Ferdino I. Rebello, J.:— The question for our consideration in the petition is as follows:
“Is the Port Trust liable to pay duty on goods pilfered while in their possession?”
2. The petitioners are a Major Port Trust, constituted under the Major Port Trusts Act, 1963 (hereinafter referred to as the “Port Trust Act”). The respondents issued several show cause notices as to why customs duty should not be recovered from them for goods which were pilfered whilst in their custody. An order of assessment thereafter came to be passed confirming the duty demanded in terms of the said show cause notices. By the present petition, the petitioners pray that the orders dated 6th November, 1997, 2nd October, 1997, 6th October, 1997, 17th May, 2001 and 30th July, 2002 be quashed and set aside. Relief is also sought against the notification dated 11th October, 2000 whereby the Commissioner of Customs (Import) in exercise of powers conferred under section 45(1) of the Customs Act, 1962 (hereinafter referred to as “the Customs Act”) had approved MbPT as a custodian of the area notified under section 8 of the Customs Act for statutory duties and responsibility prescribed under section 45(2) and 45(3) of the Customs Act.
3. The petitioners are a body corporate under the section 5 of Port Trust Act. The Port Trust Act specifies under section 42 the performance of service by the Board or other persons. We may gainfully refer to the provisions of section 42(1) of the Port Trust Act.
“42. Performance of services by Board or other person. — (1) A Board shall have power to undertake the following services:—
(a) landing, shipping or transhipping passengers and goods between vessels in the port and the wharves, piers, guays or docks belonging to or in the possession of the Board;
(b) receiving, removing, shifting, transporting, storing or delivering goods brought within the Board's premises;
(c) carrying passengers by rail or by other means within the limits of the port or port approaches, subject to such restrictions and conditions as the Central Government may think fit to impose;
(d) receiving and delivering, transporting and booking and despatching goods originating in the vessels in the port and intended for carriage by the neighbouring railways, or vice versa, as a railway administration under the Indian Railways Act, 1890 (9 of 1890);
(e) piloting, hauling, mooring, remooring, hooking, or measuring of vessels or any other service in respect of vessels;
(f) developing and providing, subject to the previous approval of the Central Government, infrastructure facilities for ports.”
4. The next relevant provision is section 43 of the Port Trust Act. The same reads as under:—
“Responsibility of Board for loss, etc. of goods. — (1) Subject to the provisions of this Act, the responsibility of any Board for the loss, destruction or deterioration of goods of which it has taken charge shall,—
(i) in the case of goods received for carriage by railway, be governed by the provisions of the Indian Railways Act, 1890 (9 of 1890); and
(ii) in other cases, be that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872), omitting the words “in the absence of any special contract” in section 152 of that Act;
[Provided that no responsibility under this section shall attach to the Board—
(a) until a receipt mentioned in sub-section (2) of section 42 is given by the Board, and
(b) after the expiry of such period as may be prescribed by regulations from the date of taking charge of such goods by the board.]
(2) A Board shall not be in any way responsible for the loss, destruction or deterioration of, or damage to, goods of which it has taken charge, unless notice of such loss or damage has been given within such period as may be prescribed by regulations made in this behalf from the date of taking charge of such goods by the Board under sub-section (2) of section 42.”
5. The relevant provisions of the customs act may now be adverted to. Section 45 of the Customs Act reads thus:
“45. Restrictions on custody and removal of imported goods. — (1) Save as otherwise provided in any law for the time being in force, all imported goods, unloaded in a customs area shall remain in the custody of such person as may be approved by the Commissioner of Customs until they are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII.
(2) The person having custody of any imported goods in a customs area, whether under the provisions of sub-section (1) or under any law for the time being in force,—
(a) shall keep a record of such goods 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.
(3) Notwithstanding anything contained in any law for the time being in force, if any imported goods are pilfered after unloading thereof in a customs area while in the custody of a person referred to in sub-section (1), that person shall be liable to pay duty on such goods at the rate prevailing on the date of delivery of an import manifest or, as the case may be, an import report to the proper officer under section 30 for the arrival of the convenience in which the said goods were carried.”
6. Another provision necessary for considering the issue in question is section 160(9) of the Customs Act which reads thus:
“160. Repeal and saving. — (9) Nothing in this Act shall affect any law for the time being in force relating to the constitution and powers of any port authority in a major port as defined in the Indian Ports Act, 1908 (15 of 1908).”
7. On behalf of the petitioners, their counsel submitted that considering section 45(1) of the Customs Act, the imported goods unloaded in a customs area of the Port Trust came to their possession not as an approved person under the Customs Act, but by virtue of the powers conferred on them under section 43 of the Port Trust Act. section 160(9) of the Customs Act, it is submitted supports the contention of the petitioners. It is therefore submitted that the impugned orders are liable to be set aside and the notification is liable to be declared as null and void and consequentially struck down.
8. On the other hand, on behalf of the respondents, their counsel submitted that the language of Section 45 of the Customs Act is clear. The liability under section 45(3) of the Customs Act for the duty payable is both of a body like the petitioners as also of the person approved under section 45(1) of the Customs Act. It is therefore contended that the submission of the petitioners is devoid of merit. The learned counsel has placed reliance on the judgment of the Supreme Court in International Airport Authority of India v. Ashok Dhawan, 1999 (106) E.L.T 16 (S.C) and on the judgment of the Board of Trustees of Madras Port Trust v. Vinod Selvextracts (P) Ltd., 2003 (151) E.L.T 290 (Mad.).
9. We have heard the learned counsel for the parties. Let us firstly examine the scheme of the Act in the matter of payment of duty. Section 12 of the Customs Act is a charging section. Under section 13, if any imported goods are pilfered after the unloading thereof and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage. In other words, the imported goods pilfered in the circumstances set out above are not liable for payment of duty by the importer. Section 23 of the Customs Act confers power on the authorities set out therein to remit customs duty on goods which have been lost or destroyed at any time before clearance for home consumption or otherwise as a result of pilferage. It is therefore clear that the duty under Section 12 of the Customs Act is leviable on the goods. Customs duty is payable by an importer considering section 17 of the Customs Act. Only in the situation covered by section 13 of the Customs Act, customs duty is not payable and in the situation covered by section 23 there is a power to remit the duty.
Under section 45(3) of the Customs Act, insofar as the goods are concerned, the duty as noted under section 13 of the Customs Act, is not payable by the importer but has to be paid by the person in whose custody they have been given. The question therefore is whether the person referred to in section 45(1), 45(2) and 45(3) of the Customs Act includes a body like the petitioners. We may note that section 45(3) of the Customs Act has been introduced for the first time with effect from 26th May, 1995. Before section 45(3) was introduced, no duty could be recovered in respect of the pilfered goods including of an approved person. It is in that context that we have to examine the matter.
10. While introducing the Finance Bill, 1995, insofar as clause 58 is concerned, this is what was stated. “Clause 58 seeks to insert new sub-section (3) in Section 45 of the Customs Act to provide for recovery of duty from the person in charge of imported goods in a customs area, if such goods are pilfered from their custody.”
11. section 45(1) of the Customs Act starts with the words “save as otherwise provided in any law for the time being in force, all imported goods, unloaded in a customs area shall remain in the custody of such person as may be approved”. In other words, it contemplates two situations, viz. custody pursuant to any law for the time being in force and custody in the hands of an approved person. The petitioners contend that insofar as they are concerned, they are person in custody of the imported goods pursuant to the provisions contained under the Port Trust Act. The question therefore is, whether under section 45(3) of the Customs Act, such a person, who is in custody of goods pursuant to a law like the Port Trust Act, is liable to pay duty on the pilfered goods in terms of section 45(3) of the Customs Act. Before answering the issue, we may also note that under section 160(9) of the Customs Act, the power of any authority conferred by the Port Trust Act is not affected by the provisions of the customs act insofar as the custody of the goods are concerned.
12. The liability to pay duty is on the importer of the goods. We have already referred to the provisions whereby an importer of the goods is exempted from payment of duty either on account of pilferage or on account of loss or damage in situations set out in the provisions. The Port Trust being a body corporate set up under the statute is a local body whereas the person approved will have the powers conferred under sections 9 and 10 of the Customs Act. Was it the intention of the Legislature by introducing section 45(3) of the Customs Act to fasten liability of duty on a local body like the Port Trust? The responsibility to pay for loss, destruction or deterioration of the goods while in possession of the Port Trust considering section 43(1) of the Port Trust Act, is of the Port Trust. Considering section 43(1) of the Port Trust Act, the responsibility for the loss, destruction and deterioration of the goods which are taken charge is that of a bailee under sections 151, 152 and 161 of the Contract Act subject to what is set out therein.
13. Thus, considering the scheme of the Customs Act and the Port Trust Act, can the Port Trust, which is a body corporate under the Port Trust Act and a local body, be saddled with the liability of duty in respect of pilfered goods, for which in law it is liable to the importer as a bailee under section 43 of the Port Trust Act. An importer, if the pilfered goods are recovered, has to pay the duty. In the case of a Port Trust, if the goods are pilfered, the Port Trust as a bailee of the goods has to pay the value to the importer. Is it possible to contend on the one hand that the Port Trust is liable to pay the value of the goods lost to the importer and, at the same time, considering the provisions of section 13 of the Customs Act, also the liability to pay duty. The importer receives from the Port Trust compensation by way damages and not the goods and that after paying such compensation to the importer, is the Port Trust, apart from that, also liable for payment of duty to the Government of India. Though the Port Trust is a statutory body nonetheless it is under the control of the Government of India. In our opinion, considering the language of section 45(3) of the Customs Act, the liability to pay duty is of the person who remains in custody of the goods as an approved person under Section 45 of the Customs Act. Considering that possession of the goods by the Port Trust is by virtue of powers conferred on the Port Trust under the Port Trust Act, it will not be possible to hold that the Port Trust is an approved person or can be notified as an approved person. To that extent, section 45(3) of the Customs Act will have to be restricted to mean to the second category of person, namely such persons approved who have approved warehouses in terms of sections 9 and 10 of the Customs Act.
14. We may now refer to the judgments adverted to at the Bar on behalf of the respondents' counsel. In the case of International Airport Authority of India (supra), it is clear that what the Supreme Court was considering was merely the scheme of the Port Trust Act. There, the issue was in the matter of payment of demurrage when goods were lost while in the custody of the International Airport Authority. The issue therefore in that case is different from what has been considered in the instant, case. Similar is the case of Vinod Selvextracts (P) Ltd. (supra)., the learned Division Bench of the Madras High Court was considering the liability of the Port Trust under sub-section (1) of section 43 of the Port Trust Act. It is in that context that reference was made to Section 45 of the Customs Act. The learned Division Bench of the Madras High Court held that once the goods are warehoused, the custody of the goods is only with the Port Trust and liability for loss and damages according to the provisions of the Major Port Trust Act is passed on the Port Trust. The issue, which is under consideration before us, was not under consideration before the learned Division Bench of the Madras High Court.
15. We are therefore of the opinion that under Section 45 of the Customs Act, the person referred to in sub-section (1) thereof can only be the person approved by the Commissioner of Customs. It excludes a body of persons who by virtue of a law for the time being in force is entrusted with the custody of goods by incorporation of law under another enactment, i.e the Port Trust Act. We see no reason what mischief Parliament sought to undo by sub-section (3) of Section 45 of the Customs Act. At the highest, it has to be read in the context that pilferage may take place from a private warehouse or a customs warehouse run by a private party. The negligence on such private parties should not cause loss to the exchequer. No purpose would be served by one arm of the Government imposing a duty on another arm of the Government which is discharging statutory duties. The impugned orders are therefore without jurisdiction and liable to be struck down.
16. Once we hold that under section 45(1) of the Customs Act the recovery of duty in respect of pilfered goods is only from the approved person, then the notification dated 11th October, 2000 would be clearly without jurisdiction and ultra vires section 45(1) of the Customs Act, and consequently will have to be declared as null and void.
17. For all the aforesaid reasons, we are clearly of the opinion that this petition will have to be allowed and consequently the Rule is made absolute in terms of prayer clauses (a) and (b). There shall be no order as to costs.
Petition allowed.
Comments