2010 (6) TMI 625 - HC - Customs

Octroi payment - Who should bear the liabilty on the goods auctioned - Held that - If the Warehouse fails to give delivery of the goods or such goods are not exported with the specified period, Warehousing Corporation is liable to pay octroi at the prevailing rate on such goods - it was also obligatory on the part of the respondent No. 1 Municipal Corporation to take action against the respondent No. 2 for permitting the imported goods to remain in the Warehouse beyond a period of thirty days without obtaining prior written permission of the Commissioner - it was the liability of the respondent No. 2, the Warehousing Corporation to pay octroi duty. Sale proceeds lying in the hands of the Customs Department - Held that - The Customs shall discharge this liability for and on behalf of the Warehousing Corporation and shall pay it to the Municipal Corporation within fifteen days from the date of this judgment and order. The balance amount remaining in the hands of the Customs Department can be appropriated by the Customs Department towards the recovery of their interest liability. In the aforesaid manner, the respondent No. 3 shall distribute that sale proceeds held by it within four weeks from the date of the judgment, failing which octroi liability shall carry interest @ 18% p.a. from the date of failure till payment in full and final which the respondent No. 3 shall have to discharge. Thus The respondent Nos. 2 and 3 shall pay the amount of cost to the petitioner quantified in the sum of Rs. 20,000/- to be shared by them in the ratio of 50 50.

Issues Involved:
1. Liability for payment of octroi on auctioned goods.
2. Application of sale proceeds from auctioned goods.
3. Conduct and misleading affidavits by Customs officials.
4. Responsibilities of the Warehousing Corporation and Municipal Corporation.

Detailed Analysis:

1. Liability for Payment of Octroi on Auctioned Goods:
The central issue in this case was determining who should bear the liability for the payment of octroi on goods auctioned by the Commissioner of Customs and stored with the Central Warehouse Corporation (Warehousing Corporation) for more than one year. The petitioner, an auction purchaser, contended that the liability to pay octroi was on the Customs Department or the Warehousing Corporation, while both respondents disowned this liability, thrusting it onto the petitioner.

The Court examined the relevant statutory provisions, including the Bombay Provincial Municipal Corporation Act, 1949, and the octroi rules framed by the Corporation. According to Rule 22(10)(b) of the Octroi Rules, if goods are retained in a bonded warehouse for more than one year, full duty is required to be paid by the importer, and if not paid by the importer, it becomes payable by the license holder, i.e., the Warehousing Corporation. The Court concluded that the liability to pay octroi was on the Warehousing Corporation, which had allowed the goods to remain in the warehouse beyond the prescribed period without obtaining the necessary permissions.

2. Application of Sale Proceeds from Auctioned Goods:
The Court also addressed the application of sale proceeds from the auction of the goods. As per Section 150 of the Customs Act, 1962, the proceeds of the sale should be applied in a specific order: payment of sale expenses, freight and other charges, customs duty, warehousing charges, and any other dues to the Central Government, with the balance to be paid to the owner of the goods.

The Customs Department realized Rs. 1,01,07,795/- from the auction. The Court directed that the sale proceeds be distributed as follows:
- Rs. 2,70,905/- to the auctioneer towards sale expenses.
- Rs. 10,27,659/- to the Warehousing Corporation for warehousing charges.
- Rs. 4,26,454/- to the Municipal Corporation for octroi duty.

The remaining amount could be appropriated by the Customs Department towards their interest liability.

3. Conduct and Misleading Affidavits by Customs Officials:
The Court noted with concern that several Customs officials had filed misleading affidavits, attempting to project terms from other auction sales as applicable to the auction in question. This conduct was strongly deprecated, and the Court suggested that disciplinary action be initiated against the responsible officers for making false and misleading statements and producing irrelevant documents.

4. Responsibilities of the Warehousing Corporation and Municipal Corporation:
The Warehousing Corporation was found liable for the octroi duty due to their failure to comply with the licensing conditions and allowing the goods to remain in the warehouse beyond the stipulated period without obtaining the necessary permissions. The Municipal Corporation was also expected to enforce its standing orders more rigorously to prevent such situations.

Conclusion:
The Court held that the Warehousing Corporation was liable to pay the octroi duty, which should be recovered from the sale proceeds held by the Customs Department. The Customs Department was directed to distribute the sale proceeds as per the statutory provisions, and both the Warehousing Corporation and the Customs Department were ordered to pay costs to the petitioner. The Municipal Corporation was advised to review and enforce compliance with its standing orders to avoid future disputes.

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