M/s Bhalla Imports Ltd. imported certain goods, which were unloaded in the customs area on 1 st October. When order for clearance was passed by…
CA Final · Indirect Tax Laws · MTP · May 2025
M/s Bhalla Imports Ltd. imported certain goods, which were unloaded in the customs area on 1 st October. When order for clearance was passed by proper officer on 5 th October, it was found that there was some pilferage of such goods. As the imported goods were in the custody of Port Trust, the Department demanded duty from the custodian under section 45(3) of the Customs Act, 1962, on such pilferage. The Port Trust denied such demand contending that it was not an approved custodian falling under section 45 of Customs Act, 1962 and possession of goods by it was by virtue of powers conferred under the Major Port Trust Act, 1963. Hence, it is not liable for customs duty on pilfered goods. M/s Bhalla Imports Ltd. has also asked the Port Trust to make good the loss of goods. Examine, whether the demands made by the Department and M/s Bhalla Imports Ltd. are justified in law, referring to decided case law.
Suggested Answer and Working Notes:
The facts of the case are similar to the case of Board of Trustees v. UOI (2009) 241 ELT 513 (Bom HC DB), wherein the High Court held that considering the language of section 45 (3) of the Customs Act, 1962, the liability to pay duty is of the person, in whose custody the goods remain as an approved person under section 45 of the Act. Therefore, section 45 (3) of the Customs Act, 1962 applies only to the private custodians who are required to be approved by Principal Commissioner/ Commissioner of Customs under section 45 (1) . Accordingly, the major ports and airports covered under Major Port Trust Act, 1963 who do not require any approval under section 45 (1) , are not covered by section 45 (3) . Thus, the Department cannot demand duty from Port Trust on the pilferage under section 45 (3) of the Customs Act, 1962. Section 45 (3) of the Customs Act, 1962 holds the custodian responsible only in respect of the customs duty in respect of pilfered goods. It does not extend to the value of goods lost. However, the Port Trust, as bailee of the goods, is liable for value of the goods to the importer.
Topics: Customs: Importation and Exportation of Goods
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