CESTAT New Delhi Sets Aside ₹51.8 Lakh Customs Duty On CONCOR, Finds No Proof of Pilferage Or Seal Tampering

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that, in the case of CONCOR, a custodian cannot be fastened with customs duty liability under Section 45 of the Customs Act, 1962 in the absence of evidence showing pilferage during its custody or tampering of seals of imported goods.

Section 45 of the Customs Act, 1962, mandates that all imported goods unloaded in a customs area remain under the custody of an approved custodian until they are cleared for home consumption, warehoused, or transhipped. Custodians are required to maintain records, prevent unauthorized removal, and act only with the permission of customs authorities.

A bench comprising Judicial Member Dr. Rachna Gupta and Technical Member P.V. Subba Rao set aside the demand of Rs. 51.80 lakh and penalties imposed on Container Corporation of India Limited (CONCOR), holding that in the absence of evidence showing pilferage during custody or tampering of seals, duty liability cannot be imposed on the custodian.

CONCOR, a public sector undertaking functioning as a custodian of imported goods at Inland Container Depot (ICD), Tughlakabad, was issued a show cause notice proposing recovery of customs duty under Section 45(3) of the Customs Act on the ground that the goods found in five containers were different from those declared in the Import General Manifest (IGM).

As per IGM records, the containers were stated to contain goods such as aluminium ingots, zinc ingots, face masks and gloves. However, upon examination, the containers were found to contain cement blocks.

The Department treated this discrepancy as attracting liability under Section 45(3) of the Act and confirmed duty demand along with penalties on CONCOR in its capacity as custodian.

The tribunal explained that in international trade, containers are handled on a “said to contain” basis, meaning that neither the shipping line nor the custodian is aware of the actual contents unless the containers are examined by customs authorities.

It noted that so long as the container seals remain intact, responsibility for the contents cannot be attributed to the custodian.

The bench observed that "Once the goods are stuffed in a container and sealed, the master of the vessel receives the container on “said to contain” basis. There is no way for the master of the vessel to know whether the goods mentioned in the documents are in the container or there are some other goods. Thereafter, the custody of the container from the master of vessel to the port

trust and to the ICD/CFS all takes place only on “said the contain” basis. So long as the seal of the container is intact, the custodian cannot be held responsible for the contents."

It further clarified that "if the seal is broken and the container is opened and the goods are pilfered or substituted, the custodian is responsible as per section 45(3) of this Act. Similarly, if there is evidence that the original seal has been broken and tampered with and the container has been sealed with a different seal, the custodian in whose custody the goods were substituted will be responsible to pay customs duty."

Examining the records, the tribunal noted that the containers had been examined by customs authorities on multiple occasions in the presence of CONCOR representatives and independent witnesses. The examination reports consistently recorded that the contents were cement blocks.

While some reports recorded that the seals were intact and others did not record any finding on the condition of the seals, none of the reports indicated that the seals were broken, tampered with, or replaced.

The tribunal held that liability under Section 45(3) arises only where goods are shown to have been pilfered after unloading while in the custody of the custodian. In the present case, there was no evidence to show that any pilferage or substitution occurred during CONCOR's custody.

Setting aside the impugned order, the tribunal observed that "These reports only indicate that the contents were cement blocks. Unless the seals were broken while the container was in the custody of CONCOR, it cannot be said that CONCOR had either opened the containers or that the contents of the container were pilfered or substituted."

Accordingly, the demand of duty and penalties imposed on CONCOR were set aside, and the appeal was allowed.

For Appellant: Advocates Ram Chandra Sankhla and Rahul Sankhla

For Respondent: M.K. Shukla, Authorised Representative