2016 (2) TMI 539 - HC - Customs

Levy of demurrage charges - levy of Warehouse charges for detained goods - Mis-declaration of description of the goods - import of waste Oil or Heavy Cut Oil - Held that - the word demurrage merely signifies a charge, which may be levied on goods after expiration of free days. The Central Warehouse Corporation or its partner, respondent no. 5 could not demand any warehouse charge on the goods, which were detained by the Customs Authority. They were bound to comply with the terms and conditions of their appointment letter read with clause 6 (l) of the Regulations of 2009. The contention of the respondents that clause 6(l) is not applicable in view of the word subject to given in clause 6(l) and, therefore, section 63 of the Act would prevail, is patently erroneous. The terms and conditions of the licence clearly prohibits the service provider to demand warehouse charges on the goods seized, detained or confiscated by the Customs department. We are, therefore, of the opinion that the respondent nos. 3, 4 and 5 had no authority of law to demand warehouse charges on the goods seized or detained by the Customs Department. The petitioner was entitled for release of the goods without payment of warehouse charges. We are, however, of the opinion that once a stand was taken by the respondents to release the goods on payment of charges, the petitioner should have got the goods released upon payment of the charges, as demanded by the respondents, by depositing the same under protest and thereafter should have contested the matter. Allowing the goods to remain in the custody of respondent nos. 3, 4 and 5 after 11.04.2014 on the pretext that the petitioner is not liable to pay demurrage charges becomes arbitrary and unjustified especially when the respondents had made their stand clear insisting upon payment of warehouse charges, even though such stand of respondent nos. 3, 4 and 5 was unjustified. The writ petition is allowed and a writ of mandamus is issued holding that the respondents no. 3, 4 and 5 are not entitled to demand warehouse charges on the goods that was initially detained but subsequently released by the Customs authority till 11.04.2014, i.e., the date when the counter affidavit of respondent nos. 3 and 4 was filed before the High Court and their stand became clear. For the period 12.04.2014 onwards till the date of actual clearance, the petitioner would be liable to pay warehouse charges.

Issues Involved:
1. Mis-declaration of imported goods.
2. Detention and testing of goods.
3. Confiscation and show cause notice.
4. Clarification from the Ministry of Environment & Forest.
5. Order for release of goods.
6. Non-release of goods by Central Warehousing Corporation.
7. Demand for warehousing charges.
8. Legal provisions regarding warehousing charges.
9. Applicability of Regulations of 2009.
10. Court's interim order and subsequent proceedings.
11. Custodian's right to charge demurrage.
12. Terms and conditions of custodian's appointment.
13. Legal interpretation of relevant sections of the Customs Act.

Detailed Analysis:

1. Mis-declaration of Imported Goods:
The petitioner, a company engaged in manufacturing petroleum products, imported Heavy Cut Oil through a bill of lading. Upon arrival, the goods were detained by the Customs Department based on an intelligence report alleging mis-declaration of the goods. Samples were taken and tested by the Central Revenues Control Laboratory (CRCL), which reported that the goods were "waste oil" covered by the Hazardous Waste Management Rules, 2008.

2. Detention and Testing of Goods:
The Customs Department detained the goods on 21.12.2011 and sent samples for testing. The CRCL report dated 10.02.2012 identified the goods as "waste oil."

3. Confiscation and Show Cause Notice:
Based on the CRCL report, the Customs authority confiscated the goods on 27.02.2012 under Sections 111(d) and 111(m) of the Customs Act, 1962, and seized them under Section 110. A show cause notice dated 12.06.2012 was issued to the petitioner to explain why the goods should not be confiscated and a penalty imposed under Section 112(a).

4. Clarification from the Ministry of Environment & Forest:
The Customs Department sought clarification from the Ministry of Environment & Forest, which clarified on 31.08.2012 that the goods imported were not "waste oil."

5. Order for Release of Goods:
The Additional Commissioner, Customs, Excise & Service Tax, Ghaziabad, after considering all aspects and the Ministry's report, issued an order on 03.01.2014 stating that the consignment was not "waste oil" and directed its release at the appropriate value at the time of import, dropping the show cause notice.

6. Non-release of Goods by Central Warehousing Corporation:
Despite the order, the goods were not released by the Central Warehousing Corporation or its service provider, World Window Infrastructure Logistics Pvt. Ltd. The petitioner filed a writ petition seeking a writ of mandamus for the release of the consignment without payment of warehousing charges.

7. Demand for Warehousing Charges:
The Central Warehousing Corporation and its service provider demanded warehousing charges, arguing that under Section 45 of the Customs Act, they were responsible for the safe custody of the goods and had a lien on them until remuneration was received.

8. Legal Provisions Regarding Warehousing Charges:
The respondents contended that under Sections 63 and 68 of the Customs Act, the owner of the goods is liable to pay warehousing charges. They also cited Sections 148 and 170 of the Contract Act, 1872, asserting a bailor and bailee relationship.

9. Applicability of Regulations of 2009:
The Customs Department argued that under Regulation 6(l) of the Handling of Cargo in Customs Areas Regulations, 2009, the custodian should not charge rent or demurrage on goods detained by the Customs Department. The respondents contended that Section 63 of the Act, which provides for payment of warehousing charges, should prevail over Regulation 6(l).

10. Court's Interim Order and Subsequent Proceedings:
The High Court, in its interim order dated 07.02.2014, directed the respondents to release the goods or show cause by filing a counter affidavit. The respondents filed their counter affidavits, reiterating their demand for warehousing charges.

11. Custodian's Right to Charge Demurrage:
The Court reviewed the legal provisions and previous judgments, including the Supreme Court's interpretation of Section 45 of the Customs Act, which allows the custodian to charge demurrage for the period goods remain in their custody.

12. Terms and Conditions of Custodian's Appointment:
The Court noted that the Central Warehousing Corporation's appointment as custodian under Section 45 of the Act included a clause prohibiting the charging of rent or demurrage on goods detained by the Customs Department.

13. Legal Interpretation of Relevant Sections of the Customs Act:
The Court concluded that the respondents were bound by the terms of their appointment and Regulation 6(l) of the Regulations of 2009, which prohibits charging warehousing charges on detained goods. The Court held that the respondents' demand for warehousing charges was unjustified and illegal.

Judgment:
The writ petition was allowed. The Court issued a writ of mandamus holding that the respondents were not entitled to demand warehousing charges on the goods detained by the Customs authority until 11.04.2014. From 12.04.2014 onwards, the petitioner would be liable to pay warehousing charges. The Court emphasized that the petitioner should have paid the charges under protest and contested the matter later to avoid further retention of the goods.

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