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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 ..... y arising on account of damages caused or loss suffered on imported or export goods, due to accident, damage, deterioration, destruction or any other unnatural cause during the receipt of the goods, storage, delivery, dispatch or otherwise handling. Thus, Regulation 5(6) is quite widely worded, so as to take into account different situations, so as to cover not only the liability arising on account of damages, but also, loss suffered on imported or export goods, which may be on account of factors like accident, damage, deterioration, destruction or any other unnatural cause. The phrase any other unnatural cause would mean any cause other than the natural cause. Applying Regulation 5(6) to the facts of the present case, it is not in dispute that there is an undertaking on the part of the CFS to indemnify the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, inter alia in regard to the loss suffered, and in the present case on export goods, by an unnatural cause, during storage of goods. Once the appellant was bound by such undertaking as contemplated by Regulation 5(6) and having consciously accepted the fact that the goods worth Rs. 4,44,32,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Customs, Excise Service Tax Appellate Authority, Mumbai (for short the tribunal ), which has been rejected by the impugned order. 2. The appellant have raised the following questions of law: (a) Given that the goods were pilfered, whether, in the facts and circumstances of the case, Regulation 5(6) of the Handling of Cargo in Customs Area Regulations, 2009, entitles the Respondent to recover the value of the lost goods from the Appellant? (b) Whether, in the facts and circumstances 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a surprise visit was conducted by the customs officials, at the premises of the appellant, when it was noticed that an empty container having unique No. XINU 1349960 was placed near another container, having customs seized goods, bearing an identical/same unique No. XINU 1349960. It was, thus, found that two containers with similar unique container number were found to be kept adjacent to each other in the area for storage of customs seized containers. On a detailed examination, it was found that the empty container was marked 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thus appeared to have made themselves liable for penal action under the provisions of Handling of cargo in Customs Area Regulations, 2009 and Customs Act, 1962. 12. Now, therefore, under regulation 12 of HCCAR, 2009, the CCSP i.e. CFS M/s. DRT-CONCOR, Dronagiri Rail terminal, Sector-2, Plot No.33, 34 35, Navi Mumbai- 400707 are hereby called upon to Show Cause to the Commissioner of Customs (General), Nhava-Sheva through the Assistant Commissioner of Customs, CCSP Cell, Jawaharlal Nehru Customs House, Nhava Sheva, Maharashtra, 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions in assailing the impugned order. He submits that in passing the impugned orders, there is an apparent overlooking of the purport of the provisions of Regulation 5(6) of the 2009 Regulations, in as much as, the provisions of such regulation cannot fasten any liability on the CFS/appellant, to indemnify the value of the stolen goods. According to Mr. Sridharan, the liability to indemnify can only be a liability arising on account of damages caused or suffered on imported or exported goods due to accident, damage, deterioration, destruction or any other similar unnatural cause during their receipt, storage, 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, a show cause notice came to be issued to the appellant by the Commissioner inter alia invoking the provisions of Regulation 11, Regulation 5(6) and Regulation 12(8) read with provisions of Section 158(2)(ii) and Section 117 of the Customs Act. The Order-in-Original confirmed the show cause notice in imposing liability on the appellant of an amount of Rs. 4,44,32,500/-, being the value of the pilfered goods/Red Sanders-logs, weighing 12695 kgs. required to be indemnified by the appellant as per the provisions of Regulation 5(6) of the 2009 Regulations. A penalty of Rs. 50,000/- under Regulation 12(8), and a penalty 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: R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for an amount equal to the average value of goods likely to be stored in the customs area based on the projected capacity, and for an amount as the Commissioner of Customs may specify having regard to the goods which have already been insured by the importers or exporters. (2) Undertake to bear the cost of the Customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance; (3) Execute a bond equal to the average amount of duty involved on the imported goods and ten per cent of value of export 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 Progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indemnify the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, 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 unnatural cause during the receipt of the goods, storage, delivery, dispatch or otherwise handling. Thus, Regulation 5(6) is quite widely worded, so as to take into account different situations, so as to cover not only the liability arising on account of damages, but also, loss suffered on imported or export goods, which may be on account of factors like accident, damage, deterioration, destruction or any other unnatural cause. The phrase any other unnatural cause would 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. The goods were prohibited goods not capable of being exported. They were of high value. It thus cannot be said that there was no loss suffered on account of theft of the said goods. Even otherwise, there needs to be a holistic reading of Regulation 5(6) taking into consideration the scheme of the 2009 Regulations read with substantive provisions of the Customs Act, namely, the provisions of Section 141 which become relevant in the present context. Section 141 reads thus: 141. Conveyances and goods in a customs area subject to control of officers of customs (1) All conveyances and goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs. ( 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 26. Now coming to the next contention as urged by Mr. Sridharan that there could not have been a double penalty imposed on the appellant, inasmuch as, the penalty of Rs. 4,00,000/- was imposed under the provisions of Section 117 of the Customs Act, as also a penalty of Rs. 50,000/- has been imposed under Regulation 12(8) of the 2009 Regulation. To appreciate Mr. Sriram Sridharan s contention, having already noted the provisions of Regulation 12(8), we would also note the provisions of Section 117, which reads thus: 117. Penalties for contravention etc. not expressly mentioned Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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