Court rules importer liable for duty on pilfered goods, shifts responsibility from custodian

The court dismissed the appeal, holding the appellant liable for duty on pilfered goods. It ruled that Section 23 of the Customs Act does not apply to pilfered goods and that Section 13 is inapplicable if pilferage is noticed after the out of charge order. The court clarified that the custodian (CONCOR) was not responsible for duty post out of charge order, shifting liability to the importer. The decision aimed to prevent duty evasion by ensuring customs duty on pilfered goods entering the market.

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Issues Involved:
1. Applicability of Section 23 of the Customs Act for remission of duty on pilfered goods.
2. Applicability of Section 13 of the Customs Act for exemption of duty on pilfered goods.
3. Liability of the custodian (CONCOR) for pilfered goods after the out of charge order.

Detailed Analysis:

1. Applicability of Section 23 of the Customs Act:
The appellant claimed a refund under Section 23 of the Customs Act, arguing that the pilferage occurred before the actual clearance of goods for home consumption. The appellant relied on a joint survey conducted on 23.05.2011, which included various authorities, to support this claim. They cited the decision in Hindustan Petroleum Corporation vs. Collector of Customs, which allowed claims under Section 23(1) even after an order for home consumption if physical delivery had not been taken. They argued that the goods remained under the control of Customs Authorities until physical delivery, thus justifying the remission of duty.

However, the judgment clarified that Section 23 pertains to complete loss or destruction of goods, not pilferage. The amendment in 1983 explicitly excluded pilfered goods from the purview of Section 23. The court concluded that Section 23 is not applicable for pilfered goods, and thus, the appellant's claim for remission of duty under this section was not valid.

2. Applicability of Section 13 of the Customs Act:
The respondent argued that remission of duty under Section 23 is not permissible for pilfered goods and that Section 13 should apply. Section 13 exempts duty for pilfered goods only if the pilferage is noticed before the out of charge (OOC) order by the Customs Officer. In this case, the OOC was issued on 18.05.2011, and the pilferage was noticed on 23.05.2011. Thus, the pilferage was identified after the OOC order, making Section 13 inapplicable.

The court emphasized that both Sections 13 and 23 require the loss or pilferage to occur before the clearance order for home consumption. Since the pilferage was noticed after the OOC, neither Section 13 nor Section 23 applied, and the appellant was not entitled to a refund of the duty paid.

3. Liability of the Custodian (CONCOR):
The appellant alternatively argued that the custodian (CONCOR) should be liable for the duty on the pilfered goods since the goods were under their custody even after the OOC order. They cited the case of ITI Ltd. vs. CC, Chennai to support this claim.

The court disagreed, stating that once the OOC order is issued, the customs authorities are no longer responsible for the goods. The responsibility shifts to the importer, and any risk of pilferage after the OOC order is at the importer's own risk. The court referenced the decision in Zenith Bearing Enterprises, which supported this interpretation. The custodian's responsibility is limited to the period required for customs formalities, and any storage beyond that is at the importer's risk.

Conclusion:
The court upheld the order rejecting the appellant's claim for remission of duty under Section 23 and exemption under Section 13 of the Customs Act. The appeal was dismissed, and the appellant was held liable for the duty on the pilfered goods. The court also clarified that the custodian (CONCOR) was not liable for the duty after the OOC order was issued. The judgment emphasized that the legislative intent was to prevent duty evasion by ensuring that pilfered goods, which eventually enter the market, are subject to customs duty.

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