TaxTMI 
TaxTMI 
2026 (8) TMI 1630
X X X X Extracts X X X X
X X X X Extracts X X X X
....sioner of Customs issued show cause-cum-demand notices dated 18.06.1996, 02.04.1997, 28.04.1997, and 24.05.2000 to the respondent as to why customs duty should not be recovered from the respondent in terms of Section 45(3) of the Customs Act, 1962 (for short, "the Customs Act") in respect of goods which were pilfered whilst in its custody during the years 1996-2000. Each of the said notices related to different events of pilferage during the years 1996-2000. The said show cause-cum-demand notices were adjudicated upon and orders dated 06.11.1997, 02.10.1997, 06.10.1997, and 17.05.2001 (for short, "orders-in-original") were passed confirming the duty demanded in terms of the show cause-cum-demand notices. 2.1 In the interregnum, a Notification dated 11.10.2000 and a Public Notice dated 11.10.2000 were also issued, by which the Commissioner of Customs (Import) in exercise of powers conferred on him under section 45(1) of the Customs Act declared the Mumbai Port Trust ("MbPT") as a "custodian" of the area notified under Section 8 of the Customs Act for statutory duties and responsibility prescribed, inter alia, under Section 45 of the Customs Act. 2.2 Aggrieved by the aforesaid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....todian of the notified customs area. It was, therefore, not without jurisdiction. 3.1.5. The impugned judgment, to the extent it holds otherwise, is liable to be set aside. Respondent 3.2. Per contra, learned Senior Counsel Sri Rakesh Khanna and Counsel for the respondents submitted as follows: 3.2.1 The respondent-Port Trust's custody of imported goods flows from the Major Port Trusts Act. 3.2.2 The liability to pay duty on pilfered goods under Section 45(3) of the Customs Act falls upon the person referred to in sub-section (1), i.e. the person approved under Section 45(1). 3.2.3 However, the Commissioner had no power to approve the respondent-Port Trust in the first place because its custody was governed by the Major Port Trusts Act. Therefore, Section 45(3) cannot independently create liability against it. In other words, the Custom Commissioner's power under Section 45(1) is said to be confined to cases where custody is not already prescribed by another law. 3.2.4 Since the Commissioner exceeded his jurisdiction under Section 45(1) in declaring the respondent-Port Trust a custodian for the purposes of payment of duty in terms of Section 45(3), the High Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orms and greater facilitation and the increasing incidence of smuggling had necessitated a comprehensive revision of the customs law. It was also considered necessary to consolidate within a single enactment the law relating to sea, land and air customs which had until then been governed by different statutes and rules. Accordingly, Parliament enacted the Customs Act as a comprehensive code regulating the levy and collection of customs duties, the import and export of goods, and the custody and control of imported goods until their lawful clearance. The Customs Act came into effect from 01.02.1963. 4.2 The relevant provisions of the Customs Act for the purpose of this case are extracted as under: "2. Definitions.-In this Act, unless the context otherwise requires,- xxx (11) "customs area" means the area of a customs station or a warehouse and includes any area in which imported goods or exported goods are ordinarily kept before clearance by Customs Authorities; (12) "customs port" means any port appointed under clause (a) of section 7 to be a customs port, and includes a place appointed under clause (aa) of that section to be an inland contain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such goods except where such goods are restored to the importer after pilferage. xxx 23. Remission of duty on lost, destroyed or abandoned goods.- (1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall remit the duty on such goods. (2) The owner of any imported goods may, at any time before an order for clearance of goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon: Provided that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force. xxx 45. Restrictions on cus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) within one day (excluding holidays) from the date on which the bill of entry is returned to him by the proper officer for payment of duty in the case of assessment, reassessment or provisional assessment; or (c) in the case of deferred payment under the proviso to sub-section (1), from such due date as may be specified by rules made in this behalf, and if he fails to pay the duty within the time so specified, he shall pay interest on the duty not paid or short-paid till the date of its payment, at such rate, not less than ten per cent. but not exceeding thirty-six per cent. per annum, as may be fixed by the Central Government, by notification in the Official Gazette. Provided that the Central Government may, by notification in the Official Gazette, specify the class or classes of importers who shall pay such duty electronically: Provided further that where the bill of entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 and the importer has not paid such duty before such commencement, the date of return of such bill of entry to him shall be deemed to be the date of such commencement for the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent on 16.10.1963. It was brought on the Statute Book as the Major Port Trusts Act, 1963 (38 of 1963) with effect from 29.02.1964. 4.4 The relevant provisions of the Major Port Trusts Act, 1963 are extracted as under: "2. Definitions.- In this Act, unless the context otherwise requires,- xxx (b) "Board", in relation to a port, means the Board of Trustees constituted under this Act for that port; xxx (d) "Collector of Customs" has the same meaning as in the Customs Act, 1962; xxx (j) "Indian Ports Act" means the Indian Ports Act, 1908 (15 of 1908); xxx (m) "major port" has the same meaning as in the Indian Ports Act; xxx (o) "owner", (i) in relation to goods, includes any consignor, consignee, shipper or agent for the sale, custody, loading or unloading of such goods; and (ii) in relation to any vessel or any aircraft making use of any port, includes any part-owner, charterer, consignee, or mortgagee in possession thereof, xxx (q) "port" means any major port to which this Act applies within such limits as may, from time to time, be defined by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under this Act on such terms and conditions as may be agreed upon. (4) No person authorised under sub-section (3) shall charge or recover for such service any sum in excess of the amount specified by the Authority, by notification in the Official Gazette. (5) Any such person shall, if so required by the owner, perform in respect of goods any of the said services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify. (6) The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of this Act, be that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872). (7) After any goods have been taken charge of and a receipt given for them under this section, no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given or to the master or owner of the vessel from which the goods have been landed or transhipped. 43. Responsibility of Board for loss, etc., of goods.- (1) Subject to the provisions of this Act, the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... therein, shall be payable to the Board, or to such person or persons as may be appointed by the Board to receive the same. xxx 128. Saving of right of Central Government and municipalities to use wharves, etc., for collecting duties and of power of Customs Officers.- Nothing in this Act shall affect- (1) the right of the Central Government to collect customs duties or of any municipality to collect town duties at any dock, berth, wharf, quay, stage, jetty or pier in the possession of a Board, or (2) any power or authority vested in the customs authorities under any law for the time being in force. (c) Notification: 4.5 The Notification dated 11.10.2000 which was quashed by the High Court reads as under: "Appraising (General) New Custom House. Ballard Estate, Mumbai-400 038. Date: 11.10.2000 NOTIFICATION Sub: Declaration of area known as Mumbai Docks at Mumbai as customs area Notwithstanding anything contained in the any Notification/ Public Notice/ Orders issued under the Sea Customs Act, 1879, relating to the declaration of various land packets as a "customs area" in the Mumbai Docks which are ope....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... White Gate, Orange Gate, Yellow Gage extended upto Mallet Basin. Further, in exercise of the powers conferred on me by section 45(1) of Customs Act, 1962, I approve MbPT as a custodian of the aforesaid customs area in respect of all imported goods and order that the custodian shall be responsible for the statutory duties and responsibilities prescribed under Section 45(2) and 45(3) of Customs Act, 1962. This Notification is issued in order to consolidate and integrate the various "Customs areas" notified from time to time under the Sea Customs Act, 1878 and Customs Act, 1962. Sd/- (K. P.SINGH) COMMISSIONER OF CUSTOMS (IMPORT) NEW CUSTOM HOUSE MUMBAI. Issued from F.No. S/26-238/2000 A(G)" Conundrum: 5. As is evident from a plain reading of the above, Section 45 of the Customs Act regulates the custody of imported goods unloaded in a customs area until they are cleared for home consumption, warehoused or transhipped. While sub-section (1) empowers the Principal Commissioner of Customs or Commissioner of Customs to approve the person in whose custody such goods shall remain, subject to the saving clause, "save as otherwise provided in any law fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof, a non obstante clause cannot cut down that construction and restrict the scope of its operation. In such cases the non obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment. ..." 6.2 The words, "any other law" will necessarily refer to any law other than the Act in which that Section occurs. By contrast, "any law for the time being in force" also includes anything provided in the enactment in which those words occur. 6.3 Applying the above principles to the provisions under consideration, it is noted that in sub-section (1) of Section 45 of the Customs Act, what is envisaged is that the Principal Commissioner of Customs or Commissioner of Customs shall approve the person in whose custody all imported goods unloaded in a customs area shall remain until they are cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the said sub-section, no duty as such was liable to be paid on pilfered goods under the Customs Act. Consequently, an obligation to pay customs duty on such goods has been cast upon the person referred to in sub-section (1) of Section 45. In order to fasten such an obligation on a person, a notification under sub-section (1) of Section 45 is a necessary concomitant. At the same time, the approval contemplated under sub-section (1) operates only by way of an exception, that is, where there is "nothing otherwise contained in any other law for the time being in force". In other words, sub-section (1) enacts a saving clause. Thus, if any other enactment prescribes that a particular person shall remain in custody of the imported goods unloaded in a customs area and also fastens custom duty for pilfered goods on them, then the Principal Commissioner of Customs or Commissioner of Customs has no powers to approve any other person for the purpose of payment of customs duty under Section 45(3) of the Act and thus cannot issue a notification under Section 45(1). It is only when under any other law for the time being in force, no person has been fastened with a liability to pay customs ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice or services and shall give a receipt in such form as the Board may specify. The Board can also authorise any person to perform any of the services mentioned in sub-section (1) of Section 42 of the said Act on such terms and conditions as may be agreed upon with the previous sanction of the Central Government. Similarly, a Board may, with the previous approval of the Central Government, enter into any agreement or other arrangement with anybody, corporate or any other person, to perform any of the services and functions assigned to the Board under the said Act on such terms and conditions as may be agreed upon. Any such person shall, if so required by the owner, perform in respect of goods any of the said services and for that purpose take charge of the goods and give a receipt in such form as the Board may specify. The responsibility of any such person for the loss, destruction or deterioration of goods of which he has taken charge shall, subject to the other provisions of the said Act, be that of a bailee under Sections 151, 152 and 161 of the Indian Contract Act, 1872 (for short, "Contract Act"). Once the Board has taken charge of the goods and issued the prescribed receipt, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsible for the loss, destruction or deterioration of the goods of which it has taken charge. In such a case the Board becomes a bailee within the meaning of Section 148 of the Contract Act, which reads as under: "148. 'Bailment', 'bailor' and 'bailee' defined.- A 'bailment' is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor'. The person to whom they are delivered is called the 'bailee'. Explanation.-If a person is already in possession of the goods of other contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment." 6.13 The duty to take care by the bailee of the goods i.e. the Board in the instant case under Sections 151, 152 and 161 of the Contract Act would apply in terms of Section 43(1)(ii) of the Major Port Trusts Act. For ease of reference, the said Sections are extracted as under: "151. Car....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Customs Act, contemplates that the Board shall be liable to pay duty on such goods at the rate prevailing on the date of delivery of the arrival manifest or import manifest, as the case may be. Such liability arises only where a notification has been issued under sub-section (1) of Section 45 of the Customs Act approving the person having custody of the goods. A person who has been notified could be a natural person notified in terms of designation or an office held by a person. A person could also mean a juristic person such as a body incorporated or a statutory body such as the Board of Trustees of a Port Trust, as the respondent in the instant case. 6.17 However, sub-section (1) of Section 45 of the Customs Act opens with a saving clause, "save as otherwise provided in any law for the time being in force." Therefore, the liability of the person referred to in sub-section (1) is subject to the operation of that saving clause. Thus, if any other law for the time being in force itself fastens liability in respect of pilfered goods upon the custodian, such law would prevail. However, where no such liability is provided under any other law, or where such liability is conditi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actual or statutory rights of indemnity or recovery against another person responsible for the loss does not detract from its primary statutory liability under Section 45(3) of the Customs Act to discharge the customs duty payable to the revenue. 6.22 Sub-section (3) of Section 45 was inserted into the Customs Act by Act 22 of 1995 with effect from 26.05.1995. Parliament simultaneously employed a non obstante clause so as to give it an overriding effect to the liability created thereunder. This is notwithstanding the fact that, by virtue of the saving clause contained in sub-section (1), the liability of the Board as custodian in respect of the loss of goods was otherwise governed by Section 43 of the Major Port Trusts Act. Since the said liability is conditional inasmuch as if no receipt has been issued by the Board under sub-section (2) of Section 42 of the said Act, the liability is not assumed by the Board and in a case of pilferage the customs duty would then not be collected under the Customs Act. Sub-section (3) of Section 45 of the Customs Act has therefore, deliberately used a legislative device in the form of a non obstante clause. The non obstante clause in sub-sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity on the Board for the loss, destruction or deterioration of goods, which would also include loss occasioned by pilferage. However, such responsibility is conditional and arises only upon the fulfilment of the statutory requirements prescribed therein. If those conditions are not satisfied, no liability can be fastened upon the Board even in a case of loss of goods by pilferage. 6.25 It is in this context that sub-section (2) of Section 45 of the Customs Act assumes significance. The said provision imposes statutory duties upon the person having custody of imported goods in a customs area, whether such custody is under sub-section (1) of Section 45 thereof or under any other law for the time being in force, which would include the Major Port Trusts Act. The duties prescribed under Section 45(2) of the Customs Act are noted below: "45. (2)... (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 or in such manner as may be prescribed" 6.26 Thus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of goods. On a reading of Section 23 of the Customs Act, pilferage of goods in a customs area is not loss of goods simpliciter. If it is a case of loss of goods simpliciter then the provisions of the Major Port Trusts Act would apply having regard to the saving clause under sub-section (1) of Section 45 of the Act. But, as pilferage is not specifically dealt with under the provisions of the Major Port Trusts Act and is dealt with only under the Customs Act and duty is imposed under sub-section (3) of Section 45 of the said Act, then, the savings clause under sub-section (1) of Section 45 would not apply. Consequently, the non obstante clause under sub-section (3) of Section 45 is used as a legislative device to meet such a circumstance. Therefore, any loss of goods other than pilferage is not a subject matter of payment of customs duty under Section 45 of the Customs Act. However, if it is a case of pilferage of goods, then under sub-section (3) read with sub-section (1) of the Customs Act, duty is indeed payable by the person approved in terms of sub-section (1) of the Section 45 of the said Act. 6.31 In the instant case, since Notification dated 11.10.2000 was issued by the C....