ORDER
1. A claim for refund of duty paid on two dumpers imported by the appellants in S.K.D. condition in respect of which damages were said to have been suffered, was rejected by the Assistant Collector of Customs, Refunds Madras by order No. S. 25/6361/81-Ap. dated 20-11-1981/30-12-1981 observing that the claimant had not followed the provisions of Section 22 of the Act for abatement of duty on damaged goods; he also observed that there was no noting of shortage after the survey and hence the claim cannot also be accepted under Section 13 of the Act. When the matter was taken up in appeal, the Collector of Customs (Appeals), Madras found the order of the Asstt. Collector to be in order on substantially the same grounds.
2. In the appeal before us the advocate for the appellants pressed the claim on two grounds:-
(a) Sub-section (1) of Section 22 of the Act provides for abatement of duty on damaged goods where it is shown to the satisfaction of the Assistant Collector that any imported goods had been damaged at any time after the unloading thereof in India but before their examination under Section 17, such abatement is mandatory, the manner of determination of chargeability to duty being in accordance with sub-section (2) of that Section. Sub-section (3)(a) provides that the value of such damaged goods may be ascertained by the proper officer. It is not expressly laid down in the Act that the ascertainment of the value of the goods should be prior to their clearance from customs control or while the goods were in the custody of customs.
(b) Alternatively the counsel urged that in terms of Section 23 when goods have been destroyed any time before their clearance for home consumption, the Assistant Collector shall remit the duty on such goods. He claimed that in the facts and circumstances of the present case, the two dumpers have been so badly damaged that they should be considered as “destroyed” for purposes of this Section.
3. The Departmental Representative resisted both the pleas. He pointed out that according to Section 22(3) the damage should be in respect of any imported goods. Section 2(25) of the Act defines ‘imported goods’ as goods ‘brought into India from a place outside India but does not include goods which have been cleared for home consumption.’ As the claim for damages is being made after the goods have been cleared from Port Trust custody for home consumption, they could not be treated as ‘imported goods’ for the purpose of Section 22(3); in other words, ascertainment of damage and assessment of the extent of damage, and hence value of any damaged goods, should all be completed before they are cleared out of customs control. He also claimed that Section 23 will not be applicable; if damaged goods are covered by the provisions of that Section, provisions of Sec. 22 will be superfluous; one cannot read the Act rendering one Section of the Act superfluous.
4. A resume of the relevant facts may be referred to before we examine the differing claims of the appellant and of the department. The appellant-company had imported two dumpers in S.K.D. condition from their supplier in U.S.A. The goods were landed on the 16th and 17th of April, 1981. However, the goods were assessed under the ‘prior entry system’ on 16-4-1981 and the assessed duty was paid and an order of clearance out of custom control was given by the proper officer on 16-4-1981 itself. The goods were removed from the Port Trust premises at Madras and transported to the appellant’s factory at Kolar Gold Fields, Karnataka between 8-6-1981 and 4-7-1981.
5. On a request dated 20-4-1981 by the appellants for examination along with a steamer agents survey, the Assistant Collector (Docks), permitted the survey “without prejudice to the eligibility for claim for refund, since it was not established that the goods were in damaged condition at the time of grant of pass out order. Examination was conducted on 21-4-1981 and 22-4-1981 when certain damages and shortages were noted. The goods were removed from the Port Trust premises and transported to the appellant’s factory at K.G.F. Karnataka by Lorry, being received at the factory between 8-6-1981 and 4-7-1981. An insurance survey was conducted on 4-5-1981, 6-11-1981, 7-11-1981 and 21-3-1982. In a report dated 23-4-1982 the nature of loss damage is described as “Dents, deep cuts, twisting, shearing, crushing, bending and breakage” and the cause of the damage as “falls or blows received whilst in transit”. Though a team of technical staff and officials constituted by the management of the appellant company (Inspection Committee) gave a finding,
“There is no possibility of repairing and utilising the two damaged SKDs and these have to be considered as a total loss and the claims with the Insurance Company may be proceeded accordingly.”
The Insurance Survey Report observed as follows:
“During our inspections, we found that since the damage to both the units were extensive and similar, it would not be possible to assemble even one unit by interchanging the undamaged components, but economical repairs appeared to be a possibility at that stage of inspection. Major assemblies like engine, transmission, final drive, hoist and hydraulic suspension system were mostly intact and as the value of these assemblies were substantial, we felt that the possibility of economical repairing has to be analysed first. From the external visual inspection we felt that major assemblies had not suffered any appreciable damage and that if necessary, the suspected parts could be dismantled to ascertain the extent of damage. Consignees did not agree to this….”
The Report, however, noted that the Inspection Committee of the Management had noted as follows:-
“From the details of the damages enumerated above, it can be seen that some items could be considered for re-utilisation after they are being repaired. However, this is not feasible at this stage since BEML has not set up manufacturing facilities for 85 ton dump trucks”.
The Report summed up the appellants’ contentions for claiming total loss in the following terms:
“(1) Major assemblies which were visibly undamaged must also have suffered internal damages.
(2) There is no facility at BEML or anywhere in this country to strip and rebuild, repair and test and guarantee the performance of these machinery, which is a necessity as a buyer invests about Rs. 80,00,000/- on each unit.
(3) For any repairs, these equipments must perforce be reshipped to the manufacturers which would be highly expensive and uneconomical.”
After noting all these, the Insurance surveyors still found as,
“On this basis, we felt that even if a due allowance of about 50% has to be provided for the increase in cost of components when supplied as spares, the repairs may still be economical.”
Considering however the practical difficulties in repairing the damaged goods the surveyors decided to treat the damaged equipment as a “constructive total loss”. After prolonged discussions between the appellant-company and the surveyors, the appellant-company offered a final salvage value of Rs. 12.5 lakhs provided the company were allowed to retain the salvage. But if the salvage were to be sold by open tender, the company would have a right to make their bid and their earlier offer of Rs. 12.5 lakhs as salvage value, would stand withdrawn; when the surveyor noted that as no one would be able to offer even Rs. 12.5 lakhs for the salvage and if any tender is invited, the offer of the company can be accepted. In finally settling the claim United India Insurance Company Ltd. in its letter No. Marine Claims: 81/80045/BEML dated 21-7-1982 to the Director of Finance, Bharat Earth Movers Ltd., Bangalore, referred to the insured value of the goods as Rs. 50,03,000/-; they also referred to an offer of Rs. 13,000/- towards the salvage of the damaged dumpers (this would be a half lakh of rupees more than what was offered at the time the surveyors discussed the matter with the appellant-company) and after obtaining the differential amount involved, released a cheque for U.S. dollar 6,40,640-the rupee equivalent of which being Rs. 62,07,801.60 at that time.
6. From the above resume, it is clear that the damage was ascertained by the surveyors by inspection of the imported goods, a few months after their date of clearance from even Port Trust premises and after a transit by lorry from the Port area in Madras to K.G.F. in Karnataka had taken place. Economical repairs was considered a possibility but was given up as being limited by the practical situation existing in respect of the specialised equipment in the country and the fact that the appellant-importer was the only one who would be interested in any part of the goods even if salvaged. Even the price of the salvaged goods had been negotiated at some length; one gets the impression that the Insurance Company got what would be the best of a bad bargain and settled the claim for the damaged goods as a ‘constructive total loss’.
7. To take the second contention of the advocate of the appellants first: Sec. 23 refers to remission of duty on goods which have been destroyed at any time before clearance for home consumption. As we have noted earlier, the goods were finally seen miles away from the place of import after a journey involving transit by trucks and a lapse of considerable period of time. The insurance surveyors did not accept that the goods were a total loss but thought that they can by repaired economically. It was the practical limitations in the facility for such procedure that led them to finally observe that the goods could be treated as ‘constructive loss’. We, therefore, do not find that on the facts on record the goods could be treated as destroyed for the purpose of Section 23 and that too, destroyed before they were removed from Port Trust custody. The claim in terms of Section 23 of the Customs Act, 1962, has to be rejected.
8. In order to appreciate the merits of the plea in respect of Section 22 of the Act namely that valuation of the goods need not necessarily be done prior to the clearance of the damaged, imported goods, it would be useful to examine the provisions of the Customs Act, 1962 in regard to importation and clearance of goods through Customs. For the purpose of ready reference the following Sections may be set out:-
17. Assessment of duty. – (1) After an importer has entered any imported goods under Section 46… the imported goods… or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer.
(2) After such examination and testing, the duty, if any, leviable on such goods shall … be assessed.
(3) …
(4) Notwithstanding anything contained in this section imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statement made in the entry relating thereto and the documents produced and the information furnished under sub-section (3) ; but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty.”
“22. Abatement of duty on damaged or deteriorated goods:-
(1)…
(2)…
(3)…the value of damaged…goods may be ascertained by either of the following methods at the option of the owner:
(a) The value of such goods may be ascertained by the proper officer, or
(b) such goods may be sold by the proper officer by public auction or by tender and the gross sale-proceeds shall be deemed to be the value of such goods.”
“45. Restrictions 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….
(2) The person having custody of any imported goods in customs area…
(a)…
(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.”
“47. Clearance of goods for home consumption:-
where the proper officer is satisfied that…the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption.”
“141. Conveyance and goods in a customs area subject to control of officers of customs:-
All…goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs.”
“149. Amendment of documents:-…no amendment of a bill of entry…shall be so authorised to be amended after the imported goods have been cleared for home consumption…except on the basis of documentary evidence which was in existence at the time the goods were cleared….”
9. It is seen from Section 17(1) and (2) that imported goods have to be first examined and thereafter assessed. Where assessment is made prior to the examination of the goods, if at the time of examination subsequently (as provided in the Act) the earlier assessment is found to be improper or incorrect, re-assessment is to be done. According to Section 47 after the proper officer has satisfied himself that the duty assessed on the imported goods has been paid, he is to make an order for home consumption. As provided in Section 141 the goods in a Customs area are subject to control of officers of Customs for the purpose of enforcing the provisions of the Act-one of which will obviously be the proper assessment and collection of duty on imported goods. The goods remain in the custody of an approved person referred to in Section 45 and such person shall not permit the goods to be removed from the customs area except with permission in writing of the proper officer ; that permission is the one envisaged in Section 47. Read together the scheme of the Act makes it abundantly clear that imported goods remain under the control of the officers of Customs for the purposes of assessment to duty and only when such assessment is completed, they are to be removed from the custody of a person having received the imported goods (such as the Madras Port Trust in this case). The determination of value of damaged goods has to be viewed in the context of these provisions relating to assessment of imported goods in which case it would be clear that the assessment, even of damaged goods, has to be completed before they are removed from out of customs control. Section 22(3) itself would lend support to the above view. Two alternative methods of determining the value of the goods have been provided namely:
(i) ascertainment by the proper officer on his own, or
(ii) sale of the goods by public auction or tender.
Obviously the latter proviso would ensure that the proper officer does not over-value the goods. If he does so, the owner of the goods can ask for sale by auction or tender. This option would also indicate that the goods must be under the control of the proper officer at the time of ascertainment of value; as otherwise it would not be open to him to offer the goods for sale in auction or by tender. We also note that Section 149 provides that no amendment of a Bill of Entry (which would include an amendment in respect of the value declared therein at the time of entry of the goods in the Custom House) can be made after imported goods have been cleared for home consumption except on the basis of documentary evidence which were in existence at the time the goods were cleared. This provision also suggests that ordinarily the value of the goods is to be determined before clearance and if at all there is any need to amend the value for the purposes of claim of refund and the like, the claim has to be examined in the light of contemporaneous evidence existing at the time of clearance of the goods. Any valuation of the goods as in the present case-and that too by insurance surveyors not officers of customs-months after their clearance from the Port area would not be in conformity with the provisions of Section 149.
10. Under the circumstances we find that the plea of the advocate for the appellant that valuation of the damaged goods can be done any time and not necessarily before their clearance from Customs control, is not well founded.
11. No particular pleas were urged regarding shortage as such.
In the result the appeal fails and is dismissed.