Legal principle

Once goods are confiscated under the Customs Act they vest in the Central Government under section 126 and remain under the control of Customs officers under section 141, so in the absence of a handover with a receipt under sections 42 and 43 of the Major Port Trusts Act, 1963, the Customs authorities—and not the Port Trust—are liable to compensate the importer for goods lost from their custody.

Court decision

The Court (per B.C. Ray, J., with Ranganath Misra, J. concurring on the conclusion) held that the goods, having been unloaded in the customs area and confiscated, were under the control of the Customs officers under section 141 and had vested in the Central Government under section 126, and were never handed over to the Port Trust with a receipt as required by sections 42 and 43 of the Major Port Trusts Act, 1963. Therefore respondent No. 1, the Collector of Customs (Customs authorities), was liable to pay the value of the lost or destroyed goods to the appellant as damages, and the Board of Trustees of the Port Trust could under no circumstances be held responsible. However, the Court held it was not possible, in an appeal under section 130-E, to ascertain and determine the money value of the lost goods, leaving the appellant free to take appropriate proceedings for determination and recovery of damages in accordance with law. The appeal was disposed of with no order as to costs.

Facts

Oswal Spinning & Weaving Mills Ltd imported 58 bales of woollen rags from Canada through the canalised agency, the State Trading Corporation, and filed a bill of entry for their release. The Customs authorities found the goods to be acrylic rags, and the Collector of Customs ordered confiscation under sections 111(d) and (m) of the Customs Act, 1962, with an option under section 125 to clear them on payment of a redemption fine of Rs. 50,000. The Central Board reduced the fine to Rs. 20,000 and required mutilation and payment of duty, and the CEGAT directed release on payment of customs, countervailing and other duties subject to those conditions. When the Supreme Court waived the redemption fine, the appellants found only part of the goods traceable: only 6 bales had been removed to the confiscated godown, and 39 bales were allegedly missing or untraceable, leading to the Calcutta Port Trust being joined as respondent No. 2.

Key provisions

• Section 126, Customs Act, 1962 — On confiscation property to vest in Central Government
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 130, Customs Act, 1962 —  Appeal to High Court
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods