Legal principle

Customs authorities cannot impose a penalty under Section 116 of the Customs Act on the basis of shore tank measurement where the ullage report taken at the time of actual discharge shows the shortage to be within the permissible limit as ocean loss.

Court decision

The Bombay High Court allowed the petition: it held it had jurisdiction because the impugned Collector (Appeals) order was passed at Mumbai, rejected the alternative-remedy objection in view of the petition's pendency of over 10 years and binding precedent, quashed and set aside the orders dated 29-8-1986 and 26-8-1987, and made the Rule absolute in terms of prayer clause (a), with no order as to costs — deciding in favour of the petitioners.

Facts

Petitioners, agents of the foreign flag vessel 'Globe Oceanic', discharged 949.584 MT of Acrylonitrile Monomer in bulk at Kandla in June 1984. The ullage report dated 30-6-1984 recorded a discharge of 948.334 MT, a shortage of 1.250 MT, which was within the permissible limit as ocean loss. On the basis of Port Trust shore tank measurement showing a shortage of 9.090 MT, the Assistant Collector of Customs, Kandla issued a show cause notice dated 22-3-1985 proposing action under Section 116 of the Customs Act, 1962. The Deputy Collector, Kandla imposed a penalty of Rs. 1,02,458 by order dated 29-8-1986, confirmed by the Collector of Customs (Appeals) on 26-8-1987, and the petitioners challenged both orders in the Bombay High Court.

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