Legal principle

A custodian/CCSP to whom seized goods are handed over for safe custody under a panchanama cannot escape liability for pilferage caused by negligence by pleading absence of supratnama or non-involvement of its employees, and such failure attracts recovery of the value of the goods under Regulation 5(6) of HCCAR, penalty under Section 117 of the Customs Act read with Regulation 12(8), and suspension of CCSP approval under Regulations 11 and 12(8).

Court decision

The Tribunal dismissed the appeal filed by CONCOR. It upheld recovery of Rs.4,44,32,500 as the value of the pilfered goods under Regulation 5(6) of HCCAR, upheld the penalty of Rs.50,000 under Regulation 12(8) and Section 117 of the Customs Act for violations of HCCAR and Section 141(2), and found no illegality in the 15-day suspension of the CCSP approval, though that portion of the impugned order became infructuous as the suspension period had already expired during the appeal.

Facts

M/s Container Corporation of India Ltd, operating Dronagiri Rail Terminal CFS at Nhava Sheva, was appointed custodian under Sections 45(1) and 141(2) of the Customs Act, 1962 and approved as a Customs Cargo Service Provider (CCSP) under Regulation 10 of HCCAR, 2019. A shipping bill dated 05.06.2013 filed by exporter M/s Krish Exports for export of stainless steel household articles (7454 kgs) to Hong Kong in container GESU-3997518 was found, on examination by SIIB JNCH, to actually contain 12,695 kgs of prohibited Red Sanders wood, which was seized and handed over to the appellant as custodian under a panchanama dated 14.06.2013. A surprise visit on 14.08.2014 revealed an empty container fraudulently pasted with the same number as a container holding seized goods, exposing a modus operandi of substituting containers, and the container with seized Red Sanders was found stolen on 25.05.2014. Show cause notice dated 16.03.2020 alleged violations of clauses (a), (b), (f), (i) and (q) of Regulation 6(1) of HCCAR, 2009 and Sections 45(2) and 141 of the Customs Act, and the Commissioner by order dated 18.04.2023 ordered recovery of the value of pilfered goods (Rs.4,44,32,500) under Regulation 5(6), imposed penalty of Rs.50,000 under Regulation 12(8) and Section 117, and suspended the CCSP approval for 15 days (01.05.2023 to 15.05.2023).

Key provisions

• Section 141(2), Customs Act, 1962 — Conveyances and goods in a customs area subject to control of officers of customs
• Section 45(2), Customs Act, 1962 — Restrictions on custody and removal of imported goods
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Regulation 6, Handling of Cargo in Customs Areas Regulations, 2009 — Responsibilities of Customs Cargo Service provider
• Regulation 11, Handling of Cargo in Customs Areas Regulations, 2009 — Suspension or revocation of approval for appointment of a Customs Cargo Service provider
• Regulation 12(8), Handling of Cargo in Customs Areas Regulations, 2009 — Procedure for suspension or revocation of approval and imposition of penalty
• Regulation 5, Handling of Cargo in Customs Areas Regulations, 2009 — Conditions to be fulfilled by Customs Cargo Service provider
• Section 2, Customs Act, 1962 — Definitions
• Section 113, Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 85, Customs Act, 1962 — Stores may be allowed to be warehoused without assessment to duty
• Section 110, Customs Act, 1962 — Seizure of goods, documents and things
• Regulation 10, Handling of Cargo in Customs Areas Regulations, 2009 — Approval of appointment of a Customs Cargo Service provider and review thereof