override the statutory provision of Section 23(1). Therefore, the bond's condition does not negate the importer's right to remission of duty under Section 23(1).

7. Precedent Cases and Their Applicability to the Current Case:
The Tribunal referred to several precedent cases, including the Delhi High Court's decision in the Sialkot Industrial Corporation case and the West Regional Bench's decisions, which supported the broad interpretation of Section 23(1). The Tribunal disagreed with the South Regional Bench's decision in Bharat Electronics Ltd., which had a narrower interpretation of Section 23.

8. Effect of the Amendment to Section 23 by the Finance Bill, 1983:
The Tribunal noted that the Finance Bill, 1983, amended Section 23(1) to exclude goods pilfered before clearance for home consumption from its purview. This amendment implied that prior to the amendment, Section 23(1) did cover pilfered goods. The Tribunal inferred that the broad interpretation of Section 23(1) was valid before the amendment.

Conclusion:
The Tribunal concluded that the appellants are entitled to remission of duty under Section 23(1) for the transit losses of petroleum products, as these losses fall within the scope of "lost or destroyed" before clearance for home consumption. The appeal was allowed, and the concerned Collector was directed to grant consequential relief to the appellants within four months.

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