2018 (10) TMI 1334 - HC - Customs

Abatement of duty u/s 22 of CA - warehoused goods was inundated with flood water resulting in loss to the goods stored therein - rejection of abatement on the ground that the damaged caused to the bonded goods was due to floods caused by rains and therefore cannot be considered as loss on account of the accident and therefore, abatement of duty also could not be considered. Held that - From the facts of the present case, it is clear that the imported goods were damaged after the rain water flooded the petitioner s warehouse - The surveyors report indicates that the goods had residual and salvage value at that time. Had the 1st respondent allowed the petitioner to clear the damaged goods then and there, duty on the abated value in terms of section 22 of the Customs Act, 1962 would have been sustainable - Request for clearance of the goods was also turned down by the 1st respondent on the ground that the request for waiver of interest was under active consideration by the 2ndrespondent in terms of the Public Notice - In the process, the goods lost their salvage value and later posed health hazard not only to the occupants of the petitioner s bonded warehouse but also to the persons in the locality near the bonded warehouse. Under these circumstances, by an order of this court on 01.02.2003 the Court allowed destruction. Thus, the goods were never allowed to be cleared even on their abated value. In absence of home clearance of the imported goods into the Domestic Tariff Area, the clamour to appropriate of amount paid towards duty even on the abated value pales out. Remission of duty u/s 23 of CA - Held that - Respondents ought to have suo motto taken steps to refund the amount as the petitioner became entitled for remission of duty under Section 23 of the Customs Act, 1962, as no duty was payable. Interest also cannot be demanded under the circumstances - Therefore, the amount of ₹ 35,35,220/- paid on 09.11.2017 by the petitioner, is directed to be refunded together with interest to the petitioner within six weeks from the date of this order subject to the petitioner satisfying that there is no unjust enrichment in terms of Section 27 of the Act. Petition are allowed with consequential relief by way of refund of the amount paid by the petitioner, subject to the petitioner satisfying that there is no unjust enrichment if refund is to be allowed.

Summary

Issues Involved:
1. Quashing of communication dated 18.3.2008 issued by the first respondent.
2. Refund of ?35,35,220/- together with interest paid by the petitioner.
3. Consideration of the petitioner’s request/application dated 13.11.2007 in light of Board Circular No.10 of 2006-Cus dated 14.02.2006.

Issue-wise Detailed Analysis:

1. Quashing of Communication Dated 18.3.2008:
The petitioner operates a duty-free shop and stores imported goods in a custom-bonded warehouse. Due to torrential rains on 3.12.2005, the warehouse was flooded, damaging the goods. The petitioner sought remission of duty under Section 23 of the Customs Act, 1962, which was rejected by the first respondent on 14.11.2006. Subsequently, a request for abatement of duty under Section 22 of the Customs Act, 1962, was also rejected on 6.1.2007, as the damage was not considered an "accident" but due to negligence. The first respondent demanded ?12,32,074/- as interest, communicated through the impugned letter dated 18.3.2008.

2. Refund of ?35,35,220/- Together with Interest:
The petitioner paid the duty on 27.08.2007 and requested waiver of interest, which was denied. The first respondent did not allow the clearance of damaged goods at abated value, leading to the goods posing a health hazard and being destroyed by court order on 01.02.2013. The court noted that the petitioner should have been allowed to clear the goods at abated value, and the respondents' failure to do so led to the goods' destruction, exempting the petitioner from duty payment. The court directed the refund of ?35,35,220/- with interest, subject to the petitioner demonstrating no unjust enrichment under Section 27 of the Act.

3. Consideration of the Petitioner’s Request/Application Dated 13.11.2007:
The petitioner sought waiver of interest based on Board Circular No.10 of 2006-Cus dated 14.02.2006. However, the respondents contended that interest was justified as the petitioner failed to clear the goods as per the bond conditions. The court found that the respondents' refusal to clear the goods at abated value and subsequent destruction exempted the petitioner from duty and interest. Thus, the petitioner's request for waiver of interest was indirectly addressed by the court's decision to refund the duty paid.

Conclusion:
The court allowed W.P.Nos. 10329 and 10330 of 2008, directing the refund of ?35,35,220/- with interest, subject to the petitioner proving no unjust enrichment. W.P.No.10331 of 2008 was dismissed as the relief sought was already addressed. The court emphasized fair and reasonable actions by customs authorities and adherence to legal provisions under Sections 22 and 23 of the Customs Act, 1962.