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2024 (8) TMI 1565 - HC - CustomsImposition of duty - confiscation - smuggled goods - definition of imported goods - provisions made in Section 45 (3) of the Customs Act 1962 - HELD THAT - As is manifest from a plain reading of Section 45 (3) of the Act the custodian of the imported goods having been in custody is liable to pay duty in case they are pilfered while in custody. Imported goods stand defined in Section 2(25) as goods brought into India from a place outside. Undisputedly the goods in question had entered the customs area as defined under the Act and were placed in the custody of the appellant. The submissions of learned counsel proceeding on the basis of Section 2 (39) of the Act and which refers to the concept of smuggled goods is clearly misconceived bearing in mind the clear and unambiguous intent of Section 45 which lays the duty burden upon the custodian. It would thus be erroneous to impute the principles of smuggled goods which is concerned with confiscation and the consequential penalties which are liable to be enforced on an importer. Accordingly we find no merit in the instant appeal. The appeal shall stand dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether confiscated goods under Section 111 clauses (l) and (m) as "smuggled goods" cease to be "imported goods" under Section 2(25) for imposition of duty under Section 45(3) Relevant legal framework and precedents: Section 2(25) defines "imported goods" as goods brought into India from a place outside India. Section 111 clauses (l) and (m) deal with confiscation of goods that are smuggled or prohibited. Section 45(3) imposes liability on the custodian of imported goods for payment of duty if the goods are pilfered while in custody. The Supreme Court in Commissioner of Customs (Preventive) v. M. Ambalal & Co held that "smuggled goods" do not fall within the meaning of "imported goods" for the purpose of exemption notifications, emphasizing the distinct legal categories created under the Act. Court's interpretation and reasoning: The Court distinguished the context of the M. Ambalal case, which dealt with exemption notifications, from the present case involving liability under Section 45(3). It held that the definition of "imported goods" in Section 2(25) is clear and unambiguous: goods brought into India from outside, which applies to the goods in question as they had entered the customs area and were in the appellant's custody. The Court reasoned that the concept of "smuggled goods" under Section 2(39) and confiscation provisions is separate and relates to penal consequences and confiscation, not to the duty liability under Section 45(3). Key evidence and findings: The goods had physically entered the customs area and were placed in the appellant's custody. There was no dispute on this fact. The appellant's liability arises from the pilferage of these goods while in custody. Application of law to facts: The Court applied the plain language of Section 45(3) to hold that the custodian of "imported goods" is liable to pay duty if the goods are pilfered. Since the goods had been brought into India and were in custody, they qualify as "imported goods" for this purpose. The confiscation and smuggling provisions do not negate this liability. Treatment of competing arguments: The appellant argued that since the goods were confiscated as smuggled goods, they should not be treated as imported goods and thus not liable for duty under Section 45(3). The Court rejected this argument, noting that the distinction between smuggled and imported goods in the M. Ambalal case pertained to exemption notifications and not to the duty liability on custodians under Section 45(3). The Court emphasized the clear legislative intent behind Section 45(3) to impose duty liability on custodians irrespective of the smuggling status of the goods. Conclusions: The Court concluded that confiscated goods deemed smuggled do not lose their character as imported goods for the purpose of Section 45(3) duty liability. The custodian is liable to pay duty when goods are pilfered in custody. Issue 2: Interpretation and scope of Section 45(3) of the Customs Act regarding duty liability on custodian of imported goods Relevant legal framework and precedents: Section 45(3) imposes a duty liability on the custodian of imported goods if such goods are pilfered while in custody. The provision aims to ensure accountability and safeguard revenue interests. The Court referred to the statutory language and the scheme of the Customs Act. Court's interpretation and reasoning: The Court held that Section 45(3) clearly places the burden of duty payment on the custodian of imported goods in case of pilferage, regardless of any subsequent confiscation or smuggling proceedings. The liability is independent and based on the fact that the goods were in the custodian's possession and were pilfered. Key evidence and findings: The goods were under the appellant's custody and were pilfered. The Court found no reason to exempt the appellant from duty liability under Section 45(3) on the basis of the smuggling or confiscation status of the goods. Application of law to facts: The Court applied the provision strictly, emphasizing the custodian's responsibility. It rejected any attempt to dilute this responsibility by invoking the smuggling classification of goods. Treatment of competing arguments: The appellant contended that the duty liability should not arise because the goods were smuggled and confiscated, and thus outside the definition of imported goods. The Court found this argument untenable in light of the statutory scheme and the purpose of Section 45(3). Conclusions: The Court upheld the imposition of duty on the custodian under Section 45(3), affirming the statutory intent to hold custodians accountable for pilferage of imported goods. 3. SIGNIFICANT HOLDINGS "As is manifest from a plain reading of Section 45 (3) of the Act, the custodian of the imported goods having been in custody is liable to pay duty in case they are pilfered while in custody. 'Imported goods' stand defined in Section 2(25) as goods brought
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