Legal principle

A penalty under Section 116 of the Customs Act, 1962 cannot be imposed solely on the basis of a (belated) Port Trust out-turn report where there is no material showing that short landing was noticed at the time of discharge under Customs supervision under Section 34.

Court decision

The Bombay High Court held that the show cause notice seeking to levy penalty under Section 116 of the Customs Act, 1962 solely on the basis of the Port Trust's out-turn report could not be sustained. The show cause notice dated 9 September 1985 was quashed and set aside, rule was made absolute in terms of prayer clause (c) of the petition, and there was no order as to costs — the petitioners succeeded.

Facts

Shaw Wallace & Co. Ltd. were the agents of the foreign flag vessel M.V. 'Texas', which called at the port of Bombay on 21 October 1981, filed the Import General Manifest on 23 October 1981, and discharged 146 containers between 26 and 28 October 1981. One container, No. HLCU-2333544-2, manifested under Item 92 of the IGM, held 285 drums of the expensive chemical Chloroquine Phosphate. After discharge the container was stored in the Bombay Port Trust premises; police investigations revealed the cargo was stolen from the Port Trust docks and taken to Delhi for sale, and the empty container with obliterated identification marks was located off berth 13A, Indira Dock on 8 February 1982. Nevertheless, on 27 April 1982 the Port Trust issued an out-turn report indicating the container was short landed from the vessel. About four years after discharge, the Customs authorities issued a show cause notice dated 9 September 1985 calling upon the petitioners to show cause why penalty under Section 116 of the Customs Act, 1962 should not be levied on the basis of that out-turn report.

Key provisions

• Section 116, Customs Act, 1962 — Penalty for not accounting for goods
• Section 34, Customs Act, 1962 — Goods not to be unloaded or loaded except under supervision of customs officer