Case: International Airports Authority Of India Etc. Etc Vs. M/S Grand Slam International &amp; Om Etc. Etc

1. International Airports Authority of India (hereinafter referred to as IAAI) and the Central Warehousing Corporation, Container Freight Station, Patparganj (in brief CWC) obtained leave of this Court under Article 136 of the Constitution of India against direction issued by the High Court of Delhi for release of imported goods without payment of any demurrage charges for the period for which detention certificate had been issued by the Customs Authorities.2. What persuaded the High Court to take this view in favour of the respondents was founded on construction of Section 45(2) of the Customs Act, 1962 ("Act" for short) and issuance of detention certificate by the Customs Authorities. What is the nature of the certificates? Whether they arc binding on the IAAI? Is there any conflict in the Public Notice issued by the Customs Authorities and Regulations framed by the IAAI, are some of the questions which arise for consideration in these appeals . But before adverting to these issues facts in brief may be mentioned.3. In Appeal No.798 of 1992 the respondent filed with the Customs Authorities bill of entry on cargo terminal along with all documents to seek clearance of goods, namely, printing papers etc. of CIF value of Rs.17, 846.00. The valuation given in the bill of entry was objected to by Additional Collector of Customs, and he passed an order on 8th November 1989 enhancing the value of the goods and directing confiscation of the same. In appeal the Customs, Excise &Gold (Control) Appellate Tribunal, New Delhi quashed the order of the Additional Collector of Customs on 3rd July 1990. Since the order enhancing the valuation and directing confiscation was quashed the Collector of Customs issued detention certificate from 7.8.1989 to 12.7.1990. It was mentioned in the certificate that the detention was due to case of the respondent pending before the Collector and, in the appeal. The respondent. the reupon applied for waiver of the demurrage charged for the relevant period. On 18th December 1990 it presented an application showing as out of charge of the Customs. But on 9th January 1991 it was informed by the appellant that the total liability of the demurrage charges was Rs. 1, 49, 100/out of which Rs.79, 364/was waived for the period of detention that is, 7.8.89 to 12.7.90. The appellant further condoned the period from 18.12.90 to 9.1.91 as the application for waiver was received and processed during this period. According to the appellant the respondent was liable to pay Rs, 69, 736/as on 9.1.91 and thereafter the liability was Rs.300/In Appeal No.4227 of 1992 the respondent imported a consignment of wool waste. It was seized by the Collector of Customs under Section 1 10 of the Act as on sample examination it appeared to be synthetic waste which was restricted item which could not be imported without a valid import licence. The respondent was issued notice to show cause why the goods of declared value of Rs. 1, 93, 237/should not be confiscated under Section 111(d) and III (in) of the Act and action under Section 112 be taken. The explanation of the respondent that test being based on sample drawn on 10% examination was not correct nor did it represent test of entire consignment, was not accepted. And the respondent was given an option to clear the goods on payment of Rs.50, 000/as fine and in addition penalty of Rs. 1, 00,In appeal on test of 7 1 % of consignment by the chemical examiner it was held that consignment was wool waste. Consequently the appeal was allowed. And in :pursuance of the order of the Tribunal the Additional Collector of Customs passed the order dated 17th December 1990 directing release of the On 24.1.1991 the Assistant Collector sent a letter to the appellant that since the goods of the respondent were seized by Customs Department on 29th April, 1986 and they have been directed to be released by the Additional Collector of Customs on 17.12.1990 the, demurrage/ ground rent and other charges accrued on consignment from 29.4.1986 to 29.12.1990 may be waived. The appellant replied this letter on 25.1.1991 informing the Assistant Collector of Customs that the matter for waiver of ground rent for the period 31.1, 1987 to 29.12.1990 has been referred to the Regional Office/Head Office. But the Assistant Collector, Customs was requested to inform the importer that they will have to bear entry fee, handling and insurance charges and ground rent after 29.12.1990 in case the Head Office agrees for waiver.5.In Appeal No. 3971 of 1992 the respondent had importedcable sealing system. The clearance of goods was claimed under Tariff Item No.85.47 on payment of duty @ 135.75%. The department on the other hand directed it to be cleared by paying duty @ 181.75% under Tariff Item No.39. However, the claim of the respondent was ultimately accepted. And provisional clearance was granted on payment of demurrage charges. After the claim was accepted the respondent wrote a letter to the appellant that since the claim had been accepted by the Customs Authorities and IAAI at the time of release had stated that this question of refund shall be considered after final decision was taken by the Customs Authorities the amount of Rs.3, 26, 645/s demurrage may be refunded. But the respondent was informed that the claim of refund was notfirst respondents had imported goods by air and filed bills of entry with the Customs authorities at the Delhi Airport, which is the property of the Authority. The Customs authorities detained the goods. Ultimately, they were released and the Collector of Customs issued detention certificates for the periods of the detentions. The first respondents thereupon applied to the Authority for waiver of demurrage charges for the periods covered by the detention certificates. The first respondents calculated demurrage, granting for these, periods waiver on a graded scale. The first respondents preferred writ petitions before the Delhi High Court, impleading the Union of India and the Authority, challenging the requirement to pay demurrage for the periods for which the detention certificates had been issued. The High Court took note of the decision of an earlier Division Bench in the case of MI s. Trishullmpex v. Union of India 1991 (2) Delhi(Lawyer) 1 = 43Delhi Law Times 538). The, High Court took the vie w that since the Authority was the custodian on behalf of the Customs authorities, the Authority was not entitled to recover any amount on account of demurrage charges for the periods for which detention certificates had been issued.25. The judgments and orders under appeal, are contrary to the judgment of: the Delhi, High:Court in the case of M/s. Trishul Impex (ibid) as also the decisions of this Court in the cases of Trustees of the Port of Madras v. M/s. Aminchand Pyarelal &Ors., (1976): 1 SCR 721 Board of Trustee of the Port of Bombay v. Indian Goody Supplying Co., , 1977 (3) SCR 343 , and Board of Trustees of the Port of Bombay v. Jai Hind Oil Mills Company &Ors., 1987 (1) SCR 932.

Reasoning:
9. The imported goods are detained in the customs area either for assessment of duty under Section 17(3) and 17(4) of the Act or for clearance under Sections 45 to 47 of the Act. These appeals arc concerned with detention for clearance. The levy of demurrage for detention at the instance of Customs Department during adjudication proceedings engaged attention of the p 161 Government even in past.It appears the Col lector of Customs, New Delhi in order to overcome this difficulty and for maintaining and regulating control over goods which arc unloaded at Indira Gandhi International Airport, issued Public Notice in 1986 in exercise of powers vested under Sections 8, 33, 34 and 45 of the Act read with Rules 56, 57, 58 and 59 of the Aircraft Rules, 1920. Paragraph (a) of it specifies the limits of customs area as whole of existing area constituting the Indira Gandhi International Airport, New Delhi including domestic arrival and departure area, Cargo Terminal New International Terminal Complex (CTNITC for short) and the entire premises of the Central Warehousing Corporation located at Gurgaon Road, New Delhi excluding M/s IAAIs Import Cargo Warehouse (Monkey torn). Paragraph (b) approves all places where parking/halting of aircraft is permitted by the Civil Aviation Depart. merit, the International Airport Authority of India for unloading/loading of imported/ exp ort goods. Paragraph (c) assigns functions under Sections 33 and 34 of the Act to the officers of the Customs/Air Customs posted at IGI Airport. Paragraph (d) approves M/s IAAI as custodian of the cargo under Section 45 of the Act. The cargo is required to be stored in IAAIs CTNITC subject to the conditions(i) that the cargo shall be subject to the control of customs; (ii) that M/s IAAI shall maintain detailed account of all imported and exports goods received by them as custodia n and shall produce such account for inspection by a gazetted officer ofis thus obvious that the Notice was issued to carry out purposes of the Act. Section 156 empowers the Central Government to frame rules and Section 157 empowers the Board to make regulations consistent with the Act to carry out the purposes of the Act. Section 152 empowers the Central Government to issue notification that any power exercisable by the Board under the Act may be exercised by the Collector of Customs. It is not claimed that no notification was issued by the Central Government empowering the Collector to exercise the powers of the Board. Therefore, the Collector could exercise the same power as the Board. Consequently, the Notice issued by him cannot be said to be invalid. It must be assumed to have been issued in exercise of powers under Section 157 to carry out the purposes of the16 of the International Airports Authority Act, 1971 is the only Section which lays down the functions which are required to be performed by the IAAI. Clause (d) of subsection (3) of Section 16 empowers the IAAI to establish warehouses at the airport for the storage or processing of goods. This would include providing for levy of charges for storing of goods, handling it, insurance etc. And on failure to pay the charges to dispose of the goods. The IAAI has in fact framed Regulations to carry out its function of warehousing. It shall be adverted to later.But in view of clause (b) of(2) of Section 45 of the Act it cannot deal with goods placed in its custody in any manner except with the permission of the Customs Department. The function of the appellants in respect of warehousing of the goods would, thus, be covered in the expression, otherwise dealt with used by clause (b) of(2) of Section 45 and, therefore, the appellants could not deal with the imported goods or perform any function without obtaining an order in writing by the proper officer. This would obviously include the right of the appellants to sell the goods forof demurrage. That is the appellants even though independent statutory bodies are precluded from dealing with the goods or selling it without obtaining permission of the proper office r. This restriction on the right and power of the appellants has been statutorily regulated by issuing Public Notice. It does not interfere with the right of the appellants to frame their rate schedule and charge demurrage. Nor does it interfere with right to charge dues for keeping the goods in the warehouse. It only provides that where the goods have been detained or seized at the instance of the Customs Department the dues might be calculated minus this period.This could have been done by the Central Government or the Board or the Collector. Therefore, the issuance of Public Notice directing the appellants not to charge any dues for the period the goods were detained would be covered in the expression, otherwise dealt with. It is further strengthened by Section 150 of the Act which lays down precedence for sale of goods which are not confiscated. The payments to the Custodian under clause (d) of(2) of the Section is to be made only after meeting the expenses of sale, freight and duty. The appellants could not, therefore, ignoresubparagraph (vii) ofparagraph (d) of the Notice. It is no more a request by the Central Government but an exercise of power by the appropriate authority under the Statute. It is not inconsistent with any provision of theis to overcome this practical difficulty yet statutory necessity that the Customs Department issued Public Notice in 1986. The IAAI or the CWC being only custodian of the Customs Department could not ignore the detention certificate issued in exercise of this power. No such Public Notice issued in exercise of power under Section 45 of the Act arose for consideration in the earlier cases. In Aminchand Pyarelal (supra) the decision turned on validity offramed by the Port Trust. , Clause 13(b) of it provided for graded, charges for the period goods were detained on account of import Trade Control Formalities. It was held by the High Court to be ultra vires as charging demurrage, for period when consignee was not at fault was unreasonable and unwarranted. It was this view of the High Court which was reversed as the byelaws had been framed by a Port Trust whose members were representatives including a Customsis a statutory custody governed by the provisions of law. Therefore, once rules were framed or Public Notice was issued in exercise of statutory power the IAAI or CWC cannot set up the claim that the intimation issued by the Customs Department could not be taken into account for determination of free days. Even on principle of bailment the, IAAI or CWC cannot escape from the effect of detention certificate., Clause (6) of Procedures and Tariff of CWC provides that subject to above terms and conditions, the rights and liabilities of the Corporation shall be as that of a bailee. A bailment under Section 148 of the Indian Contract Act, 1872 means delivery of goods, by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the persons delivering them. Here the goods were handed over to, , the IAAI or CWC for the statutory purpose contemplated by Section 45 of the Act. The, goods were to be returned after completion of proceedings as directed by, the Customs Department. Section 160 of the Contract Act specifically provides for the bailee to return or deliver the goods according to the bailors directive. The direction not to charge any demurr age does not result in making the IAAI as a gratuitous bailee as the IAAI is entitled to charge insurance charges, handling charges and demurrage except the dues mentioned for the period in the detention certificate. Therefore, once the Customs Department issued directive to release the goods, without charging any ground rent in pursuance of Public Notice issued under Section 45 the appellants as bailee could not but to follow the directions which were in accordance with law. The relationship of bailor and bailee arises out of the statutory provision between the Customs Department and the IAAI or CWC and not with the consignee. It does not make the IAAI or CWC a, gratuitous bailee. In any case, even if any amount is legally due, the IAAI may claim from Customs Department but not fromAssistant Collector of Customs to the Tribunal itself it may take sufficiently long time. By the time the consignee is able to extract himself from the cobweb of various stages he may find himself landed in the soup of demurrage. I f he is to pay the charges which in many cases due to passage of time may be many times more than the value of goods, the entire exercise may be waste. It would be anomalous that a person who ultimately succeeds in vindicating his claim that the goods arc properly valued or that the import was in accordance with law is faced with demurrage of goods which may be not only more than the value of goods but the value plus duty and penalty even. For instance in Appeal No.798 of 1992 the total value of the goods was Rs.17, 846/Ahereas the demurrage after allowing rebate as provided in the Rate Schedule of the IAAI comes to Rs.1, 115,If this amount is not paid the only remedy of the IAAI would be to dispose of the imported goods and the total value it might be able to realise could be somewhere near Rs.17,Therefore, except for the satisfaction of auctioning the goods the IAAI in some cases may not be able to compensate itself fully. And yet the consignee stands deprived of his goods. The construction as has been suggested by the appellants would, therefore, be unjust to small importers, and as observedfor the IAAI or CWC. To remedy from such hardship( vii) was enacted by way of Public Notice. It recognises the legal consequences which must follow the adjudication by directing that no demurrage should be charged for that period as in law the decision by the Tribunal dates back to the date of detention. And by fiction of law it is assumed that the Customs Department clears the goods as it should have done when the goods had landed. Even otherwise if the policy decision of capacity pay is read along with rate prescribed then levy of demurrage may defeat the very purpose and objective of the policy. Payment of three times or four times of demurrage of value of goods because the goods were detained at the instance of Customs Authorities does not accord with the policy decision. It is not in common interest. One of the settled principles of construction is to read a provision in such manner that it may not beThe levy of demurrage at the prescribed rate by ignoring the Public Notice issued by the Customs Department in 1986 is apt to lead to such disastrous consequences.21. But before parting it is necessary to observe that from 1976 to 1993 the entire Scenario of cargo traffic from air has gone tremendous change. The busy traffic, the spate of smuggling, manoeuvring of importing goods by camouflaging to avoid payment of duty have multiplied putting immense pressure on the IAAI and the Customs Department. At the same time the honest and bona fide consignee should be protected for sake of credibility. The Customs Department on its part may consider the feasibility of framing a policy by dividing the imported goods in different categories. Where the import is not prohibited or it is against licence or permit and the only dispute is about valuation or the tariff item 1 under which it falls it may be released. on furnishing of bank guarantee or security sufficient to secure the interest of Department subject to final decision. This determination should be done at the airport. It would obviate the necessity of storing goods, save the IAAI or CWC from unnecessary botheration, protect the Department, and serve the importer better. Till then the Public Notice issued by Customs Department appears to be reasonable, and practicable solution to the Problem. The IAAI or CWC may be well advised to change its regulations and fall in line with the policy decision and refrain from charging any demurrage for the period Customs Department issues a certificate undersubparagraph (vii) ofthe Public Notice. It would avoid litigation, harassment and would be, conducive to publicin pursuance of the powers conferred by sections 42, 43 and 43A, the Board had framed a scale of rates payable at the Port of Madras which had been duly sanctioned by the Central Government. Chapter IV in Book 1 thereof dealt with demurrage. Demurrage was defined as " chargeable on all goods left in the Boards transit sheds or yards beyond the expiry of the free days. After demurrage begins to accrue no allowance is made for Sundays or Boards holidays. The free days are fixed by the Board fro m time to time". ScaleA of ChapterIV prescribed conditions governing free days, the normal rule being that three working days in the case of foreign cargo, excluding Sundays and the Boards holidays, were treated as free after complete discharge of a vesseGls cargo or the date when the last package was put overside. Free periods also included periods during which goods were detained by the Customs authorities for a chemical test, which period was certified by them to be not attributable to any fault or negligence on the part ofCourt 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 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 havevirtue of the power vested in the Authority under section 37, the Authority has framed regulations called the IAA (Storage and Processing of Goods) Regulations, 1980. Under Regulation 4 the Authority is empowered to levy charges, including storage charges and demurrage. Regulation 5 empowers the Authority to fix and revise from time to time the scales of charges. By reason of Regulation 6 the Chairman may in his discretion, for reasons to be recorded, waive charges in de serving cases. The Authority has framed a policy in regard to the waiver of demurrage charges. It provides, in the case of imports, for a free period of seven calendar days from the date of landing of commercial cargo. In regard to detention certificates the policy provides for waiver of demurrage on a gradedCourt 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 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 haveNone of these provisions entitles the Collector of Customs to debar the collections of demurrage for the storage of imported goods. They do not entitle him to impose conditions upon the properties 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 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 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 seaports and airports, the facilities to be Provided thereat and t he charges to be recovered therefore. An importer must land the imported goods at aor airport. He can clear them only after completion of Customs formalities. For this purpose, theseaports and airportsare approved and provide storage facilities and Customs officers are accommodated therein to facilitate clearance. For the occupation by the goods of space in theor 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.It can not be gain s aid that, by reason of unjustified detention of his goods by the Customs authorities, the importer is put to loss by having to pay demurrage charges for the periods of such detention. The Central Government is empowered by section 35 of the International Airports Authority Act, 1971, and section III of the Major Port Trusts Act, 1963, to issue to the Authority and the Boards of Trustees, respectively, directions on questions of policy after giving them an opportunity, as far as practicable, of expressing their views.Me Central Government can, if so advised, after giving to the Authority and the Boards of Trustees the opportunity of expressing their views, direct them, under the aforementioned provisions, not to levy demurrage charges for periods covered by detention certificates.C.A. No 4227/9244. The goods of the first respondent in this appeal were stored, pending their clearance by the Customs authorities, at the Container Freight Station of the appellant, the Central Warehousing Corporation at Patparganj, Delhi. The Central Warehousing Corporation is established under the provisions of the Warehousing Corporations Act, 1962. The provisions of the Warehousing Corporations Act are substantially similar to those of the International Airports Authority Act, 1971, and the Major Port Trusts Act, 1963. What has been said above in regard to the International Airports Authority applies as well to the Central Warehousing Corporation.