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TMI Blog2023 (9) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... by taking timely action and thus such export goods attempted for illegal export was rightly seized as the same were liable to confiscation under Section 113 of the Customs Act, 1962. The argument advanced by learned Advocate for the appellants that the seized container was not an export cargo, but was kept in safe custody as a courtesy to customs department and the copy of Panchanama was not available with them, is factually incorrect. The memorandum attached to the Finance Bill, 2008 provides full information and, purport and effect of the delegation of power to subordinate authorities, the points which may be covered in the area of delegation, the particulars of subordinate authorities who are to exercise the delegated powers, and the manner in which such power is to be exercised, in respect of the above amendment. Thus the sub-section (2)n of Section 141 became part of the Customs Act, 1962, upon passing of Finance Act, 2008 w.e.f. 10.09.2008. Therefore, the Handling of Cargo in Customs Areas Regulations, 2008 (HCCAR) which had been framed by CBEC in exercise of the powers thereof, as provided under Section 141(2) ibid, has proper force of law. Thus, an order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Customs. The absence of proper system of security, control and maintenance of records in the present case of seized export goods mutatis mutandis apply to the imported goods also. Hence the appellant cannot escape from the responsibilities and obligations cast upon them as CFS operator under HCCAR for proper handling of import/export goods. In view of this, the appellants have failed to fulfil the responsibilities entrusted on them under Regulation 6(1)(a) and 6(1)(b) of HCCAR. Section 117 of Customs Act, 1962 provide for imposition of penalty on any person who contravenes any provision of the said 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, to be liable to a penalty not exceeding four lakhs rupees. The maximum amount of penalty prescribed under Section 117 initially at Rs. One lakh was revised upwards to Rs. Four lakhs, with effect from 01.08.2019 - The detailed discussions clearly prove that the appellants not only failed to fulfil the conditions and to abide by the responsibilities reposed on them as CCSP, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t goods in the said the container, and examined the same by drawing panchanama dated 14.06.2013 at the appellant s CFS. It was found that as against the declared goods of 7454 Kgs. of stainless steel household articles mentioned in the said Shipping Bill, the goods present in the containers actually were found to be the Red Sanders of 12695 Kgs., which are prohibited for export. The prohibited goods attempted for illegal export were seized under the Customs Act, 1962 and handed over for safe custody with the appellants, being custodian of import/export goods under a Panchnama dated 14.06.2013. 2.3 Subsequently, during a surprise visit conducted by JNCH Customs officers at the premises of the appellants CFS on 14.08.2014, an empty container having unique No. XINU 1349960 was placed near another container having customs seized goods bearing same unique No. XINU 1349960. Thus, it was found that two containers with the same unique container number were found to have been kept adjacent to each other in the area for storage of customs seized containers. On detailed examination, it was found that the empty container was marked with the container No.XINU 1349960 on all four sides of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurred due to their contractors. Learned Advocate also stated that the order for recovery of the value of seized goods which have been pilfered, in terms of HCCAR and imposition of penalty under Section 117 under the Customs Act, 1962 are not sustainable as the legal provisions only provide for demand of duty on goods and such penalty is applicable only for violation of the provisions of the Customs Act and not Regulations. Thus, he claimed that the impugned order is not legally sustainable and the same be setaside. In the additional written submission of the learned Advocate, he claimed that the insurance policy of the New India Assurance Company Ltd. for the relevant period provides for insurance liability in relation to cargo and containers and such liability is in respect of loss or destruction of, or damage to cargo as per CBEC regulations on handling of cargo in Customs area. Since as per the comprehensive package insurance policy, insurance is covered for claims made against duty imposed by the customs authority which is legally payable for loss or damage to cargo, and in this case the export cargo does not attract any export duty, he stated that there is no liability on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he records of the case including the additional written submissions made by both sides. 6. We find that the learned Commissioner in the impugned order dated 18.04.2023, in exercise of the powers vested with him under Regulation 11(1) of HCCAR, after duly following the procedure stated therein, had ordered for suspension of approval which was granted to the appellants for operation as Customs Cargo Service Provider (CCSP) for a period of 15 days w.e.f. 01.05.2023 to 15.05.2023 subject to certain conditions or relaxation, for allowing import-live cargo pending clearance and existing export consignments to be exported and for auction of goods on which notices have been issued. Besides the above, the impugned order also imposed penalty on the appellants under Section 117 ibid and Regulation 12(8) of HCCAR and ordered for recovery of the value of pilfered goods under Regulation 5(6) of HCCAR. Thus, we would like to examine the case before us in great detail with respect each of its factual matrix as well as on the legality of the HCCAR-Regulations in terms of the Customs Act, 1962. 7. On perusal of the records and factual matrix of the case, it is seen that there was a specific in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our presence, the said one container bearing number GESU- 3997518 (20 ), re-sealed with Customs Bottle seal No.1413790 and Concor Seal No. D 164229 prima facie containing prohibited goods were handed over to the Manager, DRT CFS for safe custody This factual position is duly supported by the letter dated 10.11.2016 written by the appellants to M/s New India Assurance Co. Ltd., wherein it is inter alia mentioned that the subject container was handed over by SIIB Customs in loaded condition on 03.06.2013 and relevant copies of documents such as Customs letter 07.05.2013 regarding shifting of container from JNPT port to CONCOR-DRT CFS, panchanama dated 14.06.2013 prepared by SIIB officials have also been given to the appellants at the time of handing over the said container. Thus, the fact of handing over the seized goods for safe custody with the appellants, being custodian of import/export goods under a Panchnama dated 14.06.2013, is a proven fact beyond doubt. Thus, the argument advanced by learned Advocate for the appellants that the seized container was not an export cargo, but was kept in safe custody as a courtesy to customs department and the copy of Panchanama w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including :- (a) standard pavement for heavy duty equipment for use in the operational and stacking area; (n) security and access control to prohibit unauthorized access into the premises, and xxx xxx xxx xxx (o) such other equipment or facilities as the Board or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may specify having regard to the screening, examination, custody and handling of imported or export goods in a customs area. (ii) safe, secure and spacious premises for loading, unloading, handling and storing of the cargo for the projected capacity and for the examination and other operations as may be required in compliance with any law for the time being in force; (iii) insurance 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 Principal Commissioner of Customs or Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irements of Rule 70. The said rule is extracted below: 70. A Bill involving proposals for the delegation of legislative power shall further be accompanied by a memorandum explaining such proposals and drawing attention to their scope and stating also whether they are of normal or exceptional character. In this regard, We find that the Memorandum regarding Delegated Legislation contained as a part of the Finance Bill, 2008, provided the powers to the Central Board of Excise Customs (CBEC) to make regulations as extracted below: Clause 69 of the Bill seeks to insert a new sub-section (2) to section 141 of the Customs Act empowering the Central Board of Excise and Customs to make regulations in respect of the manner in which imported or export goods may be received, stored, delivered, despatched or otherwise handled in a customs area and also in respect of the responsibilities of persons engaged in such activities. From the memorandum so accompanying the bill, it could be reasonably concluded that the parliament had possessed of the information regarding the delegated legislation that was introduced in the Finance Bill, 2008. The purpose of the memorandum to focus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her statues pari materia, the general scope of the statue and the mischief that it was intended to remedy. This statement of rule was adopted by the Honourable Supreme Court in the case of Poppatlal Shah vs The State Of Madras, Union Of India Others- 1953 AIR 274; 1953 SCR 677 as well as in the case of Union of India Vs. Elphinstone Spinning Weaving Co. Ltd. Ors. AIR 2001 SC 724. The relevant portion of the said judgement of Hon ble Court in Elphinstone supra, is extracted below: It is a settled rule of construction that to ascertain the legislative intent all the constituent parts of a statute are to be taken together and each word phrase or sentence is to be considered in the light of the general purpose and object of the statue. 10.3 In this context, we may like to refer the legislative history behind the basic provisions of the Customs Act, in order to clearly bring out the correct legal position. The Customs Act, 1962, comprehensively provide for administration of Customs function of the Central Government, by consolidating the existing legal provisions governing Sea Customs, Land Customs and Air Customs, by enacting a new legislation through introduction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and send a copy thereof to the proper officer; (b) shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in accordance with the permission in writing of the proper officer. Clause 45 replaces existing section 85 (of the Sea Customs Act, 1878) with the following amendments:- (i) the existing section specifies that either the Port Trust or the Customs Department shall take charge of the landed goods. The new provision enables the Collector of Customs to approve for this purpose other persons also like officers of State Governments in charge of minor ports, agents of the vessel or aircraft. (ii) item (a) of sub-clause (2) is a new provision which provides specifically that the person in whose custody imported goods are kept shall keep a record of such goods and shall send a copy thereof to the proper officer of the Customs. (iii) the existing obsolete provision making the ship's agents liable to discharge all claims for damage and short-delivery is being deleted. CHAPTER XVII MISCELLANEOUS 141. All conveyances and goods in a customs area shall, for the purpose of enforcing the provisions of this Act, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngestion at sea ports and for expediting the unloading and loading of goods at the port terminals. Thus, major ports were made efficient by concentrating on quick out turn of the vessels calling on the port, by modernising the port handling infrastructure, having PPP model of developing modern port terminals, material handling systems, specialised infrastructure for container vessels and bulk handling of cargo etc. thereby reducing the dwell time of cargo and turnover time of vessels calling at the ports, which naturally lead to reduced transaction cost in international trade. In the process, the imported goods were immediately sent to CFS upon unloading at the port terminals. Similarly, in the hinterland the Inland Container Depots (ICDs) were allowed to perform the function like a dry port and offer common user Customs clearance facilities at the doorstep of importers and exporters. These CFSs/ICDs were appointed as custodians under Section 45 of the Customs Act, 1962 after the initial approval given by the Inter-Ministerial Committee under the Ministry of Commerce. The appellants are also one of such custodian who was initially appointed by the Commissioner of Customs, JNCH Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toring mechanism in the Ministry/Department in respect of functioning of ICDs/CFSs, also seem to be very weak and ineffective. These issues have been discussed in detail in the succeeding paragraphs. xxx xxx xxx xxx 65. Under the extant rules/arrangements, responsibility for clearance / disposal of goods lies with the Custodian and the role of Customs in disposal of cargo is to examine the status of cargo and give permission to Custodians when sought for under the Customs Act. The Committee are informed that in case of non-fulfilment of the obligations by the Custodians concerned Commissioners of Customs can cancel the approval given to them to operate ICDs/CFSs. However, no detail Rules empowering the Customs to take any punitive/deterrent action against the Custodians in such cases have been framed. Further, no safeguards for protection of Revenue in cases of negligence or violations of the conditions/guidelines by the Custodians exist in the Customs Act. The Committee feel that Government should formulate appropriate rules and guidelines to control the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Commissioner of Customs for handling both the export and import containers as well as for processing of related documents, right from the beginning vide various notifications dated 18.07.1999, and subsequent renewals vide notifications dated 11.11.2003, 21.03.2006, 04.01.2011 and thereafter periodically till the last renewal on 14.10.2020, the appellants cannot escape from the responsibilities and obligations cast upon them as CFS operator and CCSP under HCCAR for proper handling of import/export goods as mandated under Section 141(1) and (2) ibid. Hence, we are of the considered view, that all custodians who are handling the import/export goods, in a customs area are required to fulfil the conditions prescribed under Regulation 5 and are required to discharge their responsibilities as laid down under Regulation 6 ibid. Any violations of the said regulations may attract initiation of necessary action by the jurisdictional customs authorities in terms of Regulation 11, 12 ibid. Inasmuch as the learned Commissioner of Customs had followed the due process of law and abided by the principles of natural justice in passing the impugned order, we find no infirmity in the said order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the instructions issued by the CBEC vide Instruction No.1/2017-Customs dated 08.02.2017, specifically provided that besides drawing a panchanama, the proper officer should also pass an appropriate order as Seizure memo/order etc. clearly mentioning the reasons to believe that the goods are liable for confiscation. However, the said instructions specifically state that it applies only in all future cases, and do not cover the past cases. Further, the Panchanama dated 14.06.2013, specifically state that the attempted illegal export of Red Sanders being prohibited for export, are being seized under the reasonable belief that the same are liable for confiscation under the provisions of Customs Act, 1962. Thus, we find that the argument of the Advocate for the appellants that there is no Supratnama or order for handing over the seized goods to the appellants, and thus they are not liable for the pilferage of seized goods, does not have any legal validity. 14.2 Further, it is not the case of the appellants that the seized export goods were confiscated and thereupon such goods became the property of the Central Government and thus it is only the Customs who are responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Areas Regulations, 2009 - regarding. *** A reference is invited to Notification No. 26/2009-Customs (N.T.) dated 17.3.2009 bringing into effect the Handling of Cargo in Customs Areas Regulations, 2009 (referred in short as 'regulations'). The regulations provide for the manner in which the imported goods/ export goods shall be received, stored, delivered or otherwise handled in a customs area. The regulations also prescribe the responsibilities of persons engaged in the aforesaid activities. It may be recalled that the Public Accounts Committee (2005-06) in its twenty-seventh report had recommended for formulating appropriate legal provisions and guidelines to control the activities of custodians. In pursuance of the recommendations made by the Public Accounts Committee (PAC), the Government had inserted a new sub-section (2) to section 141 of the Customs Act, 1962. These Regulations have been framed by the Department in pursuance of the recommendations of the PAC and consequent to the amendment of the Customs Act, 1962 as aforesaid. The salient features of the regulations are indicated in the following paragraphs. 2.1. The regulations shall be applicable to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(n) and 5(ii) is that the CCSP shall provide security and access control to prohibit unauthorized access into the premises, as well as provide safe, secure and spacious premises for loading, unloading, handling and storing of the cargo and for the examination and other operations as may be required in compliance with any law for the time being in force. In the present case, the factory sealed export goods initially entered into the CONCOR-DRT CFS for complying with the customs procedures for export, and later brought in by SIIB Customs for detailed examination of attempted smuggled goods and later were handed over to the appellants for safe custody of the seized goods in container No.GESU- 3997518 at the appellant s CFS. The facts of the case and the customs and police investigation (which have given in detail in the following paragraphs) brings out clearly the conclusion that the appellant s facilities at CONCOR-DRT CFS, particularly the Kalmar fort lift, empty container, truck were used for pilferage of customs seized goods contained in container No.GESU-3997518. 16.1 Investigation conducted by Customs and the inquiry proceedings under HCCAR reveals that during a surprise vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms seized goods handed over to them for safe custody, as one another attempt was made for removing the Customs seized goods by substitution of container XINU 1349960, within a gap of few days, which was only identified by JNCH Customs on 14.08.2014. 16.2 We also find that the CBIC have clarified vide Circular No.13/2009 dated 23.3.2009 that the HCCAR is applicable to all Customs Cargo Service Providers (CCSP) including the CFS, ICDs, Ports, airports and LCS. It has been specifically provided that the conditions to be fulfilled as prescribed under Regulation 5 of HCCAR which interalia include security and access control to prohibit unauthorised access into the premises , apply to custodians of import/export cargo i.e., CFS, ICD etc. Further, responsibilities prescribed under Regulation 6, interalia, included responsibility for the safety and security of imported and export goods under the custody of custodian, and this apply to all CCSPs including the service providers of CFS, ICD. This has been clarified specifically in the said circular which state that it may however be clarified that custodian will be responsible for fulfilment of the conditions of these Regulations even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by appellants and stands to prove the involvement of a number of unauthorized persons who had access to the CONCOR-DRT CFS, and the equipment available therein, for clandestine manner of removing the customs seized container. Thus, it is a clearly proven fact that the entire theft of customs seized red sanders have been orchestrated by the group of miscreants using the equipment belonging to the appellant s contractor that were available in CONCOR-DRT CFS and the movement of the container (having seized goods) in the truck was organized by one of the appellant s operator, improperly without any documents and by violating the laid down procedures for movement of container/goods in Customs area. This also goes to prove that had they kept a proper record of the customs seized goods/container, and connected records relating to movement of such goods/container from the demarcated area, or any other container entering in or exiting from the CONCOR-DRT CFS, then the whole operation of bringing into CONCOR-DRT CFS empty container, fabrication of empty container so as to look like seized goods container, and taking away the customs seized goods container, without any authority of Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants, appear to cover the liability arising from the loss, destruction or damage to cargo and containers in the custody of the appellants, and more so in particular reference to the CBEC regulations/HCCAR. It is also noted that the general exclusions to the said insurance policy interalia provides that wilful act or wilful negligence or the Insured or his representative are not covered under the said insurance policy. The factual records also indicate that New India Assurance Company Ltd. i.e., the insurer company, after detailed examination of the claim for insurance made by the appellants have responded vide their letter dated 10.11.2016 in which they had inter alia stated that equipment available in the CFS belonging to one of the contractor of appellant has been utilized and movement of the container (having seized goods) was organized by one of the operator without any document and against the contractual procedures. They have also stated that the goods were removed by alteration of container number on the sides of container and they have expressed that it is not clear that how such an exercise of alteration of number on all the sides could have been committed, if reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval of seized red sanders, by substitution of empty container with the seized red sander container. The serious violations on security of the CFS and the goods stored inside the CFS, established through inquiry report under HCCAR and Police investigation, have led to the action to safeguard government interest on the seized goods, and thus recovery of the above amount. Hence, we find that there is no illegality in the impugned order in seeking recovery of the value of the goods which were pilfered from the custody of the appellants as CCSP, due to aforesaid act of negligence and improper handling of cargo in customs area. Further, we find that the Customs department had been in correspondence with the appellants to deposit Rs.4,44,32,500/- way back vide letters dated 03.11.2016, 25.01.2017, 17.04.2018 and 20.11.2018 written by the Commissioner of Customs. Further, on the basis of the appellant s reply dated 19.12.2018 to keep the issue in abeyance till the time of receipt of report of police investigation, the Customs authorities have awaited and then proceeded as per law. Hence, we find that there is no undue delay or any illegality in the action taken by Customs department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orters. Further, auction of the goods for which notices have been issued under Section 48 by the custodian/CCSP and under other auction process were also permitted during such suspension period. Hence, the export and import trade has not been affected by this suspension action. Further, it is clear that the appellants work was not entirely shutdown and that there was sufficient work for the personnel employed and the contractors engaged by the appellants, disproving the appeal made by the learned Advocate that the suspension action has adversely affected the importers and exporters community and that livelihood of a large number of persons employed by them were affected. However, as the period for which the suspension of 15 days was ordered was in terms of specific dates, i.e., from 01.05.2023 to 15.05.2023, which had expired during the process of this appeal, no precipitative action was taken by the Customs pending this appeal, and the impugned order to this extent has become infructuous. Thus, even the illusory adversity of closure of the appellants CONCOR-DRT CFS has not happened in reality and hence there is no ground for entertaining the appeal on this ground. 21. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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