Full Judgment Text
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PETITIONER:
OSWAL SPINNING & WEAVING MILLS LTD.
Vs.
RESPONDENT:
COLLECTOR OF CUSTOMS & ANR.
DATE OF JUDGMENT19/04/1988
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
PATHAK, R.S. (CJ)
RAY, B.C. (J)
CITATION:
1988 SCR (3) 601 1988 SCC (3) 310
JT 1988 (2) 135 1988 SCALE (1)762
ACT:
Customs Act, 1962-Challenging order of penalty for
release of goods imported through canalised agency and
confiscated by Collector of Customs under 111(d) and (m)-of-
Whether it is liability of Customs authorities or Port Trust
authorities to account for and compensate if imported goods
are not traceable after confiscation-Determination of
question.
HEADNOTE:
This was an appeal under Section 130-E of the Customs
Act, 1962 against the judgment and order of the Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi. D
The appellant imported 58 bales of Woollen rags from
Canada, and filed the bill of entry for release of the
goods, described as woollen rags. The goods were found by
the Customs authorities to be acrylic rags and not woollen
rags. The Collector of Customs ordered confiscation of the
goods under section 111(d) and (m) of the Customs Act, but
in lieu of confiscation, the appellants were given the
option under section 125 of the Act to clear the goods on
payment of redemption fine of Rs.50,000. The appellants
appealed to the Central Board of Excise and Customs which
sustained the order of confiscation but reduced the
redemption fine to Rs.20,000 and also directed that the
goods be released after they were mutilated to the
satisfaction of the Collector of Customs so as to render
them unfit for use except as rags, and after payment of
appropriate duty. The appellants moved a revision against
the Board’s order, whereon the Customs, Excise and Gold
(Control) Appellate Tribunal passed an order, directing that
the goods be released on payment of customs and other
related duties with countervailing duty leviable under the
Central Excise Tariff and subject to Board’s order about
payment of redemption fine and mutilation of the goods. The
appellants then moved this Court for relief by this appeal
under Section; 130 of the Customs Act.
Disposing of the appeal the Court,
602
^
HELD: Per Ranganath Misra, J. (on behalf of R.S.
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Pathak, CJ. and on his own behalf) on 17th December, 1986,
this Court had directed waiving of the redemption fine. The
appellants complained that a part of the goods was not
traceable, whereupon notice was issued to the Calcutta Port
Trust which was joined as respondent No. 2 to the appeal.
The only question surviving for examination was as to the
availability of the goods, return whereof had to be made to
the appellants, and in case the whole or part of the goods
was not traceable, in what way the direction of the
Tribunal-for return of the goods had to be worked out.
[605G-H]
In view of the provisions of the Act, viz sections 45,
47, 125 and 126, there can be little scope to dispute that
until the goods are cleared for home consumption, the scheme
of the Act requires the goods to remain in the hands of the
Customs authorities and obviously the statutory authority to
account for the goods would be of the authorities under the
Act charged with the responsibility of keeping the goods.
[606G-H]
19 bales were alleged to be missing and parts of some
of the available goods were alleged to have been taken out
and made into independent bales. These allegations were not
accepted by the respondent No. 1. The Respondent No. 2
denied any liability. In case, it was ultimately found that
the Customs authorities by themselves had the total
liability to account for the goods or in case their said
liability had to be shared by the Calcutta Port Trust and
even though one or both were liable to account for the goods
and they had failed to do so, in what manner the appellants
would be compensated were matters which required factual
consideration, warranting reception of evidence. This
proceeding before the Court was not appropriate for looking
into this part of the grievance. In this situation, the
order of the Tribunal as modified by this Court for the
return of the goods could not be fully given effect to. The
Court considered it appropriate to require the Tribunal to
finally dispose of this question. In case the goods were not
finally traceable and the liability to account for the goods
was fixed on one or both of the respondents, the Tribunal
would decide what amount of compensation in lieu of the
goods should be payable to the appellants. [607A-E]
Per B. C. Ray, J.
On 17th December, 1986, this Court had passed an order,
directing inter alia the waiving of the demand of penalty,
and also directing
603
the Port Trust authorities, to which notice had been issued,
to disclose the location of the goods. The Port Trust
Authorities stated in their counter-affidavit that out of
the 58 bales only 45 bales were landed, short of 13 bales,
and that the Collector had confiscated the entire
consignment and removed 6 bales from I.K.P.D. to their
confiscated godown and balance 39 bales had been lying at
different points of docks, at the sole risk of the customs.
[610D,F]
The appellant contended that it was prepared to pay the
customs duty as demanded in compliance with the order of
this Court and to take delivery of the goods but as the
goods had been lost and were not traceable from the control
and custody of the Customs authorities, the customs
authorities were liable to pay the value of 39 bales of
woollen rags on C.l.F. basis. The customs authorities
submitted that the value of the imported goods could not be
determined in this appeal as a suit had to be brought for
such issue, and that it was the responsibility of the Port
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Trust to indemnify the appellant for the loss. [611C-E]
The imported goods had been unloaded from the ship in
the Customs area. The Collector of Customs had confiscated
the goods. Goods in the Customs area are under the Control
of the officers of the Customs as per the provisions of
section 141 of the said Act. After confiscation of the goods
in dispute, the same had vested in the Central Government in
accordance with the provisions of section 126 of the Act.
The Calcutta Port Trust, respondent No. 2, had averred that
the goods remained in the Customs area and were subsequently
confiscated by the Collector of Customs. The said goods were
not handed over to the custody of the Port Trust. [611G-H;
612A-B]
It was the Customs authorities who were in possession
and control of the said goods and they were liable to pay
the value of the goods to the appellant as damages to
compensate the appellant. Not a single document was produced
before the Court by the Customs Authorities showing that the
goods had been handed over to the custody and possession of
the Board of Trustees and that the Board had issued any
receipt for that as required by Section 42 read with section
43 of the Major Port Trusts Act, 1963. Under no
circumstances could the Board of Trustees be held
responsible for the loss or destruction of the said imported
goods. The respondent No. 1 was liable for the loss or
damage caused to the appellant by the destruction of the
said goods in the custody and possession of the Customs
authorities. [612B-F]
It was not Possible for this Court while hearing the
appeal under
604
Section 130-E of the Customs Act against the order of the
Appellate A Tribunal to ascertain/determine the money value
of the goods lost or destroyed from the possession and
custody of the Customs authorities. The appellant might take
appropriate proceedings for determination of the damages and
recovery of the same in accordance with law. [612F-G]
State of Bombay (now Gujarat) v. Memon Mahomed Haji
Hasam, [1967], 8 SCR 938, relied upon by the appellant.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4102 of
1984.
From the order dated 31.7.1984 of the Customs Excise
and Gold (Control) Appellate Tribunal, New Delhi in Appeal
No. CD(SB)(T) 8 17/82(D).
Harish N. Salve and N.D. Garg for the Appellant.
B. Datta, Additional Solicitor General, R.P.
Srivastava, D.N. Mukherjee and Ms. S. Relan for the
Respondents.
The following Judgments of the Court were delivered:
RANGANATH MISRA, J. We have had the benefit of reading
the judgment proposed by our learned Brother Ray J We agree
with the conclusion that the respondent No. 1 is liable for
the loss or damage to the goods and would like to briefly
indicate the reasons for such conclusion.
The appellants imported 58 bales of woollen rags
through the State Trading Corporation from Canada. When the
goods arrived at Calcutta, the Customs authorities called
upon the appellants to show cause as to why the same may not
be confiscated under the provisions of the Customs Act
(hereafter referred to as the Act). After hearing the
appellants, as also the State Trading Corporation,
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respondent No. 1, to which a notice was also issued, the
Collector of Customs by his order of 12th March, 1981
directed confiscation of the goods in exercise of power
under section 111(d) and (m) of the Customs Act but in lieu
of confiscation, the appellants were given the option under
section 125 of the Act to clear the goods on payment of
redemption fine of Rs. 50,000. The appellants appealed to
the Central Board of Excise and Customs which sustained the
order of confiscation but
605
reduced the redemption fine to Rs.20,000 and directed: A
".......... after the goods are mutilated to the
satisfaction of Collector of Customs, Calcutta, by
the importers at their cost and under customs
supervision so as to render them unfit for use
except rags and after payment of appropriate duty,
the goods be released on payment of a fine of
Rs.20,000 within three months hereof."
The appellants then moved the Central Government in revision
against the Board’s order and in due course the revision was
transferred to the Customs, Excise and Gold (Control)
Appellate Tribunal. The Tribunal by its order dated 31st
July, 1984 gave the following direction while disposing of
the appeal:
"...... the goods be released on payment of
customs and other related duties, under T.I.
63.02, with counter vailing duty as leviable under
corresponding entry in the Central Excise Tariff.
This is subject to Board’s order about payment of
redemption fine of Rs.20,000 and mutilation of the
goods to the satisfaction of the Collector, at the
cost of the appellants and under the supervision
of the Customs authorities "
The appellants then moved this Court by way of appeal
under section 130-E of the Customs Act. On 17th December,
1986 this Court directed waive of the redemption fine. Mr.
Salve for the appellant agreed to pay the duty, as directed,
when delivery was to be taken of the goods. When appellants
complained that a part of the goods was not traceable,
notice was issued to the Calcutta Port Trust authorities and
it has been joined as respondent No. 2 to this appeal.
In view of the order waiving the demand of redemption
fine and the appellants’ agreeing to pay the demand of
appropriate duty as directed by the Tribunal, the only
question that survives for examination is as to the
availability of the goods return whereof has to be made to
the appellants and in case the whole or part of the goods is
not traceable, in what way the direction of the Tribunal for
return of the goods has to be worked out. It is not disputed
that 58 bales of the goods in question had been received,
nor is there any dispute that the entire goods had been
confiscated under the Act. Section 45 of the Act provides:
606
"45. Restriction on custody and removal of
imported goods. (1) Save as otherwise provided in
any law for the time being in force, all imported
goods unloaded in a customs area shall remain in
the custody of such person as may be approved by
the Collector of Customs until they are cleared
for home consumption or are warehoused or are
transhipped in accordance with the provisions of
Chapter VIII.
(2) The person having custody of any imported
goods in a customs area, whether under the
provisions of sub-section (1) or under any law for
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the time being in force,
(a) shall keep a record of such goods and
send a copy thereof to the proper officer;
(b) shall not permit such goods to be removed
from the customs area or otherwise dealt
with, except under and in accordance with the
permission in writing of the proper officer."
Under section 47, provision for clearance of the goods for
home consumption is made. Section 49 makes provision for
storage of imported goods in warehouse pending clearance but
such storage is permissible only when the importer applies
for it. Section 125 provides that:
"Whenever confiscation of any goods is authorised
by this Act, the officer adjudging it may, in the
case of any goods, the importation or exportation
whereof is prohibited under this Act or under any
law for the time being in force, and shall, in the
case of any other goods, give to the owner of the
goods an option to pay in lieu of confiscation
such fine as the said officer thinks fit .. .....
"
Where such option is not given or even if such option is
given it is not availed of, under section 126, the goods are
confiscated and upon confiscation they vest in the Central
Government.
In view of these provisions in the Act, there can be
little scope to dispute that until the goods is cleared for
home consumption, the scheme of the Act requires the goods
to remain in the hands of the Customs authorities and
obviously the statutory liability to account for the goods
would be of the authorities under the Act charged with the
responsibility of keeping the goods.
607
19 bales, as alleged, appear to be missing and 39 bales
are said to be available. The appellants have contended that
the goods have not been properly preserved and parts of some
of the bales have been taken out to be made into independent
bales These allegations have not been accepted by the
respondent No. 1 Respondent No. 2 has totally denied any
liability in the matter. In case it is ultimately found that
the Customs authorities by themselves have the total
liability to account for the goods or in case their
liability in that behalf has to be shared by the Calcutta
Port Trust and even though one or both are liable to account
for the goods and they fail to do so, in what manner the
appellants would in such eventuality be compensated are
matters which require factual consideration and would
warrant reception of evidence. This proceeding before us is
thus not appropriate for looking into this part of the
grievance. A situation has now arisen where the order of the
Tribunal as modified by this Court for the return of the
goods cannot be fully given effect to. We think it
appropriate to require the Tribunal to finally dispose of
this question. Appellants. counsel has relied upon a
decision of this Court in State of Bombay (now Gujarat) v.
Memon Mahomed Haji Hasam, [1969] 3 SCR 938 As the matter is
being left open to be dealt with by the Tribunal, we do not
propose to refer to this decision at any length. The
Tribunal would give reasonable opportunity to the appellants
as also the two respondents in the matter of adjudication of
this aspect of the dispute. In case, the goods are not
finally traceable and the liability to account for the goods
is fixed in the hands of one or both of the respondents, the
Tribunal would do well to examine and decide what amount of
compensation in lieu of the goods should be payable to the
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appellants. This should be done within three months from
today. Costs to be in the discretion of the Tribunal.
B.C. RAY, J. This appeal under Section 130-E of the
Customs Act, 1962 is against the judgment and order No.
434/84-D dated 31st July, 1984 of the Customs Excise and
Gold (Control) Appellate Tribunal, New Delhi whereby the
Appellate Tribunal directed the release of the imported
woollen rags to the appellant on payment of customs and
other related duties, under T.I. 63.02, with countervailing
duty as leviable under corresponding entry in the Central
Excise Tariff. It was also directed by the said order that
the appellant will have to comply with the order of the
Board about payment of redemption fine of Rs.20,000 and
mutilation of the goods to the satisfaction of the Collector
at the cost of appellant and under the supervision of the
customs authorities.
608
The matrix of the case is that in accordance with the
import policy of 1979-80 which provided for import of
certain items including woollen rags through canalised
agency, the appellant company placed order to the State
Trading Corporation, the canalised agency, for import of
mutilated woollen rags in which the contents of wool would
be minimum 80% under the order of allocation issued by the
Textile Commissioner, Bombay in the name of the appellant.
On 4.4.1979 the foreign suppliers namely M/s. Gorodensky
Regd., 8, Queen Street, Montreal, Canada entered into a
contract for the supply of old rags of woollen textile
fabrics (including knitted and crocheted fabrics) which are
required for manufacture of shoddy yarn and not consist of
articles of furnishing or clothing or other clothing so worn
out, soiled or torn as to be beyond cleaning or repair.
Fumigation Certificate from Government or Municipal Health
Authorities was to be provided by suppliers at their cost
with the State Trading Corporation. The specification of the
goods was stated to be "CM-old original mutilated woollen
hosieries, 60% dark, 40% fancy-minimum 80% wool contents", @
65 US cents per kg. C.I.F. quantity 20,000 kg. The suppliers
sent the goods comprising of 58 bales of woollen rags
through the State Trading Corporation on 1.5.979 to be
delivered at Calcutta Port and the invoice was drawn in
favour of State Trading Corporation (allocation to the
appellant herein). Along with it there was a certificate
from the suppliers to the effect that "goods shipped are in
conformity with contract No. STC/CI/247/WR/239/78-79 dated
4.4.1979." It further certified that "the minimum wool
content is 80% in each bale". These documents were
transferred to the appellant by the State Trading
Corporation (in short STC) on High Sea Sales basis. The
appellant imported 58 bales of woollen rags through the STC
and in order to have the same released filed the bill of
entry stating the goods as woollen rags on the basis of the
aforesaid documents of the foreign suppliers. The goods
however on testing the same drawn from the said consignment
by the Customs authorities were found to have wool content
only 6 to 10% and acrylic fibre contents in the rags were
about 60 to 70% besides other synthetic fibres. It appeared
to the Customs authorities that the imported rags were
acrylic rags and not woollen rags. A show-cause notice was
issued to the appellant on 2.1.1980 that the goods imported
were in contravention of clause 3(1) of Imports (Control)
order, 1955 as amended read with Section 3 of the Imports
and Exports (Control) Act, 1947 as amended and calling upon
the appellant to show cause why the goods (58 bales of
woollen rags) be not confiscated under Section 111(d) and
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111(m) read with Section 11 of the Customs Act, 1962 and why
penalty be not imposed under Section 112 of the Customs Act,
1962. The Collector of Customs after
609
considering the reply of the appellant and hearing both the
appellant and the STC confiscated the aforesaid goods under
Section 111(d) and 111(m) of the Customs Act, 1962. In lieu
of confiscation, the appellant was given the option under
Section 125 to clear the goods on payment of redemption fine
of Rs 50,000 within one month from the date of receipt of
the order or any other period that may be extended on
sufficient cause being shown. The Collector further stated
in his order "I refrain from imposing any penalty under
Section 112 of the Customs Act, 1962 as there was no force
to show the complicity of either the STC or the Appellant in
arranging for import of goods which are different from what
had been ordered."
Against this order an appeal was made to the Central
Board of Excise and Customs. The Central Board of Excise and
Customs came to the conclusion that the goods imported could
not be described as woollen goods at all as the wool
contents were found to be not exceeding 10%. The Board
however, considering the fact that the goods have been
imported through the STC and there was no involvement of the
importers in the importation of wrong goods took a lenient
view and directed that after the goods are mutilated to the
satisfaction of the Collector of Customs by the appellant at
his cost and under Customs supervision so as to render them
unfit for use except rags and after payment of appropriate
duty, the goods be released on payment of a fine of
Rs.20,000 within three months of the order.
Against this order the appellant filed an appeal before
the Customs, Excise and Gold(Control) Appellate Tribunal,
New Delhi. The Appellate Tribunal disposed of the appeal
ordering that the goods be released on payment of customs
and other related duties under T.I 63.02 with countervailing
duty as leviable under corresponding entry in the Central
Excise Tariff. The Tribunal also stated that this is subject
to Board’s order about payment of redemption fine of
Rs.20,000 and mutilation of the goods to the satisfaction of
the Collector, at the cost of the appellant, and under the
supervision of the Customs authorities.
It is against this order the instant appeal has been
filed before this Court. This Court on hearing the learned
counsels for both the parties made an order on 17th
December, 1986 to the following effect
"Two questions arise, one relating to the demand
of duty and the other levy of penalty. On the
facts, we are satisfied and the learned Addl.
Solicitor General having agreed that
610
there is no scope for levying of penalty. The
demand of penalty, is therefore, waived and so far
as duty is concerned, Mr. Salve agrees that the
duty as demanded is pay able and will be paid. The
only difficulty is about delivery of the goods
imported. Notice has been issued to the Port Trust
Authorities and it is said to have been served,
but there is no appearance on behalf of the Port
Trust. Mr. Salve suggest that steps should be
taken first to trace the goods. The Petitioner
would pay the duty as demanded and take delivery
of the materials. The matter be listed on 23rd
January, 1987, and the Port Trust may be again
notified of this date, so that further orders may
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be passed. The Port Trust will disclose the Court
the location of the goods."
In accordance with the directions contained in the said
order the Port Trust Authorities in their counter affidavit
sworn by one Girindra Bhuson Chakraborty, the Commercial
Supervisor, Calcutta Port Trust on 18.3.1987 specifically
averred that out of 58 bales only 45 bales were landed and
13 bales were landed short. It was also further averred in
the said affidavit that the appellant did not take steps to
remove the goods from the Port areas and according to the
notification No. G.S.R. 32-F dated 1st February, 1975 issued
by the Government of India, Ministry of Shipping and
Transport under Section 126 read with Sections 42 and 43 of
the Major Port Trusts Act, 1963, no responsibility shall
attach to the Board after expiry of a period of seven clear
working days from the date of taking charge of the goods by
the Board, in respect of such goods. It has been further
stated that the Collector of Customs under his order No.
S.33/33/79A(GII) dated 2.1.1980 confiscated the entire
consignment of the said imported goods and removed 6 bales
only from 1 K.P.D. to their confiscated godown at Clive
Warehouse on 8.8.1981 by P.T.C.G. (Port Trust Covered Rly.
Wagon) No. 1362, and the balance 39 bales have been Iying
since its landing at different points of docks in a very
deteriorated condition. It was further stated that the
entire consignment was confiscated by the Collector of
Customs and only 6 bales were removed and the balance 39
bales had been Iying in the Port premises at the sole risk
of Customs and the Port Trust had no authority for the
disposal of the goods which were confiscated by the Customs
authorities. It has been stated that the Port Trust has no
liability for loss or damage of these confiscated goods
which are in the custody of the Customs authorities.
An affidavit has been filed on behalf of the appellant
sworn by
611
one Dharam Paul Oswal, Managing Director of the appellant
mill on 31.3.1987 stating inter alia that their Manager, Mr.
H.K. Goel visited the Calcutta Port Trust and Collector of
Customs as well as its officers on 30th March, 1987, for
identification of 39 bales of rags out of consignment of 58
bales and for delivery of the said 39 bales on payment of
duty. It has been further averred that the concerned
officials supervising storage/delivery have failed to
show/produce even a single bale against the alleged 39 bales
admitted to be in their possession before this Court. It has
also been stated that instead of 39 bales the Manager of the
appellant mill, Mr. H.K. Goel had been directed by C.P.T.
and Customs Department to take delivery of 300 kgs.
approximately of useless sweep waste of nil market value.
It has strenuously been contended on behalf of the
appellant that the appellant is prepared to pay the customs
duty as demanded by the Customs authorities in due
compliance of the order of this Court and to take delivery
of the goods imported but as the goods have already been
lost and are not traceable from the control and custody of
the Customs authorities, the Customs authorities are liable
to pay the value of 39 bales of woollen rags on C.I.F.
basis. It was on the other hand submitted on behalf of the
Customs authorities that the value of the imported goods
cannot be determined in this appeal by this Court as it
requires consideration of facts and the only remedy for the
appellant is to bring a suit for determination of such
issue. It was also tried to be contended that since the
goods imported were kept in the dock, it is the
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responsibility of the Port Trust to indemnify the appellant
for the loss of the imported goods.
After considering the submissions of the learned
counsels and also considering the facts and circumstances of
the case there is no manner of doubt that the goods were
confiscated by the Collector of Customs under Section 111(d)
and 111(m) of the Customs Act, 1962 and directions were
given for collection of redemption fine and for complying
with certain directions contained in the order of the
Collector before the release of goods. Section 126 of the
Customs Act specifically provides that when any goods are
confiscated under the Act such goods shall thereupon vest in
the Central Government. It is also evident from the
provisions of Section 141 of the said Act that goods in the
customs area shall be subject to the control of the officers
of Customs. Undoubtedly, the imported goods were unloaded
from the ship in the Customs area. So these were under the
control of the officers of Customs. Moreover after
confiscation of the entire consignment of imported goods
i.e. 45 bales out of 58 bales of woollen rags,
612
the same vested in the Central Government in accordance with
the provisions of Section 126 of the said Act. It is also
clear from the averments made on behalf of respondent No. 2,
the Calcutta Port Trust, as stated hereinbefore that the
imported goods remained in the Customs area and these were
subsequently confiscated by the Collector of Customs. The
imported goods were not handed over to the custody of the
Port Trust. Therefore it is the Customs authorities who are
in possession and control of the said imported bales of
woollen rags and they cannot shirk their responsibility for
the loss and damage of the said goods and they are liable to
pay the value of the goods to the appellant as damages in
order to re-compensate the appellant. It is pertinent to
mention in this connection that under Sections 42 and 43 of
the Major Port Trusts Act, 1963 it is only when the goods
have been taken charge of and receipt given for them under
Section 42(7) of the said Act liability for any loss or
damages which may occur to the person to whom receipt has
been given by the Board, arises. In other words, under the
provisions of Sections 42 and 43 Board of Trustees under the
said Act will be liable to recompense the loss or damages in
respect of goods which have been taken charge of by the
Board. In the instant case as not a single document has been
produced before this Court by the Customs Authorities
showing that the goods were handed over to the custody and
possession of the Board of Trustees and that the Board
issued any receipt for that as required under Section 42
read with Section 43 of the said Act. Therefore, under no
circumstances can the Board of Trustees be held responsible
for the loss or destruction of the said imported goods. As
stated hereinbefore the imported goods were kept unloaded in
the customs area and were confiscated and as such the
respondent No. 1 is liable for the loss or damages that has
been caused to the appellant by the destruction of the
imported goods from their custody and possession. It is not
possible for this Court while hearing the appeal under
Section 130-E of the Customs Act against the order of the
Appellate Tribunal to ascertain and determine the money
value of the imported goods which have been lost or
destroyed from the possession and custody of the Customs
authorities. The appellant may take appropriate proceedings
for determination of the damages and for recovery of the
same in accordance with law.
In view of the above findings, this appeal is disposed
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of. There will however, be no order as to costs.
S.L. Appeal disposed of.
613