1991 (8) TMI 191 - AT - Income Tax

Issues Involved:
1. Admissibility of refund under Section 23 of the Customs Act, 1962.
2. Requirement of Customs Officers' presence during the survey.
3. Applicability of Section 13 versus Section 23 for pilferage cases.
4. Interpretation of "loss" under Section 23 before its amendment by the Finance Act, 1983.
5. Timing of pilferage and its impact on the refund claim.

Issue-wise Detailed Analysis:

1. Admissibility of refund under Section 23 of the Customs Act, 1962:
The appellant, a Government of India Undertaking, imported spare parts for Ammonia Pumps from Italy. During appraisement, one package was found broken, and the appellant requested its detention. However, they mistakenly indicated the wrong package number. The survey report indicated pilferage in the correct package. The refund claim was initially rejected, but upon appeal, the Tribunal remanded the matter, emphasizing the relevance of the survey report. The Tribunal concluded that the claim was in accordance with the law, as Section 23 covered all types of losses, including pilferage, before its amendment by the Finance Act, 1983.

2. Requirement of Customs Officers' presence during the survey:
The appellant argued that there was no requirement for Customs Officers to be present during the survey, citing previous decisions (1981 (21) E.L.T. 185, 1990 (28) ECR 412, and 1990 (48) E.L.T. 300). The Tribunal agreed, stating that the survey report should be considered even if Customs Officers were not present, aligning with the decision reported in 1985 (21) E.L.T. 185.

3. Applicability of Section 13 versus Section 23 for pilferage cases:
The respondent contended that Section 13, which specifically mentions pilferage, should prevail over Section 23. They argued that Section 23 did not cover pilferage even before its amendment. However, the Tribunal noted that Section 13 and Section 23 operated under different circumstances. Section 13 applied to pilferage after unloading but before clearance, while Section 23 dealt with irretrievable loss, including pilferage, before its amendment. The Tribunal cited the Delhi High Court's decision in Sialkot Industrial Corporation, which held that "loss" under Section 23 included pilferage.

4. Interpretation of "loss" under Section 23 before its amendment by the Finance Act, 1983:
The Tribunal referred to the Delhi High Court's interpretation of "loss" in Sialkot Industrial Corporation, which included deprivation due to pilferage. This interpretation was based on the Supreme Court's decision in East & West Steamship Co. v. Ramalingam. The Tribunal emphasized that Section 23 covered all types of losses, including pilferage, before the 1983 amendment. The Tribunal also cited previous decisions supporting this view (1984 (18) E.L.T. 358 and 1985 (21) E.L.T. 185).

5. Timing of pilferage and its impact on the refund claim:
The respondent argued that the refund could not be granted as the exact timing of pilferage was unclear. They cited a previous decision (1990 (50) E.L.T. 322) where the timing of pilferage was crucial. However, the Tribunal distinguished this case, noting that the goods were imported before the amendment of Section 23. The Tribunal held that the survey report, which indicated pilferage, was relevant and should be considered. The Tribunal concluded that the refund was admissible under Section 23, as the loss occurred before the amendment.

Separate Judgment by K. Sankararaman, Member (T):
While agreeing with the decision to allow the appeal, K. Sankararaman recorded a separate observation regarding the interpretation of Section 23. He disagreed with the view that duty must be paid first to claim remission, stating that remission does not equate to a refund. He emphasized that duty would not be required to be paid for goods lost or damaged under Section 23. He concurred with the decision to allow the appeal, noting that the case was covered by Section 23(1) before its amendment.

Conclusion:
The Tribunal allowed the appeal, holding that the refund was admissible under Section 23(1) of the Customs Act, 1962, as the loss occurred before the amendment. The decision emphasized the relevance of the survey report and clarified the distinction between Sections 13 and 23 regarding pilferage and loss.

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