1 mgj IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Writ Petition No. 508 of 1993 Hasmukhlal Nandlal Desai ) carrying on business in the ) firm name and style of Hima ) Dye Chem Corporation as the ) sole proprietor thereof having) his office at 92A, D Souza ) Cross Lane, Vadgadi, ) Bombay 400 003 ) ..Petitioner vs. 1 Union of India ) 2 Central Board of Excise and ) Customs, having its office ) at North Block, New Delhi ) 3 Collector of Customs ) 4 Asstt.Collector of Customs ) Group 2-A ) Respondent nos. 3 & 4 having) their office at New Customs ) Office at New Customs House ) Ballard Estate,Bombay 400038) ..Respondents Mr.Prakash Shah i/b PDS Legal for petitioner Mr.A.S.Rao for respondents. CORAM: V.C.DAGA AND K.K.TATED JJ 12th April ,2010 2 J U D G M E N T: (Per K.K.TATED J.) 1 By this petition filed under Article 226 of the Constitution of India, the petitioner is seeking several reliefs including declaration that the amended provisions of sections 47 and 61 of the Customs Act, 1962 are only prospective and not retrospective. But considering the events that took place during pendency of this petition, Mr. Shah, learned Counsel appearing for the petitioner makes a statement that he is restricting his prayer to the extent of a direction to the respondents to pay the amount realised by them in auction of the goods during the pendency of petition. THE FACTS: 2 The brief facts of the matter are as under: 3 ` The petitioner is a sole proprietor carrying on business in the name and style of M/s Hima Dyechem Corporation. During the 3 course of his business, the petitioner imported the consignment of Aniline Oil from M/s I.C.C. Industries Inc. New York (U.S.A.) under invoice No.11-6527 dated 30th November, 1989 for 22.95 M.T. 4 The petitioner, on arrival of the goods, filed 3 Bills of Entry for home consumption dated 26th and 29th December, 1989 respectively. In the said bills of entry the petitioner declared the invoice value of U.S. $ 870.00 per M.T. for the purpose of assessment. The total declared CIF value under the said 3 bills of entry in Indian currency was Rs.3,35,994/- 5 It is the case of the petitioner that on 12th January, 1990 the respondents issued a Query Memo objecting to the declared CIF value of US$ 807 per M.T. in respect of the goods covered under the said 3 bills of entry. The Appraising Officer of Group II, New Customs House, Mumbai did not accept the 4 declared value of the goods covered by those 3 bills of entry. Because of the dispute about the valuation, the petitioner kept those goods in bonded warehouse on 31st March, 1990 under section 49 of the Customs Act. 6 Respondent no.3 issued a show cause notice dated 10th May, 1990 to the petitioner calling upon him to show cause as to why CIF value of the goods should not be taken at US $ 1240 per M.T. The petitioner filed his reply to the said show cause notice dated 16th May 1990 disputing the valuation shown in the show cause notice. Thereafter the respondents granted personal hearing to the petitioner on 16th May 1990. Considering the reply filed by the petitioner to the said show cause notice, respondent no.4 by his order dated 21st May 1990 determined the value of the goods at US $ 1240/- per M.T. CIF in terms of Rule 5 of the Customs 5 Valuations Rules,1988. 7 Thereafter, the Bond Department of the respondents issued a notice dated 15th October, 1990 to the petitioner asking the petitioner to clear the said goods kept in their bonded warehouse failing which the respondents would auction the said goods. 8 Aggrieved by the said order dated 21st May, 1990 passed by respondent no.4 and the notice dated 15th October, 1990, the petitioner filed writ petition No.3206 of 1990 in this Court. 9 In the aforesaid Writ Petition, this Court was pleased to pass an order on 19th November, 1990 and set aside the order dated 21st May, 1990 passed by respondent no.4 and directed the respondents to give inspection of all the documents and issue fresh show cause notice and hear the petitioner and pass appropriate order. This Court had also directed the respondents not to auction the 6 goods and allow the warehousing thereof till the matter is finally adjudicated. 10 It is the case of the petitioner that show cause notice was not issued by respondents for a considerable time, though this Court had directed by its order dated 19th November, 1990. The petitioner was therefore required to write several letters to the respondents for taking appropriate action. It is the case of the petitioner that ultimately on 16th April, 1991 respondent no. 4 issued a show cause notice without giving any inspection of the documents on the basis of which the show cause notice was issued. 11 The petitioner by his letter dated 25th March, 1992 called upon the respondents to comply with the order passed by this Court in Writ Petition No.3206 of 1990 on 19th November, 1990. In the said letter the petitioner pointed out that this Court had directed the respondents to issue a fresh 7 show cause notice to the petitioner incorporating all the material on which they may wish to rely upon in relation to the valuation of the subject goods, namely, Anilin Oil . He further pointed out to the respondents that inspite of several letters they failed to give inspection of the documents on which the respondents desired to rely upon for calculating the fair value of the imported goods. 12 It is the case of the petitioner that though the petitioner had written several letters since 6th April, 1991 the respondents failed to furnish the documents on which they were relying in the show cause notice, as ordered by this Court in Writ Petition No.3206 of 1990. 13 The petitioner on 26th June, 1992 filed a further detailed reply to the show cause notice. Thereafter respondent no.4 by his order dated 22nd July, 1992 accepted the 8 explanation of the petitioner and accepted that the price paid by the petitioner for the said goods was correct price and ordered clearance of the goods without loading the invoice value and without charging any fine or penalty in the matter. Respondent no.4 accepted that the price as declared originally in the bill of entry dated 20th December, 1990 was the correct value. Respondent no.4 by his order dated 26th July 1992 allowed the clearance of the goods covered under the Bill of Entry filed for home consumption. 14 Thereafter the petitioner submitted those bills of entry for payment of duty and clearance of the goods. At that time the Bond Department of the respondents affixed a stamp on the Bill of Entry stating that the petitioner is required to pay interest at the rate of 18% p.a. from 31st June, 1990 to 22nd December, 1991 and at the rate of 20% p.a. 9 from 23rd December, 1991 till actual date of payment of duty. Because of the said endorsement on the bills of entry the petitioner by his Advocate s letter dated 22nd July, 1992 informed the respondents that the payment of interest at the rate of 18% and 20% does not arise and requested the respondents to allow clearance of the goods without demanding interest as per the said endorsement made on the bill of entry. Inspite of several requests the respondents failed and neglected to allow the petitioner to clear those goods without payment of interest. Therefore, the petitioner preferred the present writ petition in this Court on 2nd March, 1993. In this petition the petitioner claims the following reliefs: (a)that this Hon ble Court be pleased to declare that the amended provisions of Sections 47 and 61 of the Customs Act, 1962 are only prospective and not retrospective. 10 (b) that this Hon ble Court be pleased to issue a writ of certiorari or any other appropriate writ, order or direction in the nature of certiorari calling for the petitioner s case records and after going into the question of legality, propriety and otherwise of the same, quash and set aside the impugned action incorporated in the bills of entry (Exh.B-1, B-2, B-3 hereto). (c) that this Hon ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus ordering and directing the respondents their officers, servants and agents:- i) to immediately order and allow clearance of the petitioner s goods covered under Bills of Entry (Exhs.B-1, B-2, B-3 hereto) without charging any interest for any period as mentioned thereon. ii) that the respondents, their officers, servants and agents be further directed to immediately withdraw and/or cancel and not to execute, enforce, and carry on with the said endorsements made on the bills of entry (Exh.B-1, B-2,B-3 hereto) or claiming or charging or recovering any amount of 11 interest at the rate mentioned therein. iii) that the respondents, their officers, servants and agents be further directed to pay to the petitioner a sum of Rs. 9,83,637/- with interest at the rate of 20% per annum till the payment as per the particulars annexed herein (Exh.J hereto.) (d) that pending the hearing and final disposal of the petition, this Hon ble Court be pleased to pass a mandatory order or injunction and direct the respondents their officers, servants and agents:- (i) to immediately order and allow clearance of the petitioner s goods covered under Bills of Entry (Exh.B-1, B-2, B-3 hereto) without charging any interest for any period as mentioned thereon. (ii) that the respondents, their officers,servants and agents be further directed to immediately withdraw and/;or cancel and not to execute, enforce and carry on with the said endorsements on the Bills of Entry (Exh.B-1, B-2,B-3 hereto) or claiming or charging or recovering any amount of interest at the rates mentioned. (iii)that the respondents, their officers, servants and agents be 12 further directed to pay to the petitioner a sum of Rs. 9,83,637/- with interest at the rate of 20% per annum till payment as per the particulars annexed herein (Exh.J hereto.) (e) Ad-interim and interim reliefs in terms of prayer (d) above be granted. (f) that the petitioner be awarded costs; and (g) such other reliefs as may be found justified by this Hon ble Court in the circumstances of the case be granted. 15 This Court by an interim order dated 8th June, 1993 allowed the petitioner to clear the goods on furnishing Bank Guarantee of any nationalized bank, to the extent of 50% of the amount of interest claimed, in favour of the Collector of Customs and execution of a bond in respect of remaining amount of interest. It is the case of the petitioner that on 4th October, 1993 he submitted a certified copy of the order dated 8th June, 1993 passed by this Court to the 13 respondents. 16 The petitioner on 16th December, 1993 through his CHA submitted three bills, bond and the Bank Guarantee as directed by this Court on 8th June, 1993. At that time, the petitioner learnt that the respondents, notwithstanding the order passed by this Court on 19th November, 1990 restraining them from auctioning the goods, held auction on 12th July 1993 and delivered the goods to the auction purchaser on 17th August, 1993. 17 The aforesaid facts were brought to the notice of this Court by the petitioner and, therefore, this Court by its order dated 25th March, 1994 directed the respondents to deposit a sum of Rs.7,34,400/- being the auction money with the Prothonotary and Senior Master of this Court. 18 The respondents by their letter dated 13th April, 1994 deposited the said sum of Rs.7,34,400/- with the Prothonotary and 14 Senior Master, High Court, Bombay. Thereafter the petitioner preferred Notice of Motion No.151 of 1994 for withdrawal of the said amount. The said Notice of Motion was dismissed by this Court by order dated 15th April, 1994. SUBMISSIONS: 19 The main contention of the petitioner in this petition is that, the petitioner was not liable to pay interest at the rate of 18% p.a. from 13th June, 1992 to 22nd December, 1990 to 22nd December, 1991 and at the rate of 20% from 23rd December, 1991 till actual date of payment. 20 Learned Counsel appearing on behalf of the petitioner submits that the petitioner is regular importer and had imported the consignment for which the Bill of Entry for its clearance was filed on 26th December, 1989. As the objection of the respondents with regard to the goods being under invoiced 15 was without any basis and, ultimately, by an order passed by the respondents on 22nd July, 1992 the show cause notice was discharged and the value as declared by the petitioner originally was accepted. Therefore, between the period of 22nd December, 1989 till 22nd July 1992, the goods were held up due to the untenable action of the respondents, which the respondents lateron realised and passed the order directing clearance of the goods. These facts lead to an irresistible conclusion that the goods were unnecessarily and without any basis arbitrarily withheld by the respondents. 21 He further submits that the charging interest is only to see it that warehoused goods do not stay longer than absolutely necessary and there is quick and prompt clearance of goods from the warehouse, in order that facility may be availed of by other importer as well. The interest is thus 16 a payment to be made for a failure to clear the warehoused goods within a reasonable time or even within the extended time. He submits that the goods of the petitioner remained in bond not due to any action or inaction on the part of the petitioner but only due to the wrong action and inaction on the part of the respondents and the arbitrary attitude exhibited by the respondents. He thus submits that for such attitude and action on the part of the respondents, the petitioner cannot be made to pay any interest as claimed by the respondents and, therefore, the same is required to be set aside. 22 Learned Counsel appearing on behalf of the petitioner submits that prior to amendment of sections 47, 59 and 61 the provision for charging of interest was only in section 61(2)of the Customs Act which provided that if the goods remained in 17 warehousing for more than one year, the interest would be chargeable at the rate of 18% p.a. He further submits that the said provision is applicable only to the goods which remained beyond a period of one year i.e. in case the bonding continued beyond one year at the request of the bonder. He submits that the petitioner s goods remained in bond till 2nd July 1992 but not at the request of or insistence of the petitioner but due to the embargo put by the respondents themselves which was wholly unjustifiable. 23 He further submits that the claim made by the respondents upto the period 22nd July 1992 would even otherwise is not maintainable as the same is an attempt to nullify the orders passed by this Court on 19th November, 1990. 24 The learned Counsel appearing on behalf of the petitioner submits that the 18 claim of the respondents for charging interest at the rate of 18% p.a. from 31st June, 1990 to 31st December, 1991 is solely on the basis that the bonding which was carried out of the goods as per order passed by the officer under section 60 of the Customs Act, 1962 was on 31st March, 1990. He submits that stamp affixed on the bill of entry states that interest is payable from 31st June, 1990 itself is a claim discloses not only total non application of mind but also lack of knowledge of the Commissioner. In any event 3 months allowed was with regard to the unamended provisions of section 61 of the Customs Act, 1962 which allow bonding of the goods for a period of 3 months unless the same is extended as per the provisions of the Act. He submits that the officer of the respondents failed to consider that the goods were warehoused under the order and directions of this Court s order dated 19 th 19 November, 1990 and, therefore, they are not liable to pay interest during that period. 25 The learned Counsel appearing for the petitioner submits that in any case it is not possible for the respondents to return the goods since the same were sold by them in public auction and, therefore, this Court directed the respondents to return the sale proceeds along with interest. 26 In reply, the learned Counsel appearing for the respondents submits that as per public notice dated 23rd December, 1991 they are entitled to charge interest as claimed by them. Paragraph 2 of the said public notice reads as under: Another important change effected by Customs (Amendments) Act, 1991 is that warehousing period has been reduced to 30 days with no provisions for extension in respect of goods covered by section 61((1)(b). Further in respect of goods specified in Clause (b) of sub-section 1 of section 61 the Importer shall pay interest on the amount of duty @ 20% P.A. as specified under section 47 for the period from the expiry of 7 20 days from the date on which the Bill of Entry is returned to the Importer for warehousing the goods under section 59A till the date of clearance of the goods from the warehouse. He submits that in view of the public notice dated 23rd December, 1991 they are entitled to charge the said interest and, therefore, there is no question of refund of the said amount to the petitioner in respect of the auction of goods on 12th July 1993. 27 Learned Counsel appearing on behalf of the Revenue submits that in terms of the order of this Court dated 19th November, 1990 in Writ Petition No.3206 of 1990 the petitioner was given all material on which the respondents wanted to rely upon regarding the value and also gave inspection of all the documents relied upon by the respondents to the petitioner. 28 He further submits that the 3 bills of entries were completed on 27th July 1992 in compliance with the order passed by this 21 Court dated 19th November, 1990 in Writ Petition No.3206 of 1990. He submits that after the order of this Court was passed, the petitioner approached the respondents by letter dated 12th July 1993 for reassessment of all the three bills of entry as the duty of Aniline Oil was reduced by the Central Government but the petitioner did not produce the three bills of entry along with that letter dated 12th July 1993. He further submits that along with the letter dated 12th July 1993 the petitioner did not produce the 3 bills of entry, bond as well as bank guarantee as directed by this Court by order dated 8th June, 1993. The petitioner produced the bills of entry, bond and bank guarantee through his clearing agent on 16th December, 1993. After the three bills of entry were handed over to the petitioner, the clearing agent of the petitioner for the first time approached for change of duty by physically 22 producing the bills of entry only on 16th December, 1993. He submits that as the petitioner failed and neglected to pay the duty for a long time after the bills of entry were finally assessed on 22nd July 1992, the goods were sold on 12th July 1993 and ultimately delivered to the purchaser on 17th August, 1993. Therefore, he submits that there is no question of violating any order passed by this Court. 29 Learned Counsel appearing on behalf of the Revenue submits that pursuant to the order dated 25th March 1994 passed by this Court they deposited a sum of Rs.7,34,400/- in this Court on 13th April, 1994. The said amount represented the total sale proceeds received on the sale of the petitioner s goods. He further pointed out that as per the order passed by this Court on 15th April, 1994, Notice of Motion No.151 of 1994 filed by the petitioner was dismissed and the 23 respondents were allowed to withdraw the amount. He submits that inspite of that order it remained on the part of the respondents to withdraw the said amount from the Registry of this Court. Thereafter they took search of the register in the Accounts Department of this Court and it is noticed that the amount has been invested in Vijaya Bank, New Excelsior Branch on 9th April, 1996. This information is noted in Ledger book no.425 at page nos. 370/371. These facts are stated by the respondents in their affidavit dated 30th June, 2003. CONSIDERATION: 30 We have heard both sides at length. It is admitted fact that respondent no. 4 by his order dated 27th July 1992 accepted the explanation of the petitioner and accepted that the price paid by the petitioner for the said goods was correct price and ordered clearance of the goods without loading 24 invoice value and without charging any fine or penalty in the matter. It is also admitted fact that inspite of the restraint order of this Court against the respondents, they held auction on 12th July 1993 and disposed of those goods. Therefore, today the question remains only about the claim regarding auction proceeds which are lying with Prothonotary and Senior Master, High Court. The petitioner in his letter dated 27th July 1992 addressed to the respondents expressed that he was ready and willing to clear the goods from the day they bonded the goods i.e. 31st March, 1990 but because of the dispute about valuation and pending adjudication, he was not allowed to clear the goods for home consumption by the Department. Considering these facts we are of the opinion that when the petitioner was ready and willing to clear the goods immediately on 31st March, 1990, he was not 25 allowed to do so by the respondents because of the dispute about the valuation. The said dispute about the valuation was decided by respondent no.4 on 22nd July 1992 in favour of the petitioner. Petitioners goods remained in bond till 22nd July 1992 were not at the request or insistence of petitioner but due to the embargo put by the respondents themselves not allowing and restricting ex-bonding of the said goods. Therefore, we do not find any justification in the stand taken by the respondents for claiming interest at the rate of 18% p.a. from 31st June, 1990 to 22nd December, 1991 and at the rate of 20% p.a. from 23rd December, 1991 till actual date of payment. 31 On the other hand it is also admitted fact that the petitioner was liable to pay customs duty on the imported goods immediately at the time of clearance but the same remained to be paid because of the 26 valuation dispute. 32 Apex Court in the matter of Northern Plastics Ltd. Vs. Collector of Customs and Central Excise reported in 1999(113) E.L.T. 3(S.C.) held that during the pendency of the appeal if the Department disposed off the goods, in that case, the assessee is entitled to the money value of those goods. The relevant observations read thus: 7 As the order of confiscation of goods was held to be bad the goods were required to be returned to the owner thereof. As the order of confiscation was declared as illegal by this Court on the ground that there was no mis-declaration of the goods and that the applicant was entitled to import those goods on the O.G.L., the confiscated goods, if they had not been disposed of, would have