Suren International Limited vs Union Of India & Ors.
2010 Latest Caselaw 4832 Del

         IN THE HIGH COURT OF DELHI AT NEW DELHI

                         W.P. (C) 3976/2007 & CM APPL 7510/2007


         SUREN INTERNATIONAL LIMITED                             ..... Petitioner
                      Through: Mr. L.P. Dhir with
                      Mr. Vikas Nautiyal, Advocate

                         versus


         UNION OF INDIA & ORS                           ..... Respondents
                       Through: Mr. Mukesh Anand with
                       Mr. Shailesh Tiwari, Mr. R.C.S. Bhadoria and
                       Mr. Sumit Batra, Advocates for R-2.
                       Mr. R.K. Joshi with
                       Mr. Jyotindera Kumar, Advocate for R-3.

    CORAM: JUSTICE S. MURALIDHAR

         1. Whether Reporters of local papers may be
             allowed to see the judgment?                         No
         2. To be referred to the Reporter or not?                Yes
         3. Whether the judgment should be reported in Digest?     Yes

                                  JUDGMENT

20.10.2010

1. The Petitioner is aggrieved by the levy of demurrage charges by the

Container Corporation of India Ltd. („CCI‟) Respondent No. 3 herein in

respect of 40 containers. The prayer is for a direction to Respondent No.2,

Commissioner of Customs to de-stuff the 13 containers remaining out of the

40 and release them without any further delay. Directions are also sought to

Respondent No. 2 to pay the shipping line charges to the respective shipping

lines.

2. In July 2001, on receiving a tip off about clandestine import of metal

scrap, containers imported by the Petitioner purportedly containing

aluminum scrap were seized by the Customs Department. The Petitioner was

alleged to have imported not just aluminum scrap but scrap of other metals

like nickel and tin which were seized and taken control of by the Customs

Department. The seized containers were transported to the Inland Container

Depot, Tuglakabad, New Delhi and lodged at the warehouse of the CCI. The

Petitioner states that the shipping line i.e. owners of the containers, began to

pressurize the Petitioner into getting the containers released. On 20th August

2001, the Petitioner asked the Customs Department to inspect the containers

at an early date so that they could be released. It was urged that any delay in

the release of the containers would result in demurrage and detention

charges owing to CCI accumulating. Further, reminders were sent on 26th

and 28th August 2001. In its letter dated 7th September 2001, the Petitioner

stated that it was ready to furnish any security or bond commensurate with

the value of the goods. The Petitioner‟s case was that the Customs

Department should bear the liability for the demurrage payable to CCI as

they were responsible for the delay in the release of the goods from 4th

August 2001 onwards. According to the Petitioner further reminders were

sent on 26th September, 10th October, 18th October and 25th October 2001.

The Petitioner states that the Customs Department deliberately delayed the

release of the containers.

3. The Petitioner relied upon Circular Nos. 84 of 1995 dated 25th July 1995,

Circular No. 83 of 1998 dated 5th November 1998 and Circular No. 42 of

2001 dated 31st July 2001 which mandated the de-stuffing of the containers

and their release within six months of their importation. The Petitioner states

that it sent reminders again on 16th February 2002, 26th August 2002 and 7th

September 2002. Since nothing was done by the Customs Department, the

Petitioner sent letters dated 26th September, 17th October, 14th November and

6th December 2002. Thereafter, the goods contained in 40 containers were

assessed and Petitioner paid the custom duty and penalty on the goods. It is

stated that CCI was not inclined to release the goods without payment of the

demurrage charges. The Petitioner paid ` 3,46,10,173.24 as demurrage

charges for the 27 containers. According to the Petitioner, the said amount

was liable to be paid by the Customs Department in the light of the circulars

referred hereinbefore. The demurrage charges for the balance 13 containers

had by the time of filing the present petition on 21st May 2007, mounted to `

2,01,53,025/-.

4. In response to the notice issued to it, a counter affidavit was filed on

behalf of CCI in which reliance was placed on the judgment of the Supreme

Court in International Airport Authority of India Ltd. v. Grand Slam

International JT (1995) 2 SC 452, which made it clear that CCI was entitled

to recover demurrage charges from the importer or consignee even where

there was a default on the part of the Customs Department or any other

agency. Reliance was also placed on the judgments of the Supreme Court in

Trustees of Port of Madras v. Nagavedu Lungi & Co. (1995) 3 SCC 730,

Shipping Corporation of India v. C.L. Jain Woolen Mills (2001) 5 SCC

345 and Union of India v. R.C. Fabrics (P) Ltd (2002) 1 SCC 718.

5. The Customs Department, in its reply, took a preliminary objection that

the petition was bad for laches and that the petition should be dismissed in

limine since the Petitioner had not stated the true and complete facts. It was

stated by the Customs Department that on the basis of specific information

received by the Commissioner of Customs, 17 containers of metal scrap

imported by the Petitioner were taken up for detailed examination. The

information indicated that the Petitioner while importing aluminum scrap

was indulging in the smuggling of high value metals such as nickel and tin.

The imported goods were also found to have been misdeclared as regards

weight and value. Six of the bills of entry filed by the Petitioner for the

above said 17 containers, when taken up for scrutiny on 3rd August 2001

confirmed the misdeclaration of weight. In the presence of the Petitioner a

detailed examination was conducted between 7th and 9th August 2001. This

revealed that against declared quantity of 155.170 MT of aluminum scrap,

40.50 MT of aluminum scrap, 99.35 MT of copper scrap, 20 MT of tin

ingots and 30.10 MT of prime nickel cathodes were found. These were

accordingly seized. As regards goods contained in 6 containers covered by

two bills of entry, the Petitioner refused to take delivery on the ground of

wrong dispatches by the foreign supplier. The writ petition filed for re-

export of these 6 containers was dismissed as withdrawn by this Court. The

spot investigation revealed that the smuggled goods had been removed in

two trucks. A combing operation was thus launched which resulted in the

seizure of imported metal scrap including tin ingots, nickel cathodes and

zinc valued over ` 5 crores from the two trucks. On the basis of further

information, a search was conducted at another storage place at Ganga

Nursery and prime metal belonging to the Petitioner was recovered and

placed under seizure.

6. It is stated by the Customs Department that that during the course of

investigation the involvement of a serving DIG posted in the National Crime

Records Bureau (whose wife and father-in-law were Directors of the

Petitioner company) was revealed. The 23 containers imported in the name

of the Petitioner arrived at JNPT Nhawa Shewa, having declared cargo of

aluminum and copper scrap of which 13 containers were purportedly

shipped by a Singapore company and 10 by a UAE Company. The

containers were brought to the ICD for examination and they were found to

have goods which were declared in same manner as in the case of 17

containers earlier seized. From these 23 containers, 191.368 MT of

aluminum scrap, 200.712 MT of copper scrap, 20 MT of tin ingots and 11.99

MT of prime nickel cathodes were seized. The case was thereafter

transferred to the Revenue Intelligence, Nepal Division. The provisions of

the Conservation of Foreign Exchange and Prevention of Smuggling

Activities Act, 1974 were invoked against the serving DIG and his wife.

Searches were conducted and the statements of more than 50 persons at

Delhi and Mumbai were recorded. Show cause notice was issued to the

Petitioner and 10 others in regard to seizure. The Commissioner on 30 th June

2003 passed an order levying duty and penalty. This was affirmed by the

Central Excise and Service Tax Appellate Tribunal („CESTAT‟) by its order

dated 2nd September 2005. It is stated that the writ petition challenging the

said order of the CESTAT was also dismissed by this Court. It is submitted

that in the circumstances no liability for demurrage can attach to the

Customs Department since the entire import was illegal.

7. It is pointed out by the Customs Department that by a letter dated 21st

October 2002 the Petitioner was duly informed that the request for de-

stuffing of the cargo could not be acceded to as the CCI had shown their

inability to provide space for the safe custody of the goods on the grounds of

the cargo being scrap material in loose condition. The Petitioner was

requested to get the seized goods released provisionally. However, the

Petitioner did not come forward to clear the goods provisionally. Also after

the final assessment the Petitioner did not opt to pay the redemption fine and

penalty. Instead the Petitioner preferred to file an appeal against the order of

the Commissioner to the CESTAT which was ultimately dismissed.

8. An affidavit was filed by CCI on 8th February 2008 stating that the goods

in 13 containers were auctioned on 20/21st August 2007 and a sum of `

1,21,13,286/- was realised on auction. The auction proceeds were utilized as

under:

(i)      Auction expenses ` 1,22,590/-

(ii)     Customs duty ` 32,16,538/- paid to the Customs Department

(iii)    Demurrage charges to the extent of ` 2,47,10,600/-

It was further submitted by the CCI that the total demurrage charges worked

out to ` 2,47,10,600/-. After adjusting ` 87,74,158/-, there was still an

amount of ` 1,59,36,442/- recoverable from the Petitioner towards

demurrage.

9. During the course of the hearing, the Petitioner pointed out that there was

discrepancy in the amount stated to have been recovered by way of auction

which took place earlier to the order dated 9th July 2007 passed by this

Court. While CCI had indicated the realised auction proceeds as `

1,21,13,286/-, the Customs Department had given the figure of `

1,46,22,000/-. By an order dated 24th September 2010, this Court directed

the Customs Department to produce the records. The records were produced.

It appears that there was a genuine mistake made by the Customs

Department when it mentioned in its affidavit that ` 1,46,22,000/- had been

recovered. Mr. Anand, on instructions, clarified that the realised auction

amount as indicated in the affidavit dated 8th February 2008 of the CCI, i.e.,

` 1,21,13,286/- is the correct figure.

10. Mr. L.P. Dhir, learned counsel for the Petitioner referred to the above

circulars which mandates that the Customs Department should clear the

imported goods without unreasonable delay. He submitted that the failure to

comply with the said circulars would entail shifting of the burden of paying

the demurrage charges to the Customs Department. He placed reliance on

the decisions in IMSA Shipping Agency v. Commissioner of Customs 2002

(145) E.L.T. 55 (Cal.), Rajeev Woolen Mills v. Union of India (1988) 15

ECC 232, Kutch Shipping Agency P. Ltd. v. Board of Trustees, Kandla

Port Trust 2001 (132) ELT 521 (SC), Bharat Petroleum Corporation Ltd.

v. Maddula Ratnavalli (2007) 6 SCC 81 and R.C. Fabrics (P) Ltd. Union of

India 1995 (76) E.L.T. (Del.). Mr. Dhir submitted that there was no

justification for detaining the cargo without de-stuffing it from the

containers for such a long period. Since this delay was not attributable to the

Petitioner, the charges owing to the shipping line as well as the demurrage

charges owing to CCI should be borne by the Customs Department. Reliance

was placed upon the decision of this Court in PIL Mumbai (India) Ltd. v.

Union of India 2010 (254) E.L.T. 67 (Del.).

11. Appearing on behalf of CCI, Mr. R.K. Joshi, learned counsel pointed out

that the settled position in law as laid down by the Supreme Court in Grand

Slam International was that the CCI was entitled to recover the demurrage

charges from the importer irrespective of any illegality committed by the

Customs Department. He pointed out that judgment of this Court R.C.

Fabrics relied upon by Mr. Dhir was overruled by the Supreme Court in

Union of India v. R.C. Fabrics (P) Ltd. (2002) 1 SCC 718. He also relied

upon the judgment of Om Shankar Biyani v. Board of Trustees (2002) 3

SCC 168.

12. Mr. Mukesh Anand, learned counsel appearing for the Customs

Department, pointed out that the entire import was illegal and assessment of

the duty and penalty by the Customs Department was upheld by the

CESTAT as well as by this Court. The duty and penalty had since been

recovered from the Petitioner. Since the import was itself illegal and the

Petitioner had failed to avail of the opportunity of getting the goods cleared

either provisionally or, after assessment, by paying the duty, redemption

fine and penalty, the delay and consequent accumulation of demurrage

charges was entirely attributable to the Petitioner. The liability to pay the

demurrage charges could not possibly be fastened on to the Customs

Department.

13. The above submissions have been considered. The principal submission

of learned counsel for the Petitioner that on account of its failure to allow the

Petitioner to clear the goods for import in reasonable time in terms of the

circulars, the Customs Department should bear the demurrage charges is

without merit. The Petitioner does not deny that the imports were found to

be entirely illegal on account of misdescription of goods and misdeclaration

of weight and value. The said orders holding the imports to be illegal have

attained finality. During the period the imported goods were detained,

investigations were in progress and this revealed that that the Petitioner was

in the garb of importing aluminum scrap in fact also importing nickel,

copper and tin ingots. The question of the circulars applying to the facts of

the present case does not arise. The time limits set therein can be said to

apply where the importer has made a valid import, has made no

misdeclaration of any sort and the delay in effecting clearance is entirely on

account of the Customs Department. Having sought to smuggle copper and

nickel scrap and tin ingots, the Petitioner cannot insist that its imports should

have been cleared in the same time frame as a normal import. The

submission is rejected as misconceived.

14. The Customs Department is right in its contention that it was open to the

Petitioner to have the goods cleared provisionally if it felt that the demurrage

was mounting alarmingly. The Petitioner did not choose to do so. Even after

the assessment by the Commissioner it did not choose to pay the differential

duty assessed, the fine and penalty but challenged the order unsuccessfully

before the CESTAT. In the circumstances, no liability can attach to the

Customs Department for payment of demurrage charges.

15. The settled position in law is that the CCI can recover demurrage

charges from the importer or consignee, as the case may be, irrespective of

who may have been responsible for the accumulation of demurrage charges.

Also the Customs Department cannot be issued a mandamus to pay the

demurrage charges. When a direction to this effect was issued by this Court

in R.C. Fabrics (P) Ltd. it was reversed by the Supreme Court in Union of

India v. R.C. Fabrics (P) Ltd. where in para 16 it was held as under:

"16. The High Court has directed that the Customs Department would pay the demurrage, container charges and ground rent to the Corporation from 16-1-1991. The said direction is contrary to the decision of this Court in International Airports Authority of India v. Grand Slam International (1995) 3 SCC

151. The Corporation is entitled to recover its charges from the importer. Therefore, the direction in the impugned judgment and order that the Customs Authorities shall pay those charges is set aside. Thus, the appeal filed by the importer (CA No. 7931 of 1995) deserves to be dismissed. In any event, no one has appeared in support of that appeal."

16. The settled law as laid down by the Supreme Court in Grand Slam

International is as follows:

"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 therefore. An importer must land the imported goods at a seaport 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 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."

17. This was reaffirmed in Shipping Corporation of India Ltd. v. C.L. Jain

Woolen Mills. In the context of the Major Port Trusts Act, the position was

reiterated by the Supreme Court in Om Shankar Biyani. In view of the

settled position in law the plea of the Petitioner that it should be exempted

from paying the demurrage charges and a mandamus should issue to the

Customs Department to pay the demurrage charges has to be rejected.

18. This writ petition is dismissed with costs of ` 10,000/- out of which `

5,000/- will be paid by the Petitioner to the Customs Department and `

5,000/- by the Petitioner to the CCI within four weeks from today. The

pending application is also dismissed.

S. MURALIDHAR, J.

OCTOBER 20, 2010 ak