Legal principle

Sections 22 and 23 of the Customs Act, 1962 (abatement and remission of duty on goods lost or destroyed) enure exclusively to 'importers' of the goods, so a bonded warehouse custodian/licensee remains liable for the duty, and any insurance indemnity for that duty should be paid directly to the Customs Department to avoid unjust enrichment.

Court decision

The Supreme Court dismissed the insurer's appeal, upholding the NCDRC award in favour of the insured on the finding of wrongful repudiation; it directed that the customs duty component of Rs.2,13,00,061.01, if payable, be discharged directly to the Customs Department rather than to the insured, with parties bearing their own costs.

Facts

M/s Mudit Roadways, acting as custodian of its clients' customs bonded goods, leased warehouse premises at Village Veshvi, Taluka Uran, District Raigad (Maharashtra) from M/s Platinum Logistics and insured the goods and premises under Standard Fire and Customs Duty Package policies with New India Assurance, paying Rs.44,02,562 as premium. On 14.03.2018 a fire broke out in the bonded warehouse, destroying bonded goods, and a claim of Rs.6,57,55,155 (including a customs duty component of about Rs.2.15 crores) was raised. The insurer repudiated the claim, alleging the fire was caused by the insured's negligence during roof welding/construction and that the fire-affected survey number was not covered. Customs authorities, by letters dated 06.02.2019 and 26.10.2020, demanded Rs.2,13,00,061 as customs duty from the insured for the destroyed bonded goods. The NCDRC partially allowed the consumer complaint with interest, and the insurer appealed to the Supreme Court.

Key provisions

• Section 23, Customs Act, 1962 — Remission of duty on lost, destroyed or abandoned goods
• Section 22, Customs Act, 1962 — Abatement of duty on damaged or deteriorated goods
• Section 46, Customs Act, 1962 — Entry of goods on importation
• Section 15(1)(b), Customs Act, 1962 — Date for determination of rate of duty and tariff valuation of imported goods
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 57, Customs Act, 1962 — Licensing of public warehouses