2002 (5) TMI 72 - HC - Customs

Iron waste and scrap, or, usable M.S. pipes - Classification of goods - Import - Detention, Misdeclaration - Evidence - Demurrage

Summary

Issues Involved:
1. Whether the petitioner imported serviceable pipes or scrap.
2. Liability of the petitioner to pay demurrage and charges for containers.

Issue-wise Detailed Analysis:

1. Whether the petitioner imported serviceable pipes or scrap:

The petitioner, engaged in the manufacture of mild steel ingots, imported iron scrap from the Middle East. On March 24, 2000, the petitioner filed a Bill of Entry for 25 containers, out of which 21 were released and 4 detained by the Customs Authorities. Later, another consignment of 51 containers arrived in April 2000, and 24 containers were released after inspection. However, on May 2, 2000, the competent authority ordered the seizure of goods in 27 containers under Section 110 of the Customs Act, 1962. The petitioner claimed the pipes were old, used, rusted, and pitted, and thus, should be classified as scrap.

To resolve the dispute, the court appointed a Local Commissioner, Dr. S.R. Prabhakar, Head of the Metallurgical Engineering Department, Punjab Engineering College, to inspect the goods. His report indicated that the pipes were old, used, and heavily corroded, classifiable into three types based on the degree of corrosion. The report concluded that the goods were not serviceable pipes but scrap, corroborated by photographs and detailed observations.

The respondents' claim, based on a report by Mr. Rajesh Shori stating 85% of the pipes were unused, was dismissed as unreliable. The court noted that the show cause notice issued in February 2002 described the pipes as old and used, contradicting Shori's report. Thus, the court concluded that the goods imported were indeed scrap, not serviceable pipes.

2. Liability of the petitioner to pay demurrage and charges for containers:

The petitioner faced demands for demurrage and container charges due to the delayed release of goods. Despite repeated requests to mutilate the goods to avoid such charges, the Customs Authorities detained the goods arbitrarily. The court found that the respondents acted in violation of the instructions to mutilate and release the goods, causing undue delay and financial burden on the petitioner.

The petitioner settled a demand of Rs. 82 lacs from the Shipping Company at Rs. 35 lacs and faced a demand of Rs. 26 lacs from the Punjab State Warehousing Corporation for demurrage. The court held that the petitioner was not at fault and should not bear these charges. The responsibility for the charges was placed on the Customs Authorities, who were directed to reimburse the petitioner and pay the demurrage to the Warehousing Corporation.

The court emphasized the need for the government to fix responsibility and take action against the defaulting officers, particularly Mr. R.C. Sankhla, who was ordered to show cause for his conduct.

Conclusion:

The writ petition was allowed, setting aside the impugned orders. The bank guarantees furnished by the petitioner were ordered to be released, and the respondents were directed to pay the demurrage charges within two months. The court also issued a notice to Mr. Sankhla to explain his conduct and consider penal and compensatory costs against him.