1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR JUDGMENT J.K. Cement Works Vs. The Commissioner, Central Nimbahera, Distt.Chittorgarh. Excise & Customs,Jaipur & Ors. D.B. CIVIL WRIT PETITION NO.1820/2005 under Article 226 and 227 of the Constitution of India. Date of order : 12th February, 2007 PRESENT HON'BLE MR. JUSTICE RAJESH BALIA HON'BLE MR. JUSTICE CHATRA RAM JAT Mr. L.R. Mehta for the petitioner. Mr. V.K. Mathur for the respondents. ________ BY THE COURT:-(PER HON'BLE RAJESH BALIA, J.) This writ petition is directed against the order of Assistant Commissioner Customs refusing the application moved by the petitioners in June 2004 under proviso to Section 68 which has been inserted in the Customs Act vide Act No.32/2003 on 14.5.2003. Proviso to Section 68 reads as under:- 2 “Provided that the owner of any warehoused goods may, at any time before an order for clearance of goods for home consumption has been made in respect of such goods, relinquish his title to the goods upon payment of rent, interest, other charges and penalties that may be payable in respect of the goods and upon such relinquishment, he shall not be liable to pay duty thereon.” It is also not in contention that no order for clearance of goods for home consumption has been made until the petitioner has made the aforesaid application, nor upto now. We may notice in brief the circumstances in which this controversy has arisen. The petitioner had imported the Retrofit Grate Cooler and was warehoused at Customs Warehouse of Central Warehousing Corporation at Udaipur in September 1996. Since it was import of capital goods meant for home consumption in terms of Section 61(1)(b), the 3 statutory period fixed within which the goods were required to be removed from warehousing was till the expiry of one year subject to extension of period for keeping it at the warehousing being granted by the competent authority. Due to financial difficulties pleaded by the petitioner-company, M/s J.K. Synthetics of which J.K. Cement Works is a unit, extension of time for warehousing machinery in question was sought and in the first instance extension was granted upto 31.12.1997. The second application for extension of time until 31st March, 1999 was made pointing out that the petitioner company has been declared as a sick undertaking as a DIFR and the scheme for rehabilitation is under consideration. The said application for extension of period of warehousing upto 31st March, 1999 was rejected on 11.2.1999. On 25th May, 2001 the Superintendent of Central Excise and Custom informed the petitioner that AG Audit has inquired about the matter, whether the revival package programme has been approved and if so a copy thereof was demanded 4 by him, as the machinery in question was lying there for a long time. Against this, enquiry was made vide letter dated 24th April, 2002. The petitioner informed the respondents vide letter dated 27.4.2002 that after the scheme for rehabilitation was approved by the AA IFR (Appellate Authority), it could not be implemented on account of interim order granted by the High Court on an application having been moved on behalf of the workers and staff of Kota Unit J.K. Synthetics and informed the probability of requirement of Retrofit Grate Cooler lying in the warehousing is not likely to arise before 30th September, 2002. In September 2002, the petitioner also moved an application once again for extension of warehousing period of Retrofit Grate Cooler upto 31st March, 2003. On 14th March, 2003, the petitioner moved 5 another application seeking permission to reexport the machine in question. However, before that application could be considered on 20th March, 2003 exercising the power under Section 72(1)(b) of the Customs Act, 1962 the Duty payable on the machine was computed and a demand was raised along with the interest payable thereon in terms of Section 61 of the extended period of the machinery lying in the warehouse w.e.f. 26.8.1997. On 27th March, 2003 on receipt of the aforesaid notice, the petitioner requested the respondents not to give effect to the order dated 20th March, 2003 as they have made an application for permission to re-export the machine in question. On 13th June, 2003 the petitioner received a notice fixing the date for personal hearing on the demand notice dated 20th March, 2003. On 7.10.2003 while that hearing in respect of the demand notice dated 20th March, 2003 was pending, the petitioner requested the Chief Commissioner Customs (Preventive), New Delhi to consider his application for reexport of the machine 6 sympathetically vide his letters dated 7.10.2003 and 9.10.2003. On 3.11.2003, the petitioner received a letter from Assistant Commissioner, Udaipur referring to his application dated 9.10.2002 for considering the application for reexport of goods, asking the petitioner that since the time of extension requested by the petitioner has already been expired whether it was still interested to pursue the application for permission to reexport the goods in question by asking to seek specific time limit for reexport and extension of warehousing period. On 7.11.2003, the petitioner was required to furnish certain information in respect of his application for reexport of the machine. On 10.11.2003, the petitioner requested for permission to re-export the machinery and for extension of time for warehousing upto 31st March, 2004. 7 On 21.11.2003, the Dy. Commissioner, Technical replied the petitioner's letter dated 10.11.2003 and asked for further information about the reexport application concerning the prospective buyer, agreement, expected price and whether the RBI permission / authorization has been obtained and whether the extension upto 31st December, 1999 has been granted to it. On 24th December, 2003 again information was expeditiously solicited from the petitioner in pursuance of earlier notice dated 31st November, 2003. While pursuit of seeking permission to reexport the machine in question was going on and was under consideration before the respondents, the petitioner moved an application in June 2004 firstly before the Debt Recovery Tribunal, Mumbai, who had appointed a receiver in respect of assets of the company to relinquishing the Retrofit Grate Cooler which was lying in the warehouse, Udaipur. On 11.8.2004, the Debt Recovery Tribunal, 8 Mumbai allowed the said application. On 29th October, 2004 the order of Debit Recovery Tribunal on application filed by the ICICI Bank discharging the Court receiver subject to petitioner's depositing the due was made. On 1.12.2004, the DRT, Mumbai directed the Court to hand over all assets to the petitioner thereafter on 27.12.2004, the petitioner submitted a letter to the Assistant Commissioner, Central and Excise relinquishing its title to RFC in terms of Section 68 of the Customs Act, 1962 which was inserted w.e.f. May 2003 as noticed above. The request of the petitioner for relinquishing its title to machine in question, which was still lying in the warehouse, was rejected by the order dated 15th / 17th March, 2005 inter alia on the ground that where the case falls under Section 72, the proviso to Section 68 cannot be invoked. It was stated by the Commissioner in his order that since over stay of the machine in warehouse beyond the extended period of time, by considering it to be deemed improper removal contrary to the provisions of Section 61, the case does not fall 9 under Section 68. Therefore, proviso to Section 68 cannot be invoked. Hence, this petition. Learned counsel for the petitioner contends that the proviso to Section 68 operates independent of Section 72 and so long as the imported goods were lying in warehouse and have actually not been removed nor any order has been made for its clearance for home consumption, the petitioner was within his entitlement to make an application for relinquishment of goods in terms of provisions to Rule 68, which was in operation as on the date application was moved, no duty could become payable and cannot be recovered in respect of such goods notwithstanding the respondents have taken action under Section 72 which operates on different field. Proviso to Section 68 being a new provision has primarily been enacted for the purpose, where goods are not made as warehouse. For various reasons no order has been made for removal of the goods from the warehouse. The importer could subject to his liability to 10 pay interest and warehousing charges relinquish his title in goods in terms of provision, and if he does so, he is not liable to pay duty is clear mandate. It does not affect the validity of order passed under Section 72 but affects the owner's liability to pay Duty on such goods owned by him. The title in respect of which has been relinquished is still lying in the warehousing. It is contended, on the other hand, by the learned counsel for the Revenue that once the goods are deemed to have been removed from the warehousing, under Section 72 the same cannot be considered as the goods lying in the warehousing notwithstanding the goods may not have been actually removed and may still be lying in the warehouse. The levy of duty being itself not under challenge, the petitioner is not entitled to avail the benefit of proviso to Section 68. The reliance has been placed on the decision of the Supreme Court in Kesoram Rayon Vs. Collector of Customs, Calcutta 1996 (86) E.L.T. 464 (SC) in support of the contention that over stay of the goods in 11 warehousing beyond the extended period permitted for the purpose of such storage amounts to improper removal of goods and case being not covered by Section 61(1)(b) or Section 68. It is apposite here to notice that relevant provisions of the statute having bearing on the present controversy, Section 12 of the Customs Act requires that Customs duty shall be levied, at such rates as are specified in the Customs Tariff Act or any other law for the time being in force, in goods, imported into India. Section 15 provides for date of determination of rate of duty and tariff valuation of imported goods. Section 15 at the relevant time provides that rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, and in case of goods entered for home consumption under Section 46 on the date on which a bill of entry in respect of such goods is presented under that Section. Secondly, in the case of goods cleared from a warehouse under section 68, on the date on which the goods are actually removed from the warehouse. This provision was amended w.e.f. 12 14.5.2003 and provided that where in case of goods cleared from the warehouse under Section 60 the rate of Duty and tariff shall be on the date on which the bill of entry in respect of such goods is presented under Section 68 in the case of other goods on the date of payment of duty. Section 46 requires that importer of goods, other than goods intended for transit or transshipment, to make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form. We have already noticed that Section 61 provides that the period during which any such goods remained in warehouse. Section 71 puts an embargo on removing of goods from warehouse except on clearance for home consumption or exportation or as otherwise provided by the Act. Section 72 in certain circumstances empowers the competent authority to demand full amount of duty chargeable on goods falling in various categories falling under Section 72(1) which reads as 13 under:- “SECTION 72. Goods improperly removed from warehouse, etc.-(1) in any of the following case, that is to say, - (a) where any warehoused goods are removed from a warehouse in contravension of section 71; (b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under section 61 to remain in a warehouse. (c) where any warehoused goods have been taken under section 64 as samples without payment of duty; (d) where any goods in respect of which a bond has been executed under section 59 and which have not been cleared for home consumption or exportation are not duty accounted for to the satisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect 14 of such goods.” A perusal of Section 72 goes to show that whereas clause (a) deals with actual removal of goods without proper authorization and duties become chargeable on goods actually removed clause (b) of Section 72 (1) shows that duty is chargeable without, removal of goods from the warehouse but because of the over stay in the warehouse only. With the aforesaid proviso inserted w.e.f. 14.5.2003, Section 68 reads as under:- “SECTION 68. Clearance of warehouse goods for home consumption.- The importer of any warehoused goods may clear them for home consumption if- (a) a bill of entry for home consumption in respect of such goods has been presented in the prescribed form; (b) the import duty leviable on such goods and all penalties,rent, interest and other charges payable in respect of such goods have been paid; and 15 (c) an order for clearance of such goods for home consumption has been made by the proper officer.” Provided that the owner of any warehoused goods may, at any time before an order for clearance of goods for home consumption has been made in respect of such goods, relinquish his title to the goods upon payment of rent, interest, other charges and penalties that may be payable in respect of the goods and upon such relinquishment, he shall not be liable to pay duty thereon.” We have already noticed that the proviso to Section 68 was inserted w.e.f. 14.5.2003 and was not part of statute book earlier thereto. While there can be no doubt about it that proviso is prospective in operation and cannot relate to earlier transactions of clearance of imported goods for home consumption prior to the date of insertion of proviso but it does operate on the facts which have already come into questions before the insertion of the proviso. The proviso on its plain terms makes it clear that where the goods are stored in warehouse and no order for its 16 removal for home consumption has been made by the proper officer and before any such order of removal is made, the owner of the goods has option to relinquish the title to the goods in favour of the revenue upon payment of rent, interest and other charges and penalty that may be payable in respect of goods and on such relinquishment having been made, he is not liable to pay duty thereon. Apparently, while Section 72 (1)(b) enables the proper officer to charge duty on warehoused goods which have remained beyond the permissible period for which they were permitted to remain in warehouse, Section 68 gives an option to the owner of such goods to relinquish his title to such goods before order for clearance of such goods for home consumption has been made by the proper officer. Sub-section (2) of Section 72 also has relevance in this context which empowers the proper officer to detain goods at warehouse and select such portion of such goods detained in any warehouse, which 17 in his opinion may be sufficient for the purpose of recovering duty levied under Section 72(1) and sell the same. Apparently, there is no disharmony between sections 68 and 72 in relation to the exercise of power by the proper officer as well as exercise of the option by the owner of the goods. It is within the domain of the proper officer not to extend the period for retaining goods in warehouse and raise a demand under Section 72(1)(b) and it is in the domain of the owner of such goods that in such circumstances, he may mitigate his liability by relinquishing his title to the goods in favour of the Revenue upon payment of rent, interest and other charges and penalty as may be payable under the Act and then the proper officer can deal with such goods in the manner he likes for the purpose of effecting recoveries. But in such event law specially envisage that no duty is payable on such goods. In such event, the property having vested in respondents is not available for effecting recoveries from 18 the owner which is due in relation thereof in respect of rent, interest, other charges and penalty that is payable otherwise then relinquish in favour of revenue. Apparently, under proviso to Section 68 an option is given to the assessee to relinquish his ownership in favour of the revenue in lieu of duties payable thereon. The other liabilities remaining recoverable from him. Therefore, we are unable to sustain the reasoning of the Adjudicating Authority that the case must first come within the domain of Section 68 to invoke the proviso. If the importer is able to pay full duty, the question of exercise of option for relinquishment would not arise. If the order for removal of such goods from warehouse for home consumption has been made by the proper officer, the proviso would not apply. Bill of entry for home consumption can also be under Section 46. Therefore, to permit exercise of option only on fulfillment of clause (b) of Section 68 of the Act would be to render the effect of proviso nugatory. Apparently, the proviso was only to mitigate hardship arising from non-removal of imported goods 19 from warehouse. It is only in clause (b) that the imported goods warehoused and because of non-extension of time or other reasons some of which are demonstrably present in the present case, as noticed above the option has been given to the owner of the warehoused goods to exchange his title in lieu of liability of goods to Duty. Apparently the proviso which came into force only on 14th May, 2003 could not have invoked earlier. The facts noticed by us clearly goes to show that the assessee has pleaded the financial difficulties which were demonstratively there on account of the company of which the unit in question was a part had negative networth and had been declared as sick industry by the BIFR under the Sick Industrial Companies (Removal of Difficulties) Act, 1985 and the rehabilitation package approved by the Appellate Authority was stayed by the orders of the High Court and was not being implemented. The other available recourse for mitigating the duty liability, the assessee has availed way back on 14th March, 2003 before the demand dated 20th 20 March, 2003 was raised seeking permission to reexport the goods which was under active consideration of appropriate authority, and the request was pending until he made an application for relinquishment of his title of goods in question. It is also apparent that the revenue was considering the extension of period for warehousing facilities until the application seeking permission to reexport the machine is decided or permission is granted notwithstanding that the order under Section 72 (1)(b) has already been made way back on 23rd March, 2003. The parity can be seen that while Section 68 provides for procedure for seeking an order of clearance of particular goods from warehouse for home consumption, section 69 provides for procedure for clearance of goods from warehouse for the purpose of re-export. If the order passed under Section 72(1)(b) is considered as bar against the invoking provisions to section 68 or invoking section 68 itself, it shall obviously be barred in maintaining the application under Section 69. Apparently, the respondents were not considering 21 the application under Section 69 to be not maintainable. The only condition for inviting application of proviso to Section 68 is that before the importer could exercise his option for relinquishing his title in the goods no order of clearance of such goods for home consumption had been made. Apparently, the other conditions implicit in such option is that the goods must still be in warehouse where from they can be cleared for the home consumption so that when the relinquishment is made the importer has also the option to seek clearance of such goods for home consumption. We are, therefore, not impressed with the contention raised by the Revenue. In case where the order under Section 72 (1)(b) has been made, it does not entitle the owner of the goods to remove the goods from warehouse without getting proper authorization for such removal from the proper Authority. Suffice it to say that even when order under Section 71(2) has been made, for clearance of the goods he was still required to seek proper authorization for such removal in respect of goods and make payment. Thereafter only order of 22 clearance of such goods could have been made. Therefore, the procedure under Section 68 was still required to be followed before the removal of goods are not necessarily for the purpose of invoking the proviso absolving him from the liability to pay Duty. It is important to notice that relinquishment does not absolve him from the total liability but only the liability to pay the duty is appropriated towards goods which vest in Revenue or such other specified authority on relinquishment of title by the owner of the goods. For other liabilities in respect of such goods including the rent, interest with effect from the date the duty becomes payable and other charges that may be payable under the Act in respect of such goods still remain payable and receivable. Therefore, the contention that before invoking proviso to Section 68 the condition of Section 68 must be fulfilled as a condition precedent and non- exercise of power under Section 72 cannot be accepted. Reliance has been placed in Kesoram Rayon Vs. Collector of Customs, Calcutta, 1996 (86) E.L.T. 464 (SC) (Supra). Apparently, it was not controverted before 23 the Supreme Court that no Duty is payable by the importer on the imported goods housed at warehouse beyond the prescribed or extended period and no relief in terms of Sec.68 was claimed and interpretation of Section 68 since its amendment w.e.f. 14.5.2003 was not the issue in contention. The only issue raised and decided by the Hon'ble Apex Court was about the rate of duty prevailing and on which date is to be applied in determining Duty payable on such goods u/s 72(1) of the Customs Act. Whether the rate prevailing as on the date of actual removal of goods from warehouse under Section 15(1)(b) was to be applied or the date on which the importer became liable to Duty under Section 72(1) when the period of overstay commenced. The contention was in respect of effect of exemption of notification dated 25th May, 1984. The issue about statutory procedure of removal and statutory option made available to owner of imported goods before the same are authorized for removing the same for home consumption in respect of goods lying in warehouse was not the issue before the 24 Supreme Court. Question of ambit and scope of proviso to Section 68 was not before Supreme Court, nor it could have been because the said proviso had not come into force at that time. The primary issue raised before the Supreme Court was about the rate at which the duty is to be levied under Section 72(1)(b). It was a case in which the goods have been over stayed in the warehouse and the duty has been levied under Section 72(1)(b). The proper officer has levied the duty at the rate it was chargeable on the date the extended period for keeping the goods had expired. Relying on Rule 15(1)(b) the importer has contended that for invoking the rate of duty, date of actual removal is