pvr 1 wp1781-95 IN THE HIGH COURT JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1781 OF 1995 M/s.SVA Udyog Viniyog Ltd. ...Petitioner vs. 1.The Union of India & Ors. ...Respondents --- Mr.Kamal Bulchandani i/b. Kamal & Co., for Petitioner. Ms.S.I.Shah, for Respondent no.7. Mr.A.S.Rao, for Respondent nos.1 to 4. Mr.Milan Bhise i/b. Milan Bhise & Co., for Respondent no.8. --- CORAM: D.K.DESHMUKH & N.D.DESHPANDE,JJ. DATED: 22nd December, 2010 P.C.: 1. The facts that are material and relevant for deciding this petition are that the petitioner has filed this petition challenging pvr 2 wp1781-95 the action of the respondent-Custom Authority denying the benefit of duty free clearance to Polyester Filament Yarn imported by the petitioner against freely transferable Advance Licences for the said goods, which the petitioner had acquired by transfer in its favour. The respondents denied such clearance on the ground that the original licence holders had not effected the exports at all and the original licence holders had fabricated shipping bills and forged bills of lading and for that reason the respondents seized the petitioner s goods on 25.9.1995. The petition was admitted by order dated 18.10.1995. By the said order, this Court made notices of interim relief returnable on 20.11.1995 and in the meantime directed that the clearance of the goods need not be withheld if the petitioner was willing to pay the customs duty in cash under protest. The petitioner had filed Bills of Entry for warehousing of the goods and as petitioner was not willing to pay duty, the Counsel for the petitioner applied to the pvr 3 wp1781-95 learned Single Judge that the respondents be directed to allow bonding of the goods to prevent further damurrage. This request on behalf of the petitioner is recorded in para 16 of the order of the learned Single Judge. However, Counsel for the respondents made a statement to the Court that the goods had already been seized by the respondents on 25th September,1995, and therefore, no further demurrage would or can be claimed from the petitioner. This is also recorded in para 16 of the order. Further, the learned Judge in para 16 of the order observed that in view of the statement made by the Counsel for the respondents, no order for bonding of the goods need be passed. 2. The notice for interim relief which was made returnable by the said order dated 18th October,1995 was disposed of by a learned Single Judge by his order dated 1.12.1995 declining to give interim relief prayed by the petitioner. In Appeal No.62 of 1996 preferred against the order, pvr 4 wp1781-95 the Division Bench by order dated 8th February, 1996, granted liberty to the petitioner to clear the goods on payment of duty under protest. The said order dated 8th February,1996 was modified by the Division Bench by order dated 17.5.1996 and liberty was given to the petitioner to clear the goods on payment of 50% of the duty and furnishing a bond for the balance amount. 3. Pursuant to the order of the Division Bench, the petitioner approached the Customs authorities to clear the goods in terms of the Division Bench order dated 17.5.1996. However, the Customs authorities claimed from the petitioner demurrage even for the period subsequent to the date of seizure i.e. 25.9.1995. The petitioner brought to the notice of customs authorities the statement made by their counsel before this Court that no demurrage would or can be claimed from the petitioner and requested to issue necessary detention certificate to the effect that the petitioner was not liable for pvr 5 wp1781-95 demurrage after the date of seizure. The department, however, informed the petitioner by letter dated 20.7.1995, that detention certificate could be issued only for three days after order dated 18.10.1995 of this Court. The petitioner again wrote to the respondents through its Advocate pointing out that their decision to give detention certificate for only three days after the order dated 18.10.1995 was incorrect inasmuch as Counsel for the respondents had clearly made a statement to the Court that in view of the seizure dated 25.9.1995 no further demurrage could or can be claimed from the petitioner. The Customs, however, by their letter dated 1.10.1996 contended that no such statement was made by their Counsel that no further demurrage would accrue on the goods. On the petitioner making a further representation to the respondents by its letter dated 26.8.1996, the respondents once again by their letter dated 3.9.1996 declined to issue detention certificate and contended that the agents of the shipping pvr 6 wp1781-95 company had on 20.11.1995 been allowed by the respondents to destuff and warehouse the goods. Being aggrieved by the Respondents action not to issue necessary certificate, the petitioner had taken out notice of motion no.358 of 1996 seeking necessary directions to the Respondents. That notice of motion was decided by the learned Single Judge of this Court by order dated 31.10.1996. The learned Single Judge in the order dated 31.10.1996 referred to the statement that was made on behalf of the Custom Authority before this Court and it was recorded by this Court which is to the following effect:- There learned Counsel for the petitioners makes an application to the Court that the Respondents may be directed to bond the goods to prevent recurring further demurrage. The learned Counsel for the respondents informs the Court that since the goods are already seized under the seizure memorandum dated 25h September,1995, no further demurrage would or can be claimed from the pvr 7 wp1781-95 petitioners. In view of this statement made bay the learned Counsel for the Respondents no order for application of bonding of the goods need be passed at this stage. The learned Single Judge thereafter observed thus:- In view of the clear and unequivocal statement made by the Advocate for the respondents and recorded by the learned Judge it is impermissible for the respondents to refuse the necessary certificate for the entire period. If the respondents had allowed bonding warehousing of the goods, the question of demurrage including container detention charges would not have arisen. As goods would have remained in customs custody, no harm could have been done to custom s interest. By making a statement that no further demurrage would or can be claimed from the petitioner the respondents persuaded the Court into not passing an order for bonding of the goods, which the petitioner was pvr 8 wp1781-95 claiming to stop further recurrence of demurrage. Having led the Court by such statement into holding that no order for bonding need be passed, the respondents are now seeking to resile from the said statement. IN my opinion, the stand taken by the respondents is totally unjustified. Having persuaded the Court not to pass any order on the petitioner s request for bonding the goods, it is not open for the respondents now to resile from their stand and refuse to grant the necessary certificate. Ultimately, the learned Single Judge granted that notice of motion in terms of prayer clause (a). Prayer clause (a) of that notice of motion reads as under:- (a)that the Respondents be ordered and directed to issue the requisite certificate/directions for waiver of demurrage for the period from the date of filing of Bills of Entry till clearance. 4. Consequent to this order the Additional pvr 9 wp1781-95 Commissioner of Customs issued a detention certificate dated 27.11.1996 for release of the goods. However, the Port Trust and the Shipping Company did not accept the detention certificate. Therefore, several letters were written by the petitioner to the Deputy Commissioner of Customs for release of the goods without requiring the petitioner to pay the demurrage and detention charges of the containers. It was pointed out by the petitioner that they have been put to undue hardship for no fault of their s. The petitioner s request to destuff the containers and put the goods in the warehouse was also rejected. Then the petitioner approached the Government of India by letter dated 19.1.1998 for release of the goods without requiring the petitioner to pay demurrage. 5. The petitioner had, in the meantime, challenged the order requiring the petitioner to pay custom duty on the goods. Ultimately, the matter was decided by the Tribunal by its pvr 10 wp1781-95 decision dated 19.7.2006 which reads as under:- The benefit of advance licences has been denied to the appellant who is transferee of the same on the ground that the same were procured by the transferor, by fraud. 2. After hearing both the sides, we find that the Larger Bench of the Tribunal in the case of Hico Enterprises Vs. Commissioner of Customs, Mumbai (2005(189)ELT 135 (Tri.LB)) has held that the benefit of the advance licences obtained by fraud or misrepresentation, cannot be denied to the transferee, who has procured the same for value. To the similar effect is the Bombay High Court decision in the case of Sanjay Sanwarmal Agarwal Vs. Union if India (2004(169)ELT 261 (Bom.)), inasmuch as, the issue is decided in favour of the appellant by the above referred decision, we set aside the impugned order and allow the appeal with consequential relief to the appellant. pvr 11 wp1781-95 Thus, the Tribunal found that the Petitioner was entitled to the release of the goods without paying any custom duties. This decision of the Tribunal has not been further challenged by the Customs Authorities and it has become final between the parties. 6. It is common ground that the goods of the petitioner which were imported were in four containers. Two of the containers were with the Respondent no.8 JNPT and two containers were with the Respondent no.7. It is also common ground that during the pendency of this petition, the Respondent no.8 has sold the goods which were in two containers in its custody for Rs.16,01,000/-. It is also common ground that Rs.8,00,500/- from the amount of sale proceeds has been paid by Respondent no.8 to the Custom authorities towards custom duty and the balance amount of Rs. 8,00,500/- has been retained and adjusted by Respondent no.8 JNPT towards sale expenses. As observed above, two containers were with pvr 12 wp1781-95 Respondent no.7. One of those two containers was cleared by the petitioner and that container has also been disposed of by the petitioner. One container, however, continues with the Respondent no.7-Central Warehousing Corporation. According to the Respondent no.8, it is entitled to adjust the amount of Rs.8,00,500/- from the amount of sale proceeds towards expenses and is also entitled to further amount from the petitioner towards demurrage. It is the case of the Respondent no.7 that the Respondent no.7 is not liable to release one container which it is holding without the petitioner paying the demurrage. The amount of demurrage that the Respondent no.7 claims is in excess of Rs.30 lakhs. The case of the petitioner, on the other hand, is that so far as the amount of Rs. 8,00,500/- paid by the Respondent no.8 to the Customs Authorities is concerned, the petitioner is entitled to the refund of that amount with interest because now as a result of the decision of the Tribunal it is an established position pvr 13 wp1781-95 that the petitioner is not liable to pay any custom duty. According to the petitioner, the petitioner is also entitled to the refund of the amount of Rs.8,00,500/- from the amount of sale proceeds from the Respondent no.8. According to the petitioner, the Respondent no.8 cannot claim Rs.8,00,500/- as the amount of sale expenses. According to the petitioner, the Respondent no.8 is also not entitled to claim any amount as demurrage from the petitioner. According to the petitioner, similarly Respondent no.7 is also not entitled to claim any demurrage from the petitioner for the one container that it is holding. 7. So far as the question of refund of the amount of Rs.8,00,500/- which is paid by the Respondent no.8 to the Customs Department is concerned, the learned Counsel appearing for Customs Department stated that the Customs authorities are willing to refund the amount to the petitioner within such time as may be fixed pvr 14 wp1781-95 by this Court. 8. Therefore, the only questions that are required to be considered are :- (i) Whether the Respondent nos.7 and 8 are entitled to claim demurrage from the petitioner though the goods came to be detained due to fault of the Customs authorities?; and (ii) Whether the Respondent no.8 is entitled to adjust the amount of Rs.8,00,500/- towards sale expenses for selling the goods of the petitioner which were in their custody? 9. The learned Counsel appearing for Respondent nos.7 and 8, relying on the judgment of the Supreme Court in the cases of International Airports Authority of India Vs. Grand Slam International, 1995(77) E.L.T. 753(S.C.) , contended that even assuming that the goods were wrongly detained by the Customs Authorities, the importer is not entitled to waiver of the demurrage as a matter of right. The pvr 15 wp1781-95 learned Counsel took us through the judgment of the Supreme Court in the case of Grand Slam International referred to above. The learned Counsel appearing for petitioner, on the other hand tried to distinguish the judgment of the Supreme Court in the Grand Slam International case, relying on the judgment of the Supreme Court in the case Union of India & Ors. Vs. Sanjeev Woollen Mills, (1998)9 Supreme Court Cases 647 . He contended that in the present case the petitioner had applied for bonding of the goods to the Court, but the Court did not grant that prayer only because a statement was made before the Court on behalf of the Customs Authorities that no demurrage would be claimed on the seized goods. The learned Counsel submits that the goods were not released even after detention certificate was issued because the demurrage was not paid. The learned Counsel submits that in this case it will be harsh and unreasonable to require the petitioner to pay demurrage though it is the authorities of pvr 16 wp1781-95 the Customs Department who are entirely at fault for wrongly detaining the goods. The learned Counsel submits, after taking us through the observations of the Supreme Court in paragraph no.43 of its judgment in Grand Slam International case that the Government of India has power to waive demurrage, and therefore, in any case directions should be issued to the Government of India to consider the application of the petitioner for waiver of the demurrage. The learned Counsel submits that it is extremely unreasonable on the part of Respondent no.8 to adjust the amount of Rs.8,00,500/- towards only sale expenses. He submitted that by no stretch of imagination it can be said that the Port Trust incurred expenses of Rs.8,00,500/- for selling the goods which are worth Rs.16,01,000/-. He submitted that an order should be made directing Respondent no.8 to refund that amount. 10. Now taking the first question for consideration that though the goods were pvr 17 wp1781-95 detained solely because of the fault on the part of the Customs Authorities, the importer i.e. the petitioner is liable to pay demurrage, in our opinion, the learned Counsel appearing for Respondent nos.7 and 8 rightly relied on the judgment of the Supreme Court in Grand Slam International case. The Grand Slam International case was decided by the bench of the Supreme Court presided over by three learned Judges of the Supreme Court. Perusal of the judgment delivered by Justice R.M.Sahai shows that he held that the appeals before the Supreme Court were liable to be dismissed. Whereas Justice S.P.Bharucha and Justice Venkatachala by their separate judgments held that the appeals were to be allowed. Thus, the view expressed by Justice S.P.Bharucha and Justice Venkatachala constitute majority opinion. Perusal of the judgment of Justice S.P.Bharucha shows that he considered the law laid down by the Supreme Court in its judgment in the case M/s.Trishul Impex Vs. Union of India, 1992(58) E.L.T. 182 , then pvr 18 wp1781-95 the judgment of the Supreme Court in the case Trustees of the Port of Madras Vs. M/s.Aminchand Pyarelal & Ors, (1976)1 S.C.R.721 and the judgment of the Supreme Court in the case Board of Trustee of the Port of Bombay Vs. Indian Goods Supplying Co., (1977)3 S.C.R.343 and the judgment of the Supreme Court in the case Board of Trustees of the Port of Bombay Vs. Jai Hind Oil Mills Co. & Ors, 1987(30)E.L.T.633 , and in paragraph 31 has observed thus:- 31. This Court in the cases aforementioned, therefore, held that the Board of Trustees of a port was, under the statute that created it, entitled to charge demurrage even in respect of periods during which the importer was unable to clear goods from its premises for no fault or negligence on his part. It was held that the Boards were entitled to charge demurrage even in respect of periods during which the importer was unable to clear goods because of the detention thereof by the Customs Authorities or the Authorities under pvr 19 wp1781-95 the Import Trade Control Regulations, which detentions were thereafter found to be unjustified. This Court also recognised that the Boards were entities in their own right so that the courts could not direct the Customs Authorities to issue a detention certificate without hearing the Board concerned. This was because the issuance of a detention certificate had the effect of reducing the amount of demurrage that the Board would otherwise have charged. 11. Thereafter, the learned Judge considered the contention raised before the Supreme Court that because of the detention certificate issued, the Customs Authorities became liable to pay amount of demurrage for the period covered by the detention certificate issued by it and in paragraph 35 the learned Judge has observed thus: 35. It was submitted by learned Counsel for the first respondents that the judgments in the cases of pvr 20 wp1781-95 M/s.Aminchand Pyarelal, Indian Goods Supplying Co. and Jain Hind Mills Company decided only that an importer had to pay demurrage though the delay in clearing his goods was not due to his default or negligence. It was submitted that the contention in these appeals was different, namely, that the Authority was the custodian of the Customs Authorities and was obliged, by reason of the detention certificates issued by the Customs Authorities, not to charge demurrage for the periods covered by the detention certificates. The judgments aforementioned do not only hold that an importer is liable to pay demurrage though he is not responsible for the delay in clearing his goods. The judgments deal with detention certificates issued by the Customs Authorities and hold that the importer is liable to pay demurrage at the reduced rate prescribed by the policy framed in that behalf by the Boards even for the period for which a detention certificate has been issued. The judgments recognise that the Boards are entities in their own pvr 21 wp1781-95 right and that even the courts cannot compel the Customs Authorities to issue detention certificates without first hearing the Board concerned, because detention certificates have the effect of reducing the revenues of the Boards. The Boards and the Authority being similarly placed, the judgments determine the questions raised in these appeals. In our opinion, the observations made by Justice S.P.Bharucha in his judgment in paragraphs 40 and 41 are also relevant. They read as under:- 40. None of these provisions entitles the Collector of Customs to debar the collection of demurrage for the storage of imported goods. They do not entitle him to impose conditions upon the proprietors of ports or airports before they can be approved as Customs ports or Customs airports. Section 45 provides that all imported goods imported in a Customs area must remain in the custody of the person who has been approved by the Collector of Customs pvr 22 wp1781-95 until they are cleared and such person is obliged not to permit them to be removed from the Customs area or otherwise dealt with except under and in accordance with the permission of the Customs Officer. Section 45 does not state that such person shall not be entitled to recover charges from the importer for such period as the Customs Authorities direct. 41. The purpose of the Customs Act on the one hand and the Major Port Trusts Act and the International Airports Authority Act on the other hand are different. The former deals with the collection of Customs duties on imported goods. The latter deals with the maintenance of sea-ports and airports, the facilities to be provided thereat and the charges to be recovered therefor. An importer must land the imported goods at a sea-port or airport. He can clear them only after completion of Customs formalities. For this purpose, the sea-ports and airports are approved and provide storage facilities and Customs officers are accommodated pvr 23 wp1781-95 therein to facilitate clearance. For the occupation by the imported goods of space in the sea-port or airport, the Board or the Authority which is its proprietor is entitled to charge the importer. That until Customs clearance, the Board or the Authority may not permit the importer to remove his goods from its premises does not imply that it may not charge the importer for the space his goods have occupied until their clearance. Justice Venkatachala concurs with the view taken by Justice S.P.Bharucha. The observations made in paragraphs 65 and 66 in the judgment of Justice Venkatachala, in our opinion, are relevant. They read as under:- 65. From the above decisions of this Court it becomes clear that an authority created under a statute even if is the custodian of the imported goods because of the provisions of the Customs Act,1962, would be entitled to charge demurrages for the imported goods in pvr 24 wp1781-95 its custody and make the importer or consignee liable for the same even for periods during which he/it was unable to clear the goods from the Customs area, due to fault on the part of the Customs Authorities or of other authorities who might have issued detention certificates owning such fault. 66. Thus, the above decisions of this Court which uphold the power of Ports Trusts created under Ports Act to levy and collect demurrage charges for goods they keep as Custodians for Customs Department from the consignees notwithstanding the detention certificates issued by the Customs Department clearly support the view I have taken that the IAAI, an authority constituted under the International Airports Authority Act, 1971, when is entitled to collect charges for keeping custody of the imported goods by regulations made thereunder and according to its policy, the Collector of Customs or his delegatee could not direct the IAAI by issuance of a detention pvr 25 wp1781-95 certificate to release the goods of the importer without collection of the charges liable to be paid in respect thereof, inasmuch as the Collector of Customs or his delegatee has not been empowered under the provisions of the Act or its Rules or its Regulations to direct release of the imported goods without collection of keeping charges, for the keeping of which by the IAAI, charges are to be paid under the Rules made under the International Airports Authority Act,1971. Thus, the law laid down by Three Judges bench of the Supreme Court on the subject supports the case of Respondent nos.7 and 8 that they are entitled to claim demurrage from the petitioner though the goods were detained for no fault of the petitioner and though the detention certificate was issued by the Customs Authorities. 12. Now so far as the judgment of the Supreme Court in the case Sanjeev Woollen Mills pvr 26 wp1781-95 referred to above, which was relied on by the learned Counsel appearing for petitioner is concerned, perusal of that judgment shows that the Delhi High Court had directed the Customs Authorities to pay the demurrage charges because the Delhi High Court found that the conduct