Orissa High Court
(Appeals Under Section 23 Of The Railway ... vs M/S. Kiocl Ltd on 7 November, 2025
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT,
CUTTACK
Date: 07-Nov-2025 19:22:44
IN THE HIGH COURT OF ORISSA AT CUTTACK
FAO No. 371 of 2019
(Appeals under Section 23 of the Railway Claims Tribunal Act, 1987)
Union of India .... Appellant (s)
-versus-
M/s. KIOCL Ltd., Bangalore .... Respondent (s)
WITH
FAO No.372 of 2019
Union of India .... Appellant(s)
-versus-
M/s. KIOCL Ltd., Bangalore .... Respondent(s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr. Bhabani Shankar Rayaguru, Sr.P.C.
For Respondent (s) : Mr. Satya Smruti Mohanty, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-08.09.2025
DATE OF JUDGMENT:-07.11.2025
Dr. Sanjeeb K Panigrahi, J.
A. Since common question of facts and laws are involved in both the
above mentioned FAOs, the same are heard together and are disposed
of by this common judgment. However, this Court feels it apposite to
deal with the FAO No.371 of 2019 as the leading case for proper and
effective adjudication of both the cases.
B. In filing this FAO, the Appellant being represented through its
General Manager, East Coast Railway, Chandrasekharpur has
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Location: ORISSA HIGH COURT,
CUTTACK
Date: 07-Nov-2025 19:22:44
challenged the impugned judgment dated 04.02.2019 passed by the
learned Railway Claims Tribunal, Bhubaneswar Bench, Bhubaneswar
in Case No.OA III/9/2015.
C. These appeals assail the judgment dated 04.02.2019 passed by the
Railway Claims Tribunal, Bhubaneswar Bench ("RCT") in OA
III/9/2015, whereby the RCT directed refund toRs.58,01,110.80
(Distance Based Charges, "DBC") with simple interest @ 6% per
annum from 02.12.2015 till payment, holding that DBC was
impermissibly levied on a rake of iron-ore fines booked under RR No.
261002668 dated 15.12.2012 when the resultant pellets were not
exported but sold domestically.
D. The controversy turns on a narrow compass, as to whether on the facts
and the governing tariff circular--Railway Board Rates Circular No. 36
of 2009 dated 01.06.2009 ("RC-36/2009")--the subject consignment
attracted export tariff (Class-180 + DBC) or domestic tariff (Class-140
without DBC). The answer rests on (a) the legally relevant "end-use"
at the time of carriage; (b) compliance with documentary conditions in
RC-36/2009 to qualify for the domestic rate; and (c) the effect, if any, of
Sections 78 and 83 of the Railways Act, 1989 ("the Act") on the levy in
question.
I. FACTUAL MATRIX OF THE CASE:
1. The brief facts of the case are as follows:
i) The Respondent-Company, a Government of India enterprise
engaged in the metallurgical sector, is primarily devoted to the
production and commercial dissemination of iron oxide pellets,
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Location: ORISSA HIGH COURT,
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Date: 07-Nov-2025 19:22:44
and operates a fully integrated industrial establishment
encompassing both upstream and downstream facilities. The
said establishment comprises, inter alia, a pelletization plant
endowed with an installed production capacity of 3.5 million
tonnes per annum, together with a blast furnace unit designed to
yield approximately 2.16 lakh tonnes per annum of foundry-
grade pig iron. In order to secure a continuous and assured
supply of its principal raw material, namely iron ore fines, the
Respondent entered into a long-term contractual covenant with
M/s. National Mineral Development Corporation Limited
(NMDC), under which the requisite quantities of iron ore were
to be loaded at NMDC's Kirandul and Bacheli loading stations in
the Bailadila sector and transported through railway rakes
placed and operated by the East Coast Railway, Bhubaneswar.
Pursuant to the said arrangement, the Respondent regularly
procured substantial consignments of iron ore fines from
NMDC's Bailadila mines located at Kirandul/Bacheli. The said
iron ore fines, though forming part of the Respondent's broader
stream of industrial procurement, were, during the relevant
period, not earmarked for export, but were rather consumed
captively within the Respondent's domestic manufacturing
operations for conversion into iron oxide pellets. The resultant
pellets were predominantly channelled into the domestic market
for industrial utilisation, and only such incidental or residual
quantities, as may have remained unabsorbed in domestic
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Location: ORISSA HIGH COURT,
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Date: 07-Nov-2025 19:22:44
demand, were thereafter diverted for export on a need-based
and on ancillary basis.
ii) The Respondent-Company is entirely dependent upon the
services of the Indian Railways for the conveyance of its raw
material, namely iron ore fines, from the Kirandul and Bacheli
loading stations to the Visakhapatnam Port (VSKP), such
transportation being effected through a dedicated private
railway siding integrated into its logistical chain. Upon arrival at
Visakhapatnam, the said iron ore fines are trans-shipped and
thereafter conveyed via maritime route to the Respondent's
Pelletization Plant at Mangalore, where they constitute the
indispensable feedstock for the continuous operation and
sustenance of its iron oxide pellet production process. The
Respondent's dependence on the railway network is thus
absolute and structural, the entire supply chain being
intrinsically interlinked with the efficiency and regulatory
framework of the East Coast Railway, without which the
Respondent's industrial production cycle would inevitably be
rendered inoperative.
iii) The payment of freight charges in respect of the railway rakes
loaded for the Respondent-Company, M/s. KIOCL Limited, at
the NMDC, Kirandul Loading Station, was effected through an
Online e-Freight Payment System, a digital mechanism
instituted for seamless remittance of freight dues to the Railway
Administration. In order to operationalize this arrangement, a
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Location: ORISSA HIGH COURT,
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Date: 07-Nov-2025 19:22:44
tripartite agreement was executed on 29th February, 2012 among
the parties like the State Bank of India, Panambur Branch,
Mangalore, the Respondent-Company, and the East Coast
Railway, Bhubaneswar, stipulating the modalities for payment
of freight and rake charges through the e-payment mode. Under
the terms of the said covenant, the Respondent was obligated to
ensure the availability of requisite funds on a daily basis, which
were to be transferred from its designated account maintained
with SBI, Mangalore Branch, to a dedicated account of the East
Coast Railway. The said account, maintained at the State Bank of
India, Main Branch, Bhubaneswar, was to serve as the
authorized repository for receipt of such e-payments, thereby
facilitating a continuous and automated settlement of freight
liabilities arising out of the Respondent's consignment
movements.
iv) In the ordinary course of its operations, the Respondent-
Company booked a railway rake vide Railway Receipt (RR) No.
261002668 dated 15th December, 2012, which was loaded on 14th
December, 2012 at the NMDC's NMVK Siding for carriage to its
destination at VPTG, covering a distance of approximately 562
kilometres. The Appellant-Railway Administration, while
assessing the freight payable on the said consignment, not only
levied the regular freight charges but also imposed an additional
Distance Based Charge (DBC) component thereon.
Consequently, the total freight realised from the Respondent
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Location: ORISSA HIGH COURT,
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Date: 07-Nov-2025 19:22:44
aggregated to ₹1,14,46,604/-, which sum comprised, inter alia, a
DBC component of ₹58,01,110.80/-, notwithstanding the fact that
there was no default or misfeasance attributable to the
Respondent, nor was the consignment intended for export. It is
of some considerable significance that the Respondent had,
contemporaneously, furnished an affidavit of declaration
affirming that the iron ore fines in question were intended
exclusively for domestic industrial consumption and not for
exportation. Notwithstanding such declaration, the Appellant
proceeded to levy the DBC, which under the governing Rate
Circular No. 36 of 2009 is impermissible in cases where the
consignment is meant for domestic use and not for export-
oriented processing. Upon being apprised of the said levy, the
Respondent promptly lodged a formal claim for refund of the
excess freight amounting to ₹58,01,110.80/-, vide its
representation dated 6th February, 2013, asserting that the
charge had been illegally and unjustifiably imposed.
v. The full particulars of payment of freight are furnished
hereunder:-
Amount of
Sl. Date of
RR Station Freight paid in Rs. refund of
No. Booking
claim in Rs.
1 15/12/12 261002668 NMVK VPTG 1,14,46,604/- 58,01,110.80
Total 58,01,110.80
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Reason: Authentication
Location: ORISSA HIGH COURT,
CUTTACK
Date: 07-Nov-2025 19:22:44
The Appellant-Railway Administration was, therefore, under a legal
and equitable obligation to refund the sum of ₹58,01,110.80/- (Rupees
Fifty-Eight Lakhs One Thousand One Hundred Ten and Eighty Paise
only), representing the excess freight erroneously recovered by way of
Distance Based Charges (DBC), notwithstanding that the consignment
in question was not destined for export. The Respondent had, in its
claim, further sought interest at the rate of 18.25% per annum,
computed from the date of lodging of the claim until the date of actual
realisation, on the principle that the Railway Administration had
unjustly enriched itself by retaining amount collected in contravention
of the governing tariff instrument, namely Railway Board's Rate
Circular No. 36 of 2009, which explicitly prohibits the levy of DBC in
cases involving domestic consumption of iron ore fines. The impugned
collection, thus, stood squarely opposed to the statutory framework
and administrative instructions regulating freight computation,
warranting restitution of the amount together with appropriate
interest to neutralise the pecuniary prejudice occasioned to the
Respondent.
v) Challenging the said action of the Appellant, the Respondent herein
(who was the applicant in the learned Court below) preferred an
application vide Case No.OAIII/9/2015 before the learned Railway
Claims Tribunal, Bhubaneswar Bench, Bhubaneswar. While hearing
the said application, the learned Tribunal had framed the following
issues for determination:-
i. Is the O.A. maintainable?
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Location: ORISSA HIGH COURT,
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Date: 07-Nov-2025 19:22:44
ii. Whether the use of iron ore fines, or the end use of the
iron oxide pellets, determines the freight rate, i.e. domestic
consumption rate of export rate?
iii.Whether the respondents entitled to levy Distance
Based Charges for manufacture of pellets by the applicant?
iv. Whether the applicant is entitled for refund of
Rs.58,01,110/- collected by the respondent?
v. To what reliefs the applicant is entitled?
vi) Accordingly, on hearing both the sides, the learned Tribunal decided
the above noted issues in favour of the Respondent herein vide
judgment dated 04.02.2019. The direction portion of the said
judgment dated 04.02.2019 is reflected hereunder:-
ORDER
"The OA is allowed on contest. The Respondent is
directed to pay a sum of Rs.58,01,110/- (Rupees
Fifty Eight Lakhs One Thousand and One Hundred
Ten) only along with simple interest @ 6 per cent
per annum from the date of application i.e.
02/12/2015 till the date of the payment to the
applicant.
In the peculiar circumstance of the case there shall
be no order as to costs."
Being aggrieved by the said judgment dated 04.02.2019 passed in the
above noted Case bearing No.OAIII/9/2015 the Appellant-East Coast
Railway, Bhubaneswar has preferred this present appeal.
II. SUBMISSIONS ON BEHALF OF THE APPELLANT:
2. Learned counsel for the Appellant earnestly made the following
submissions in support of his contentions:
i) It is the contention of the Appellant-Railway Administration
that, in terms of the enabling provisions enshrined under
Sections 78 and 83 of the Railways Act, 1989, the Railway
Administration is vested with the statutory prerogative to re-
measure, re-calculate, or re-assess the freight charges and, if
necessary, to raise a consequential demand at a subsequent stage
upon discovery of any error or omission in the initial
computation. It is urged that the learned Railway Claims
Tribunal, while adjudicating the dispute, failed to take
cognizance of or give due interpretative weight to these
provisions, which according to the Appellant, confer upon the
Railway Administration an unfettered statutory authority to
review and rectify freight assessments retrospectively whenever
found inconsistent with the prescribed tariff or circular. The
grave omission to consider the statutory latitude embodied in
Sections 78 and 83, has vitiated the impugned decision by
rendering it juridically incomplete and procedurally infirm.
ii) The Appellant-Railway Administration further contends that
the Respondent-Company, M/s. KIOCL Limited, is an
admittedly 100% Export-Oriented Unit (EOU), a material aspect
which the learned Railway Claims Tribunal failed to properly
appreciate while adjudicating the issue concerning the levy of
Distance Based Charges (DBC). It is further submitted that the
Tribunal, while rendering its judgment, deviated from the
significant interpretative framework delineated under Paragraph
3(B)(III) of the Railway Board's Rate Circular No. 36 of 2009,
dated 1st June, 2009, which governs the conditions and
parameters for classification of freight at domestic or export
tariff rates. By departing from the binding administrative
guidelines and by placing disproportionate reliance upon the
deposition of A.W.-1 representing M/s. KIOCL Limited, the
Tribunal has arrived at a conclusion bereft of empirical
foundation and unsupported by the statutory scheme, thereby
vitiating the adjudicatory process with manifest error in
appreciation of evidence and misapplication of governing
circular instructions.
iii) It is further submitted on behalf of the Appellant-Railway that
the determinative criteria expressly enunciated in Rate Circular
No. 36 of 2009 have been completely disregarded by the learned
Railway Claims Tribunal in the course of adjudication. The said
circular, which constitutes the operative framework governing
the levy or exemption of Distance Based Charges (DBC),
mandates that the eligibility for concessional or domestic tariff is
conditioned upon the establishment of actual end-use of the iron
ore consignment in the manufacture of consumable goods within
a pre-declared domestic manufacturing unit. Unless such end-
use is affirmatively demonstrated through cogent documentary
evidence, the consignment, by necessary implication, continues
to attract the export tariff classification, inclusive of DBC.
However, the learned Tribunal, while rendering the impugned
decision, appears to have proceeded on a presumptive premise
that the iron ore fines transported were utilised by the
Respondent-KIOCL Limited for domestic industrial
consumption, without undertaking the requisite factual and
evidentiary verification mandated under the said circular. The
impugned finding is therefore legally unsustainable, being
contrary to the express stipulations of the governing tariff
regime and unsupported by the evidentiary record.
iv) The learned Tribunal has not considered the issue that the
Respondent-KIOCL Ltd. had not submitted the requisite
documents i.e. Affidavit by consignee before taking delivery and
indemnity note by consignee as specified vide Para 3(B)(III) and
Para 3(B)(V) respectively of the Rates Circular 36 of 2009, to avail
domestic rate and passed the impugned judgment against the
Appellant which is per se not maintainable.
v) Learned counsel for the Appellant has raised the following
issues for determination by this Court:-
a) Whether the finding of the learned Railway Claims
Tribunal, Bhubaneswar with regard to applicability of
domestic tariff rate or export tariff rate to the Applicant/
Respondent is just and proper?
b) Whether the finding of the learned Railway Claims
Tribunal, Bhubaneswar with regard to entitlement of
the Appellant/ Respondent-Railways to levy Distance
Based Charges for manufacture of pellets by the
applicant/ Company is sustainable in the eye of law?
c) Whether the finding of the learned Railway Claims
Tribunal, Bhubaneswar with regard to entitlement of
Rs.58,01,110/- collected by the Appellant-Railways is
justified?
d) What relief the applicant/ Company is entitled to?
vi) The present Respondent has suppressed the end use and it is a
100% export oriented company which exports iron oxide pellets
which can be clarified / verified from the Excise Return of the
applicant / respondent for the month of October, 2012. The
Respondent had availed "domestic freight rate" for the period
from 22.05.2008 to 31.03.2012 based on its false declaration on
forwarding notes and on detection of such false declaration by
the Central Audit. Further, upon a query made by the Appellant
in the matter, the Respondent submitted its reply on 26.01.2013
thereby admitting the export of 4,76,298 tons of iron oxide pellets
during the period from June, 2009 to September, 2011.
vii) It was further pleaded by the Appellant before the learned RCT
that the applicant/ the Respondent herein had availed "domestic
tariff rate" instead of "export tariff rate" by giving false
declaration in the forwarding notes during the period from
22.05.2008 to 31.03.2012 and as such, the Appellant/Respondent
had raised demand to a tune of Rs.414.45 crores against the
applicant/ Respondent herein. Thereafter, the
applicant/Respondent herein had challenged the said penalty
before this Court through Writ Petition vide W.P.(C) No.22943 of
2013 and this Court vide order dated 13.12.2013 granted interim
order of stay in respect of 50% of the demand subject to payment
of the balance 50% wherein this 50% was the freight charges
only, excluding the penalty and pursuant to such order passed
by this Court, the Applicant has paid a sum of Rs.51.80 crores
only to the Appellant.
viii) For similar miss-declaration made by the applicant/
Respondent this Appellant had raised demand of
Rs.182,09,16,780/- on 13.10.2014 in respect of 2,82,848 tons of iron
ore for the period from 11.07.2008 to 05.06.2009 and on the same
day i.e. on 13.10.2014 demand of Rs.6,27,77,95,421/- was raised in
respect of 8,71,015.32 tons of iron ore for the period from
06.06.2009 to 23.08.2011 for miss-declaration furnished by the
applicant/ Respondent vide letter dated 13.10.2014 and all these
documents clearly shows that the iron oxide pellets were
exported by the applicant/ Respondent for which the applicant
was liable to pay export tariff rate.
ix) When iron ore is moved for pelletization (for export), such
carriage of iron ore will be charged at Class 180 along with levy
of Distance Based Charges which ultimately means that it will
attract export tariff rate and paragraph no.5 of the Rate Circular
No.36 of 2009 dated 01.06.2009 under Annexure-R/7 of the
Written Statement filed by the Appellant clarifies such position.
Moreover, for violation of the provisions stipulated under
paragraph 3(B)(III) and paragraph 3(B)(V) of the Rate Circular
No.36 of 2009 dated 01.06.2009, the applicant is also liable to pay
freight charge at Class 180 and distance based charge under
paragraph 4(c) thereof.It is pertinent to mention here that the
end use of the goods transported determines as to whether
domestic consumption rate or export rate would apply and this
is the essence of the Rate Circular No.36 of 2009. The said
circular prescribes the submission of specific documents by the
applicant in order to avail the domestic consumption rate.
Further, the applicant/ Respondent is registered as a Company to
carry out the works of filtration of iron ore concentrate and its
export and production of iron ore pellets and its export.
x) Further, the applicant/ Respondent-Company at the time of
booking of iron ore from KRDL and BCHL, had submitted the
monthly excise returns as applicable to 100% export oriented
unit and no document in support of domestic manufacture of
pig iron was submitted to the Appellant and only on forwarding
note the applicant had declared the consignment was meant for
domestic consumption and by virtue of such declaration, the
Company availed the domestic tariff rate, though such
declaration was false. The applicant/Respondent manufactures
and exports pellets. The production record of the Company
during the period from 22.05.2008 to 31.03.2012 shows that 6423
MT pellets generally meant for export, was produced and as
against only 180 MT pig iron and by mis-declaration, the
company unduly availed domestic tariff rate.
xi) Further, the date of booking of consignment in respect of the
instant case is 15.12.2012 and as such, the Rate Circular No.30 of
2008 has no application, but the Rate Circular No.36 of 2009 will
be applicable, as it supersedes the former circular. But, in this
case, while adjudicating the matter the learned Railway Claims
Tribunal failed to consider the above aspects in its proper
perspective, so also did not considered the provisions stipulated
under the Rate Circular No.36 of 2009. The Ld. Tribunal settled
the issues in favour of the applicant in a mechanical and routine
manner which is not only erroneous, but also unsustainable in
the eye of law and as such, the impugned judgment dated
04.02.2019 requires to be set aside.
xii) The actual end-use was export of pellets which is the key factor
as per the applicable Rate Circular No.36 of 2009. When iron ore
is moved for pelletization for export, the applicable rate is Class-
180 + DBC=Export Tariff, whereas in case of Domestic Rate,
Class-140 without DBC is only allowed, if conditions in
paragraph No.3 of the Rate Circular No.36 of 2009 are fulfilled,
including affidavits and proof of use in domestic production like
pig iron. Here in this case, the conduct of the applicant-
Company shows export use, as the applicant produced 6423 MT
of pellets (exportable), but out of which only 180 MT of pig iron
was for domestic use. Further, the applicant admitted the export
of 4,76,298 MT iron ore and despite this, the applicant's claim for
domestic tariff rate is quite inconsistent and amounts to
misdeclaration.
xiii) Further, it is trite that in case of statutory circulars or rate
circulars, the binding effect on the parties and authorities is
emphasized, unless contrary to law. Hence, the rate Circular
No.36/2009 is binding unless it is set aside and as such, it must
be complied with. Misdeclaration or false representation
disentitles a person from availing concessional tariff which is
squarely applicable to the case of the applicant/Respondent.
Learned counsel for the Appellant, accordingly, prays for allowing the
prayer made in both the FAOs.
III. SUBMISSIONS ON BEHALF OF THE RESPONDENTS:
3. The Learned Counsel for the Respondents earnestly made the
following submissions in support of his contentions:
i) The Respondent-KIOCL Limited, a Government of India enterprise
under the aegis of the Ministry of Steel, instituted O.A. No.
III/9/2015 before the Railway Claims Tribunal, Bhubaneswar,
impugning the levy of Distance Based Charges (DBC) amounting to
₹58,01,110.80, in respect of R.R. No. 261002668 dated 15.12.2012. The
Respondent contended that the consignment of iron ore fines was
exclusively utilised for domestic industrial production of iron oxide
pellets, and not for export-oriented processing, thereby rendering
the DBC levy contrary to the statutory tariff prescription embodied
in Rate Circular No. 36 of 2009.
ii) Upon a scrupulous evaluation of the evidentiary record, including
the excise returns for the quarter October-December 2012, the
learned Railway Claims Tribunal (RCT) arrived at a clear and
empirically substantiated finding that no iron oxide pellets were
exported outside India during the relevant period and that the
entire production was sold within the domestic market. This
finding, resting on primary contemporaneous documents, was
untainted by conjecture or extraneous inference. The Tribunal also
noted that the collection of DBC was not disputed, being reflected
in the Railway Receipt entries (Sl. Nos. 33-34) and duly remitted
through the e-payment mechanism prevailing at that time.
iii) Proceeding on these foundational premises, the learned Tribunal
held that the levy of DBC was inherently unsustainable in law,
being in direct contravention of Rate Circular No. 36 of 2009,
which--having the force of subordinate legislation--explicitly
excludes the imposition of DBC on domestic consumption
consignments. The Tribunal, applying the equitable doctrine of
restitutio in integrum, directed the Appellant-Railways to refund
the said amount of ₹58,01,110.80 together with simple interest at 6%
per annum, reckoned from 02.12.2015 until payment, thereby
effectuating the principle of restitutionary justice that seeks to
restore the aggrieved party to its rightful financial position had the
illegal exaction not occurred.
iv) Responding to the Appellant's reliance on Sections 78 and 83 of
the Railways Act, 1989, it is contended that these provisions are
purely procedural and enabling in nature, authorising recalculation
of freight or recovery of undercharges, but they do not create a
substantive head of charge. The present dispute, which turns on the
validity of a tariff classification and the illegality of the DBC levy,
therefore falls outside the ambit of these provisions.
v) On the argument that KIOCL, being a 100% Export-Oriented Unit
(EOU), could not claim the domestic rate, the Respondent submits
that an EOU is statutorily entitled to engage in domestic tariff area
transactions to the extent permitted under the Foreign Trade Policy.
This is corroborated by the excise returns for October-December
2012, where Column 4A (Domestic Tariff Area sales) records the
transactions in question, while Column 4B (exports) remains
blank--decisively establishing that the pellets were sold
domestically and not exported.
vi) The Appellant's plea of non-submission of the requisite affidavit
and indemnity note is untenable. The Appellant's own written
statement (para 10) before the Tribunal categorically acknowledges
that the Respondent had duly submitted these documents. Even
assuming arguendo a procedural lapse, the doctrine of substantial
compliance would operate to prevent a purely technical omission
from defeating a substantive entitlement, particularly where no
prejudice has been demonstrated.
vii) The reliance placed on the pendency of S.L.P. (C) No. 15869 of
2015 and Transfer Petitions (C) Nos. 832-854 of 2015 before the
Hon'ble Supreme Court is, it is urged, misconceived both in law
and in fact. The order of the Supreme Court dated 14.12.2015
merely stayed proceedings in certain identified writ petitions,
which were specifically enumerated in the order. The present
appeal is not among them, nor has any specific stay been issued
restraining its adjudication. The said order, being context-specific,
cannot be expanded into a blanket interdiction covering all matters
involving the issue of DBC.
viii) The Respondent further clarifies that the proceedings pending
before the Supreme Court concern the constitutional validity of the
Rate Circular and the Distance Based Charge regime in general. In
contrast, the instant case raises a question of application, not of
vires. The Respondent has not challenged the competence of the
circular but has merely asserted that its operative terms are
inapplicable to the present factual matrix. The issue, therefore, lies
within the interpretative rather than constitutional domain
ix) Lastly, it is emphasised that although O.A. No. III/9/2015 was
filed in 2015 and decided on 04.02.2019, the Appellant never
disclosed the alleged pendency of proceedings before the Supreme
Court during the Tribunal's adjudication. The belated invocation of
this plea at the appellate stage betrays an absence of bona fides,
constituting an afterthought calculated to delay restitution of the
amount unlawfully retained. Such conduct, it is urged, offends the
duty of candour and procedural fairness incumbent upon public
authorities.
For all these reasons, the Respondent prays that the appeal be
dismissed, and the well-reasoned judgment of the Railway Claims
Tribunal be affirmed in toto.
IV. FINDINGS OF THE TRIBUNAL:
4. The Railway Claims Tribunal, Bhubaneswar Bench heard the parties,
perused the documents on record, and upon the basis of the pleadings
framed five issues for consideration.
5. On the issue of maintainability, the Tribunal observed that on perusal
of the agreement placed before the Bench on the date of arbitration,
the tripartite agreement among Chief Commercial Manager, East
Coast Railway, KIOCL Ltd and State Bank of India dated 29/02/2012 is
an agreement which governs the methodology of transfer of fund
electronically relating to payment/ realisation of freight and any
dispute thereof from KIOCL Ltd. by State Bank of India on advice
from Railways/ and is not related to charge of freight based on
classification of goods as well as type of materials to transport as in
this claim case and is not applicable to the subject issue concerned in
this particular claim. There is no record available in the WS and during
the proceeding of the case wherein the respondent neither mentioned
the presence of the agreement nor did they make any application for
referring the case to arbitration. The pleading of the respondent thus
fails to satisfy the observations of the Apex Court mentioned under
serial No.i) to (iv)at page 13 of that judgement.
6. In view of above, the Bench is convinced and decide this issue against
the respondent. This is also in the conformity of the judgment of
Allahabad High Court in the case of Bal Kishan Bansal Vs Pramit
Bansal and another1 and the judgment of the Supreme Court of India
in the Civil Appeal No.5156 of 2003 (Arising out of SLP (C) No.21154/
2002) and the judgment in the case of Hindustan Petroleum
Corporation Ltd Vs. Pinkcity Midway Petroleum decided by the
2006 (4) AWC 3509 in Civil Revision No.369 of 2004 dated May 2006
Supreme Court of India in the Civil Appeal No.5156 of 2003 (Arising
out of SLP (C) No.21154/2002) .
7. So far as the issue with regard to use of iron ore fines, or the end use of
the iron oxide pellets, determines the freight rate i.e. domestic
consumption rate or export rate is concerned, the Tribunal observed
that the applicant as well as the respondent relied upon the Rate
Circular No.36 of 2009 dated 01/06/2009 (Exhibit R/7) extended
thereafter time to lime in support of their respective case. Paragraph 5
of the Rates Circular mandates that carriage of pallets of export as well
as carriage of iron ore moved for such pelletization for export will be
charged at class 180 plus DBC (Distance Based Charges) and the
applicant is required to prove that iron ore transported and pallets
produced are used domestically and not exported.
8. While discussing the issue No.3, the Tribunal observed that on
scrutiny of the records and exhibits filed by both parties, the Bench
observes that the concerned RR was raised on 15th December 2012. The
examination of Exhibit R/3, Exhibit A/9 & Exhibit A/10 i.e. Excise
Returns of KIOCL for the month of October 2012, November and
December 2012 show that no pellets KIOCL outside India and all the
pellets sold domestically. There was no other evidence available in the
case file to and were exported by were sold accept the pleading of the
respondent that the iron ore fines / pellets were exported.
9. Concerning to the RR, the Bench is, therefore, convinced that the
respondent plea is not supported by any cogent evidence and thereby
fails to prove the plea.
10. So far the issue nos.4 and 5 are concerned, it is observed that the
applicant filed documents and stated that the freight charges along
with Distance leased Charges (DBC) collected by the respondent vide
RR i.e. Annexure-3 is not controverted by the respondent. The
document is in respect to the collection of the amount by the
respondent. There is no denial with respect to the collection of the
amount by the respondent with an entry as DPOU on the RR. On
scrutiny, the Tribunal is convinced that the said ER was a paid RR and
the Distance Based Charges (DBC) under the entry as DPOU on RR
amounting to R5.58,01,110/- has been collected through e-payment
system by the respondent.
11. Accordingly, the O.A. was allowed by the Tribunal directing the
appellant/ Union of India to pay a sum of Rs.58,01,110/- only along
with simple interest @ 6 per cent per annum from the date of
application till the date of payment to the respondent.
V. COURT'S REASONING AND ANALYSIS:
12.Upon hearing learned counsel for the respective parties and upon an
anxious consideration of the pleadings, documents, and materials
placed on record, this Court deems it appropriate to structure its
analysis in a systematic and comprehensive manner, so as to ensure
clarity of reasoning and logical coherence in adjudication.
Accordingly, the analytical framework of this judgment is delineated
under the following heads:
A. Statutory and Tariff Framework:
i)The controversy arising in the present appeal is situated within
the delicate interstices of statutory authority and administrative
discretion that define the freight regulation regime under the
Railways Act, 1989. The Act, being a comprehensive legislative
framework, delineates the contours of the Railway
Administration's power to levy, assess, and recover freight, while
simultaneously circumscribing that authority through procedural
safeguards and tariff rationalization mechanisms.
ii) The issue assumes further complexity in light of the binding
tariff circulars issued by the Railway Board in exercise of its
delegated legislative competence under the Act. These circulars
constitute subordinate legislation, having the force of law, and
are intended to secure uniformity, transparency, and fiscal
discipline in freight computation. The interplay between the
statutory provisions--particularly Sections 78 and 83 of the Act,
which confer limited powers of recalculation and recovery--and
the administrative tariff prescriptions such as Rate Circular No.
36 of 2009, forms the crux of the present adjudication.
iii) The analytical fulcrum of the present adjudication pivots upon a
twofold inquiry. Firstly, it necessitates an examination into the
nature, scope, and limits of the authority conferred upon the
Railway Administration under Sections 78 and 83 of the
Railways Act, 1989--provisions which, though procedural in
formulation, often assume interpretive significance in the
assessment and re-determination of freight liability. The inquiry
must, therefore, address whether these sections merely empower
the Railway Administration to rectify computational or clerical
discrepancies, or whether they extend to authorise a substantive
reclassification of tariff heads once the transaction has been
consummated.
iv) Secondly, the analysis must engage with the interpretive reach
and normative import of the Railway Board's Rate Circular No.
36 of 2009, which governed the field during the relevant period
of booking. This circular, issued in the exercise of delegated
legislative competence, constitutes not merely an administrative
guideline but a binding fiscal instrument, defining the operative
tariff structure applicable to the carriage of iron ore for both
domestic consumption and export.
v) The interpretive exercise thus requires reconciling the statutory
empowerment under Sections 78 and 83 with the regulatory
prescriptions of the circular, so as to ascertain whether the
impugned levy of Distance Based Charges (DBC) conforms to
the tariff logic and legislative intent underlying the framework
of railway freight governance.
B. Sections 78 and 83 of the Railways Act, 1989
i) Section 78 of the Act empowers the Railway Administration to
undertake re-measurement, re-weighment, or re-calculation of
freight, thereby enabling correction of computational or clerical
errors. However, Section 83 authorises the Administration to
recover under-charges arising from such re-assessment. These
provisions, by their very structure and context, are procedural
and ancillary, designed to secure the fidelity of freight
computation to the governing tariff. They do not, in
jurisprudential contemplation, create a substantive head of
charge, nor do they vest any discretion to alter the character of
the levy or reclassify traffic contrary to the tariff instrument that
was legally applicable at the time of booking.
ii) The principle underlying these provisions is one of
administrative correction, not of substantive reassessment. The
power to recalculate does not carry within its fold, the power to
reimagine the transaction. Any interpretation to the contrary
would subvert the fundamental rule that the delegated
administrative authority must operate within the four corners of
the enabling statutory and tariff framework, and cannot, under
colour of recalculation, import a new incidence of charge alien to
the governing schedule.
Rate Circular No. 36 of 2009 -- the Normative Matrix
i) The Railway Board's Rate Circular No. 36 of 2009, which
superseded Circular No. 30 of 2008, codifies a dual tariff
structure premised upon the end-use of iron ore consignments,
distinguishing between traffic for export-oriented processing
and those intended for domestic consumption. Being a form of
subordinate legislation of fiscal character, the circular possesses
binding normative force upon both the Railway Administration
and the consignor, subject only to judicial review on grounds of
illegality, irrationality, or procedural impropriety.
ii) The Rate Circular No. 36 of 2009, which constituted the operative
tariff framework during the relevant period, delineates a dual-
stream classification predicated upon the intended end-use of
the consignment and the corresponding fiscal consequence.
Under the Export Stream, where iron ore is transported for
pelletisation or beneficiation with the ultimate object of export,
the freight is chargeable at Class-180 together with the levy of
Distance Based Charges (DBC), cumulatively forming the export
tariff--a structure designed to align higher freight incidence
with the commercial orientation and profit-yielding character of
export transactions. In contrast, under the Domestic Stream,
where the movement of iron ore is demonstrably for domestic
end-use within a pre-declared manufacturing unit, the
applicable freight rate stands reduced to Class-140, exempt from
DBC, subject to compliance with specific procedural and
evidentiary safeguards such as the filing of an affidavit by the
consignee prior to delivery, an indemnity note, and a verified
end-use declaration. These safeguards serve a regulatory
purpose, ensuring transparency, accountability, and prevention
of fiscal evasion. The dual classification thus embodies a
teleological balance between industrial facilitation and revenue
protection, linking tariff incidence to the consignment's
economic destination and thereby integrating the principles of
functional differentiation and proportionality into the railway
freight regime.
iii) In fact, two doctrinal consequences emanate from the above
scheme namely, first, the end-use of the consignment is not a
mere ancillary fact but a constitutive element of tariff
classification. The freight liability crystallises ex ante, by
reference to the intended and declared use of the consignment,
as corroborated by contemporaneous records such as excise
returns, manufacturing declarations, and affidavits. In other
words, purpose conditions classification. This jurisprudential
position aligns with the broader administrative law principle
that tax or tariff incidence must attach to objective and
ascertainable factual predicates existing at the time of levy, not
to speculative or retrospective assessments of conduct. Second,
Documentary Compliance as Condition Precedent. The filing of
the requisite documents under Paragraphs 3(B)(III) and 3(B)(V)
of the Circular is not a matter of procedural triviality but a
substantive evidentiary safeguard designed to ensure
transparency in tariff application. Yet, once the foundational fact
of domestic end-use stands established through primary and
contemporaneous evidence, such as excise returns evidencing
domestic sales and absence of export, a purely technical
deficiency in paperwork cannot serve as a juridical basis for
transmuting a domestic consignment into an export on
iv) In the realm of administrative law, the doctrine of substantial
compliance occupies a position of settled authority. It postulates
that procedural imperfections or technical omissions cannot be
permitted to defeat a substantive entitlement, particularly where
the statutory purpose has been fulfilled in essence and the public
authority has suffered no demonstrable prejudice. The doctrine
thus preserves the equilibrium between administrative discipline
and substantive justice, recognising that procedural form is a
means to an end, not an end in itself. Viewed through such lens,
Rate Circular No. 36 of 2009 epitomizes a teleological synthesis--
it insists upon procedural fidelity to ensure transparency and
regulatory uniformity, yet it accords primacy to substantive
truth over formal compliance. Where the end-use of the
consignment, being the decisive normative criterion, stands
established beyond cavil through contemporaneous and credible
evidence, form must yield to substance, and procedure must
bend to purpose. Such a construction alone harmonises the spirit
of the circular with the broader principles of administrative
fairness and equitable enforcement.
v) The Railway Claims Tribunal (RCT), upon an assiduous and
methodical appraisal of the evidentiary corpus--including, inter
alia, the excise returns for the quarter October to December
2012--arrived at an unequivocal finding that no iron oxide
pellets were exported during the relevant accounting period, and
that the entire quantum of production was sold within the
domestic market. This conclusion is anchored in primary
contemporaneous documentary evidence, unsullied by
conjecture, speculation, or extraneous inference, and therefore
commands a high degree of evidentiary sanctity.
vi) In the absence of any demonstrated perversity, patent illegality,
or mis-appreciation of evidence, such a finding warrants judicial
deference under the well-settled doctrine governing appellate
circumspection. This Court, exercising limited appellate
jurisdiction under Section 23 of the Railway Claims Tribunal Act,
1987, is not tasked with re-evaluating factual determinations
duly rendered upon an adequate evidentiary foundation. The
principle of concurrent factual finality, deeply embedded in
appellate jurisprudence, obliges this Court to respect the factual
conclusions of the Tribunal, particularly when they emanate
from contemporaneous industrial and fiscal records, and exhibit
both coherence and evidentiary integrity.
vii) The Railways' endeavour to impugn the Tribunal's factual
finding by adverting to instances of export activity during
previous accounting periods (2008-2011) betrays a fundamental
misapprehension of the normative structure of the prevailing
tariff regime. Under the framework of Rate Circular No. 36 of
2009, tariff classification is conceived as transaction-specific
rather than reputation-based, attaching legal consequence to the
particular consignment and its contemporaneous end-use, not to
the general business profile or historical conduct of the
consignor. The mere fact that a consignor has, in previous years,
engaged in export operations cannot, in the absence of cogent
nexus or contemporaneous linkage, retroactively transmute the
juridical character of a distinct and subsequent consignment. If
this Court holds otherwise, it would offend the principle of
temporal specificity in tariff incidence, a cardinal tenet of fiscal
jurisprudence which mandates that liability crystallises with
reference to the factual matrix existing at the time of the
transaction, and not by retrospective attribution of character
from unrelated periods. Consequently, in the absence of any
evidentiary continuum connecting Railway Receipt No.
261002668 with an export transaction, the attempt of the
Appellant-Railways to predicate its claim on the Respondent's
prior export history is legally misconceived and untenable.
viii) The plea advanced by the Appellant-Railway Administration,
alleging non-submission of the requisite affidavit and indemnity
note by the Respondent-Company, stands squarely refuted by
the Appellant's own pleadings before the learned Tribunal,
wherein the filing of such documents was expressly
acknowledged. The argument, therefore, collapses under the
weight of the Appellant's own admissions. Even assuming
arguendo that certain procedural formalities may not have been
adhered to in a manner of absolute precision, such deviation,
being de minimis and merely technical, cannot vitiate a
transaction otherwise grounded in substantive compliance with
the governing Rate Circular.
ix) Upon analysing from the administrative law standpoint, the
doctrine of substantial compliance operates to distinguish
between form and substance, recognising that procedural
prescriptions are designed to advance, not obstruct, the
attainment of statutory objectives. In the absence of
demonstrable prejudice, fiscal detriment, or impairment of
regulatory purpose, the invocation of minor procedural lapses
cannot serve as a legitimate ground for withholding a benefit
that is otherwise legally due. The Appellant's failure to establish
any causal nexus between the alleged omission and material
prejudice renders this contention juridically untenable and
doctrinally unsound.
x) The freight was duly paid through the e-payment system,
delivery was effected without objection, and the
contemporaneous excise documentation corroborates domestic
utilisation. In such circumstances, the doctrine of substantial
compliance, long entrenched in Indian administrative
jurisprudence as echoed in State of Haryana v. Raghubir
Dayal2must be invoked to immunise bona fide industrial
transactions from technical nullification.
AIR 1995 SC 2130
xi) The Scope and limitation of Sections 78 and 83 demonstrates
that the statutory power to re-measure or re-calculate freight
under Sections 78 and 83 operates within, not beyond, the four
corners of the governing tariff. These provisions presuppose the
existence of a legally correct tariff classification, and their
purpose is to rectify quantitative miscalculations, not to effect
qualitative reclassification. In order to employ them as
instruments of substantive reassessment would be to invert their
legislative intent and to allow administrative overreach under
the guise of procedural rectitude. Thus, when RC-36/2009 does
not authorise the levy of DBC for domestically consumed
consignments, Sections 78 and 83 cannot be deployed as vehicles
for its imposition.
xii) The Pendency of case before the Supreme Court vide SLP (C)
No. 15869 of 2015 and connected Transfer Petitions (Civil) Nos.
832-854 of 2015 is equally misplaced. The order of the Hon'ble
Supreme Court, dated 14th December 2015, confers a limited
stay upon specific writ petitions enumerated therein; it does not
extend to this appeal, nor was any such order ever produced
before the Tribunal during the pendency of the proceedings. In
the absence of a specific stay, the adjudicatory process must
proceed unhindered --mere pendency of SLP does not ipso facto
translate into prohibition.
xiii) The doctrine of appellate restraint has long attained the status
of a juridical axiom. An appellate court does not sit as a court of
second evaluation on matters of fact or appreciation of evidence;
interference is justified only where the order under challenge
suffers from manifest perversity, patent illegality, or
jurisdictional infirmity. The impugned judgment of the Ld.
Railway Claims Tribunal discloses none of these vices. On the
contrary, the Tribunal has correctly identified the determinative
legal test--that of end-use as the decisive criterion--and has
duly applied the governing tariff instrument, namely Rate
Circular No. 36 of 2009, to the established facts. The findings
recorded are empirically grounded, documentarily
substantiated, and logically coherent, reflecting a reasoned
adjudicatory process. In the absence of any perversity or
material misdirection, this Court finds no warrant or justification
for appellate interference, the judgment being juridically sound
and evidentially unassailable.
13. CONCLUSION:
14.In view of the foregoing discussions, the RCT directed refund of the
DBC component amounting to ₹58,01,110.80, with simple interest at
6% per annum from 2nd December 2015 (date of filing of the claim
application). Although the Respondent had claimed interest at 18.25%
per annum, the Tribunal's grant represents a judicious equilibrium
between restitutionary fairness and fiscal restraint. The principle of
restitution in integrum obliges the public authority to restore the
aggrieved party to the financial position it would have occupied had
the unlawful exaction not occurred. Interest, in this context, is not a
windfall but a juridical recognition of the time-value of money
wrongfully detained. Nevertheless, as the Respondent has not
appealed for enhancement and the Appellant contests even the
existing award, this Court, exercising appellate prudence, affirms the
rate so determined, while clarifying that interest shall continue to
accrue until the actual date of refund, if not already effected.
15.Regarding costs, the Tribunal's decision to make no order as to costs
was predicated upon the "peculiar facts and circumstances" of the
case. In view of the foregoing analysis, the appeals are devoid of merit
and are accordingly dismissed. It is hereby ordered as follows:
a. The judgment dated 04.02.2019 rendered by the Railway Claims
Tribunal, Bhubaneswar Bench in O.A. No. III/9/2015 is affirmed
in toto.
b. The Appellant-Railway Administration shall refund the sum of
₹58,01,110.80 (Rupees Fifty-Eight Lakhs One Thousand One
Hundred Ten and Eighty Paise only), representing the Distance
Based Charges (DBC) component, to the Respondent-KIOCL
Limited, together with simple interest at 6% per annum from
02.12.2015 until the date of actual payment (or until the date of
refund, if already effected). The refund shall be effected not later
than Two Months from today.
16. Accordingly, both the FAOs are disposed of.
17.Interim order, if any, passed earlier in any of the afore-mentioned
FAOs stands vacated.
(Dr.Sanjeeb K Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 7th November, 2025/
