TaxTMI 
TaxTMI 
2009 (3) TMI 333
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....liers. These goods were duly insured with the United India Insurance Company Ltd., (for short Insurer). The imported goods landed in Bangalore Airport on 4-6-2000. The Mysore Sales International Limited, (for short MSIL) had been appointed as a custodian under Sec. 45(1) of the Customs Act (hereinafter referred to as the Act) in respect of the goods imported and landed in Bangalore Airport which has been duly notified as a Customs Airport, as required under Sec. 7 of the Act. The goods imported by HAL which reached Bangalore Airport on 4-6-2000 came to the custody of the MSIL on the same day. The Air Cargo Complex maintained and managed by MSIL had been notified as customs area within the meaning of Sec. 2(11) of the Act, as, such goods are required to be stored in the custom area only. The goods imported by HAL and stored in the Air Cargo Complex maintained by the MSIL, was destroyed in a fire accident that occurred on 5-6-2000. Thereafter, the Importer viz., HAL secured non-delivery certificate from the custodian MSIL and lodged its claim with its Insurer. The Insurer, after satisfying itself about the correctness of the claim and also the destruction of the imported goods in a f....
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....Customs Department had no control over the imported goods and since goods were in possession of the custodian when it was destroyed, the customs authority have no liability and they are not answerable for the loss. They also contended that the custodian alone is answerable for the claim. 5. Thereafter, the parties let-in evidence. One suit viz., SC 1087/2003 was pending before 1st Addl. Judge, Court of Small Causes while remaining 23 suits were pending before the III Addl. Judge, Court of Small Causes, Bangalore. The learned 1st Addl. Judge, Court of Small Causes, disposed of the said suit in SC 1087/2003 by judgment and decree dated 29-10-2004. The learned Judge, on consideration of the oral and documentary evidence and also various provisions of the Act, held that both custodian as well as customs authority are jointly and severally liable to pay the value of the imported goods to the Insurer which had satisfied the claim of the Importer, together with interest at 6% from the date of suit till the date of realization. 6. Being aggrieved by the said judgment and decree, the MSIL has filed CRP 294/2005 questioning the judgment and decree holding it liable for answering the claim ....
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....orities would be the principal while the custodian appointed as per Section 45(1) is only an agent. Therefore, the principal is responsible for the acts of the agent, as such, the Court below ought to have granted decree against all the three defendants jointly and severally. Therefore, he submitted that the judgment and decree passed by the I Additional Judge in S.C. No. 1087/2003 decreeing the suit against all the three defendants jointly and severally is in accordance with law and it does not call for any interference by this Court. In respect of the decrees passed in the remaining 23 cases, he submitted that the decree passed by the Court below required to be modified and all the three defendants should be held liable jointly and severally for the claim of the plaintiffs. He would further submit that assuming for the purpose of argument, there is some kind of arrangement between the Customs Authorities and Custodian restricting the liability of the custodian, it would not bind the plaintiff. He further submitted that all the imported goods are deemed to be in the custody of the Customs Authority till they are cleared by Customs Authority, and if any loss occurs during that peri....
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.... error committed by the said Court in dismissing the suits against. Defendants - 2 and 3, and there is no ground to interfere with the said findings. He would further submit that there is no relationship of Principal and Agent between the Customs Authority and MSIL and since MSIL, as custodian gets commission for their services rendered, the custodian is exclusively liable for any loss or damage to the goods while in their custody. According to the learned counsel, the customs department will not be in custody and control of the goods imported and except for collection of duty, the Customs Department has no other role to play and at no stage, the Customs Authorities would have any control over the imported goods. Placing reliance on the provisions of Section 45(3) of the Act, he would submit that the said provision provides for payment of duty by the custodian to the Customs Department in respect of goods pilfered and this indicates that the Customs Authorities would not be in control of the goods stored in the customs area by the custodian. He also drew attention of the Court to the provisions of Section 48 of the Act, which empowers the custodian to sell the goods not cleared or ....
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....efer to certain provisions of the Customs Act, which have relevance. 13. According to Section 7, the Central Board of Excise and Customs may appoint the ports and airports which alone shall be customs ports or customs airports for the unloading of imported goods and the loading of export goods or any class of such goods. 14. According to Section 8 of the Act, the Commissioner of Customs may approve proper places in any customs port or customs airport for unloading and loading of goods or for any class of goods and also may specify the limits of customs area. 15. Section 29 of the Act directs the person-in-charge of an aircraft entering to the Indian territory from any place out side while carrying passengers or Cargo brought in that aircraft shall not permit or cause such aircraft to land at any place other than a customs airport. There is no dispute that the Bangalore Airport was duly notified as Customs Airport. Therefore, the Cargo brought from out side India could land in Bangalore Airport. 16. According to Section 30 the person-in-charge of the aircraft carrying imported goods or any person notified in that behalf by the Central Government should deliver to the proper offi....
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....e 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. 21. Section 46 deals with the duty of the importer of the goods upon when entry of goods on importation. According to sub-section (1) of Section 46, the importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form and such bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor. 22. Section 47 deals with the clearance of goods for home consumption. According to sub-section (1), the proper officer on being satisfied that the goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, he may make an order permitting clearance of the goods for home consumption. According to sub-section (2), if the importer fails to pay the import duty under sub-section (1) ....
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.... and by the custodian. The said notification along with its annexures have been marked during evidence in all the cases. The procedures laid down in the said annexures are in line with the provisions of the Act contained in Sections 30 to 33, 45 etc. referred to above. According to the contents of these annexures, imported goods kept in the custody of MSIL shall be stacked property to facilitate easy identification and location. Imported cargo shall be under double/shed lock and double security provided by MSIL and customs respectively and MSIL shall maintain proper accounts of the imported goods kept with them in the Air Cargo Complex in Proforma 'C' annexed. As per Clause (3) of this annexure attached to the public notice, the party, who is the importer should take the duplicate copy to the Warehouse Inspector for examination and clearance. The Examining Officer may examine the goods kept in the custody of MSIL and if he satisfied as to the quantity, quality, description etc., given in the Bills of Entry and other documents, he will give a stamp "Passed out of customs Control" on the duplicate copy of the Bill of Entry. 27. According to Clause 3(c) of the said notice, the party ....
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....er Section 45(1). However, reading of the entire provision contained in Chapter VII makes it clear that the Customs Authorities exercise complete control over the imported goods while in possession of custodian. 30. In the light of the aforesaid provisions, in so far the importer is concerned, the moment imported goods lands in customs area, since statutorily it has to remain in the custody of the Customs Authorities till it is released either for home consumption or for warehousing, there will be a statutory creation of bailment and the Customs Authorities become the bailee vis-à-vis the importer. Therefore, in my considered opinion, the customs authorities are principally liable for the proper return of the imported goods to the importer concerned on its clearance. No doubt, the custodian is a statutory creation. However, it is an arrangement made by the customs department for proper storage of the imported goods till they are cleared. On that ground, the customs authorities cannot plead that they are not liable to answer the importer for any loss or damage to such imported goods, though in possession of the custodian. 31. Section 141 of the Customs Act though appears to be a ....
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....der : "It is thus clear that the imported goods are kept at the airport or the Warehousing Corporation in the customs area over which it is the Customs Department which exercises control. No goods can be removed from there either by the importer or even the custodian. The detention is to enable the Customs Department to proceed in accordance with law and determine if the valuation disclosed was correct or the goods had been properly imported etc. A person importing the goods is required to comply with rules and notification issued by the Government permitting, prohibiting or regulating import. Whether the importer is complying with the rules or not and acting in accordance with law is entrusted to the Customs Department. No goods can be cleared except with permission of the Customs Department. Therefore, it is by operation of the statutory provision that an area specified as customs area is under control of the Customs Department. In fact fictionally it is the Customs Department which for purposes of imported goods, its checking, storage, release etc., is in control of it." 34. In the light of the above, there is no difficulty in holding that having regard to the scheme of the Ac....
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....er Section 151 of the Indian Contract Act, it is not open for it to contend that it is not liable for losses occasioned. No doubt, as per the public notice, which was issued pursuant to an arrangement between the Customs Department and the Custodian, the liability of the custodian is limited to 20 US $ per Kg., or the actual value of the imported goods, whichever is less. Even if the said public notice has been Gazetted, it does not absolve the 1st defendant from its liability to answer the claim of the plaintiffs with regard to the loss of goods. The terms of the said public notice would only bind the MSIL and the Customs Authorities. It is open to the 1st defendant to workout its remedies with the Customs Authorities in accordance with law and in accordance with the terms agreed to between them to restrict its liability. In my considered opinion, the terms of said public notice would not bind the importer. Therefore, in my considered opinion, the Court below, namely, the III Additional Judge of the Court of Small Causes, is not justified in decreeing the suits only against Defendant No. 1. The Court below ought to have decreed the suits against all the three defendants directing ....