2022 (12) TMI 1340 - HC - Customs

Port Trust not liable for customs duty on lost cargo in cyclone, High Court rules

Paradip Port Trust, Jagatsinghpur Versus Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar and another

The High Court of Orissa ruled in favor of Paradip Port Trust (PPT) regarding the liability to pay customs duty on uncleared cargo lost in a super ... Levy of Customs Duty - pilfered goods or not - loss of the cargo on account of the super cyclone - cargo covered by Bills of Entry (B/E) but not cleared by M/s. MESCO Steel - penalty as assessed in terms of Section 114A read with Section 117 of the Act? - HELD THAT:- It has not been able to be disputed by the Customs Authorities that goods stored in open spaces, stocking yards remained at owner’s risk. Section 42(2) of the MPT Act clearly states that the Port Authority would not be responsible for any pilferage or damage or loss. This was also incorporated in the license issued to MESCO as a condition. The Customs Authorities, also have not been able to dispute the fact that although MESCO sent a letter on 1st April, 2000 informing them of the loss of cargo in the super cyclone, no action was taken till the issuance of SCN three years later on 18th July, 2003. This delay has not been explained. If the goods themselves were not available on account of the super cyclone, it is inconceivable how the PPT could be made liable to pay customs duty on such goods under Section 45(3) of the Act which applies only in a situation where imported goods are “pilfered after unloading”. There is absolutely no material to come to the conclusion that the aforementioned goods not cleared by MESCO were ‘pilfered’. There cannot be any presumption on this score as has been done in the adjudication order and the appellate orders. The three orders run contrary to the factual position regarding loss of the cargo on account of the super cyclone as informed by MESCO to the Customs Authorities on 1st April, 2000 itself. The case on hand is on an even better footing. As far as the present case is concerned, there is sufficient material available on record to show that the goods in question were in fact lost in the super cyclone. Therefore, any attempt to fasten liability on PPT i.e. the Port Authority under Section 45(3) of the Act would not only be misconceived but legally unsustainable. This Court has no hesitation in setting aside the adjudication order, and the Appellate Orders of the Commissioner (Appeals) and CESTAT affirming such order has been entirely without legal basis - Appeal allowed. Issues:1. Liability of Paradip Port Trust (PPT) to pay customs duty on uncleared cargo.2. Applicability of penalty under Section 114A read with Section 117 of the Customs Act, 1962.Analysis:Issue 1:The case involved the liability of PPT to pay customs duty on cargo covered by Bills of Entry (B/E) but not cleared by M/s. MESCO Steel. The dispute arose when MESCO failed to clear 1001.5 MT of LAM Coke from the Paradip Port, leading to a demand of Rs.17,41,843/- along with interest and penalty under the Customs Act. The Customs Authorities alleged that the goods were pilfered after unloading, holding PPT responsible as the custodian. However, the Court found that the goods were lost in a super cyclone, and PPT could not be held liable under Section 45(3) of the Act, which pertains to pilferage after unloading. The Court cited Section 42(2) of the Major Port Trust Act, stating PPT was not a bailee for bulk cargo, and the loss was due to natural events beyond their control. The Court emphasized that no statutory obligation required PPT to inform Customs Authorities of the loss, as MESCO had already notified them. The delay in action by Customs Authorities and the absence of evidence of pilferage led the Court to rule in favor of PPT, setting aside previous orders.Issue 2:The second issue was the applicability of penalty under Section 114A read with Section 117 of the Customs Act. However, since the Court ruled in favor of PPT on the primary issue of liability to pay customs duty, it did not delve into the consideration of the penalty. The Court's decision to set aside the adjudication order, as well as the appellate orders of the Commissioner (Appeals) and CESTAT, was based on the lack of legal basis for holding PPT liable for the customs duty on the lost cargo. Consequently, the appeal was allowed in favor of PPT, and the questions of law were answered in the negative against the Customs Department.In conclusion, the judgment by the High Court of Orissa in this case clarified the liability of Paradip Port Trust regarding customs duty on uncleared cargo and highlighted the legal provisions under the Customs Act and Major Port Trust Act. The Court's detailed analysis emphasized the absence of evidence of pilferage, the impact of natural calamities, and the statutory framework governing port authorities' responsibilities. The decision provided a comprehensive interpretation of the law and set a precedent for cases involving similar circumstances.