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TMI Blog2023 (12) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, penalty can be imposed on the Appellant under Regulation 12(8) of the Handling of Cargo in Customs Area Regulations, 2009? (c) Whether, in the facts and circumstances of the case, penalty can be imposed on the Appellant under Section 117 of the Customs Act, 1962? (d) Whether, in the facts and circumstances of the case, the impugned order was correct in imposing penalty on the Appellant under Regulation 12(8) of the HCCAR and Section 117 of the Customs Act, 1962, simultaneously for the same contravention?" 3. The facts relevant for the adjudication of this appeal are as follows:- The appellant is a Public Sector Undertaking, having Container Freight Stations (for short "CFS") at different locations in India. It is stated to have presence at all the major ports. The present proceedings concern the appellant's CFS at Dronagiri Rail Terminal, which is close to the Jawaharlal Nehru Port Trust (for short, "JNPT"). 4. It is not in dispute that the appellant's CFS is governed by the provisions of the Handling of Cargo in Customs Areas Regulations, 2009 (for short, "2009 Regulations"). Under these regulations, the appellant is recognized as a "Customs Cargo Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arked with the said container number on all four sides of its body. However, on the top of the empty container and on the CSC plate, which was affixed at the time of its manufacture, the actual was No. XINU 1106045. It was thus noticed that the modus operandi was of removing seized 'red sanders' kept in safe custody in the appellant's CFS, by substituting the container having seized goods, with another empty container pasted with same unique container number, similar to the seized goods. The custom officials also undertook a complete physical inventory of containers and having seized the goods, that were put on hold by Customs. It was found that the container in question containing red sanders No. GESU-3997518 as handed over to the appellant's CFS for safe custody, vide a panchanama dated 14 June, 2013 was tampered/ pilfered and the entire red sanders of 12695 Kgs. was found stolen by such modus operandi. 9. In the above circumstances, the department initiated proceedings inter alia against the appellant as also the exporters. The appellant was issued a show cause notice dated 16 March, 2020 under Regulation 12(1) of the 2009 Regulations, setting out in extenso the facts as inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htra, within 30 days of receipt of this Notice as to why; (i) The appointment of M/s. DRT-CONCOR CFS as CCSP shall not be suspended/revoked under regulation 11 of the HCCA Regulations, 2009 after following the procedure under regulation 12 ibid. (ii) The total value of pilfered goods amounting to Rs. 4,44,32,500/- (Rupees Four Crores Forty Four Lakhs Thirty Two Thousands and Five Hundred only) should not be held as liability arising under regulation 5(6) of HCCAR, 2009 and why the same should not be recovered. (iii) Penalty under Section 158(2)(ii) and Section 117 of the Customs Act, 1962 should not be imposed upon them. (iv) Penalty under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009 should not be imposed on them." (emphasis supplied) 11. By an Order-in-Original dated 18 April, 2023 passed by the Commissioner of Customs, the show cause notice came to be confirmed in the following terms:- "ORDER 40. I, therefore, pass the following Order: (i) I order to suspend the approval granted vide Public Notice No.134/2020 dated 14.10.2020 for operation as Customs Cargo Service Providers (CCSP) to M/s. Container Corporation of India Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torage, delivery, dispatch or otherwise handling. It is his submission that a situation where an illegality has taken place namely of the goods being pilfered or stolen in the course of storage would not fall under the provisions of Regulation 5 subregulation (6) of the 2009 Regulations. It is hence submitted that there was no question of the Commissioner of Customs seeking an indemnification from the appellant when the appellant's obligation/function was limited, which was merely storage of the seized containers. It is hence his submission that the impugned order on such ground needs to be set aside. 14. Mr. Sridharan's next submission is in regard to the penalty as imposed on the appellant. It is submitted that the provisions of Regulation 12(8) were certainly not attracted, as no fault could be attributed to any actions of the appellant. It is also his submission that there cannot be a simultaneous penalty under Section 117 of the Customs Act, as also penalty under Regulation 12(8) of the 2009 Regulations. It is his contention that thus, the order imposing penalty on the appellant is also an illegality as reflected from the impugned orders. 15. On the other hand, Mr. Subir Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 4,00,000/- under section 117 of the Customs Act was also imposed. The said Order-in- Original has been confirmed by the Tribunal in appeal. 18. On such backdrop, to appreciate the contentions as urged on behalf of the appellant on the applicability of Regulation 5(6) of the 2009 Regulations, insofar it requires the appellant to indemnify the Commissioner of Customs for the loss of goods, as also, qua the provisions of Regulation 12(8) insofar as the penalty of Rs. 50,000/- is imposed on the appellant, we note the said regulations, which reads thus: "Regulation 5. Conditions to be fulfilled by Customs Cargo Service provider - The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (1) Provide the following to the satisfaction of the [Principal Commissioner of Customs or Commissioner of Customs, as the case may be) namely: (i) Infrastructure, equipment and adequate manpower for loading, unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including:- (a) standard pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport goods likely to be stored in the customs area during a period of thirty days and furnish a bank guarantee or cash deposit equivalent to ten per cent of such duty: Provided that the condition of furnishing of Bank guarantee or cash deposit shall not be applicable to ports notified under the Major Ports Act, 1962 (38 of 1963) or to the Central Government or State Governments or their undertakings or to the Customs Cargo Service provider authorised under Authorised Economic Operator Programme. (4) Execute a separate bond for an amount equal to ten percent of value of export goods with a bank guarantee for an amount equal to ten percent of the value of the bond, towards the export goods transported from the customs area to any other customs area for export or transshipment, as the case may be; (5) Undertake to comply with the provisions and abide by all the provisions of the Act and the rules, regulations, notifications and orders issued thereunder. (6) Undertake to indemnify the Commissioner of Customs from any liability arising on account of damages caused or loss suffered on imported or export goods, due to accident, damage, deterioration, destruction or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould mean any cause other than the natural cause. Theft and/or pilferage of goods which are in the custody and seal of the Customs certainly is an unnatural cause, which has taken place during the storage of the goods as in the present case. Regulation 5(6) not only covers "storage" but also any unnatural event in regard to the goods during the 'receipt', 'delivery', 'dispatch' or otherwise handling of the goods. Such is the wide canvass of the Regulation 5(6) of the 2009 Regulation. 20. Thus, the purport and interpretation of Regulation 5(6) as canvassed on behalf of the appellant is not correct and acceptable. It is also not possible to accept an interpretation which goes contrary to the plain language of the regulation. In fact such interpretation of Regulation 5(6) as urged on behalf of the appellant, in our opinion, would lead not only to an absurdity but would cause a serious prejudice to the interest of the revenue, which is sought to be protected under the varied circumstances the regulation would ordain. This, not only as seen in the explicit wordings of the said Regulation, but also implicit, in the consequences the such regulation would take within its ambit, in the eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (2) The imported or export goods may be received, stored, delivered, dispatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed." (emphasis supplied) 23. Section 141(2), therefore applies to the imported or export goods which may be received, stored, delivered, dispatched or otherwise handled in a customs area only in a manner "as may be prescribed", so as to provide that the responsibilities of persons engaged in the said activities shall be such as may be prescribed. As per the provisions of Section 2(32) of the Customs Act "prescribed" is defined to mean prescribed by regulations made under the Act, hence, all activities of the appellant were required to be undertaken as per the Regulations as framed under the Customs Act and in the present case 2009 Regulations. Thus, insofar as the appellant's contention on the misapplication of Regulation 5(6) is concerned, the contentions are untenable and are required to be rejected. 24. We may observe that the provisions of Regulation 6(1)(a), (b), (f), (i) and (q) were also invoked by the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such contravention or failure, shall be liable to penalty not exceeding four lakh rupees." 27. On a plain reading of Section 117 of the Customs Act, it is quite clear that the provision pertains to penalties for contravention of the provisions of the Act or in the event of abetment of any such contravention and /or failure to comply with the provisions of the Act, with which the person was under a duty to comply and where no express penalty elsewhere is provided for such contravention or failure, it is only in that event, Section 117 can be invoked. Thus, Section 117 of the Customs Act is an independent provision inter alia dealing with the contravention of the provisions of the Act. 28. In the facts and circumstances of the present case, the Commissioner was justified in imposing a penalty for contravention of the provisions of Customs Act by the appellant in relation to the goods in question. Also the appellant has not raised a dispute, as the contention of the appellant is that there cannot be a simultaneous penalty under Section 117 of the Customs Act and Regulation 12(8) of the 2009 Regulations. Thus, no fault can be found on the penalty of Rs. 4,00,000/- as imposed un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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