2007 (11) TMI 247 - HC - Customs

Petitioner has a warehouse importer didn t cleared goods from warehouse within warehousing period - after getting permission from custom dept., petitioner sold the goods in auction to recover warehousing charges from auction proceeds revenue plea that entire auction proceeds had to be first adjusted towards customs duty, is rejectable - Petitioner is not liable to pay custom duty which is recoverable from the importer, so he was justified in recovering warehousing charges u/s 63(2)

Summary

Issues Involved:
1. Entitlement to invoke powers under Section 63(2) of the Customs Act, 1962.
2. Justification of customs authorities' demand under Section 72 of the Act.
3. Appropriation of auction sale proceeds under Section 150 of the Act.
4. Legality of encashing the bank guarantee by the customs authorities.

Issue-wise Detailed Analysis:

1. Entitlement to Invoke Powers under Section 63(2) of the Customs Act, 1962:
The petitioner, a warehouse keeper, invoked Section 63(2) of the Customs Act to auction goods for recovering warehousing charges. Section 63(2) permits the warehouse keeper to sell goods if rent or charges are unpaid within ten days from the due date, after notifying the owner and obtaining permission from the proper officer. The petitioner conducted multiple auctions with the customs authorities' consent, eventually selling the goods for Rs. 41,44,555/-. The court affirmed that the petitioner was justified in initiating the auction under Section 63(2) to recover warehousing charges.

2. Justification of Customs Authorities' Demand under Section 72 of the Act:
Section 72(1) allows customs authorities to demand full customs duty if warehoused goods are improperly removed or not cleared within the permitted period. The customs authorities contended that the entire auction proceeds should be appropriated towards customs duty. However, the court clarified that Section 72(1)(d) applies to the owner of the goods, not the warehouse keeper. Thus, the customs authorities' demand for the entire auction proceeds towards customs duty was not justified.

3. Appropriation of Auction Sale Proceeds under Section 150 of the Act:
Section 150 outlines the procedure for the sale of goods and application of sale proceeds, prioritizing expenses of the sale, freight, and other charges before customs duty. The court noted that the auction was conducted to recover warehousing charges, not customs duty. Section 150(2)(d) prioritizes payment of charges due to the person having custody of the goods (i.e., warehousing charges) over customs duty. Therefore, the petitioner had a superior right to recover warehousing charges from the auction proceeds.

4. Legality of Encashing the Bank Guarantee by the Customs Authorities:
The customs authorities encashed the petitioner's bank guarantee of Rs. 27,47,146/- to recover customs duty. The court held that the petitioner, as a warehouse keeper, could not be held liable for customs duty recoverable from the importer, M/s. Kushang Apparels. The encashment of the bank guarantee was deemed without legal justification.

Judgment and Directions:
The court quashed the impugned letters dated 17th February 2005 and 19th April 2005, deeming the demands against the petitioner unauthorized. The following directions were issued:
(i) Refund of Rs. 27,47,146/- to the petitioner with 12% interest per annum until payment, to be made within four weeks or by 15th January 2008.
(ii) Delay in payment would attract penal interest at 18% per annum, and the respondents would be liable for contempt of court.
(iii) Payment of Rs. 5,000/- as costs to the petitioner within the stipulated period.

The writ petition was allowed with the above directions, and pending applications were disposed of. Compliance was scheduled for 17th January 2008.