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TMI Blog2019 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... a transaction with M/s Kingfisher Airlines. Kingfisher's defaults (unconnected with ILFC) led to detention of some aircrafts by various revenue authorities including the customs department, as a consequence of which, the engine of one of these aircrafts was removed (cannibalized). 3. ILFC the lessor and the owner of the aircraft, for safeguarding its interest in the craft wished to fly back the aircraft. To this end, it assisted the entry of an aircraft engine. The engine was flown in showing Kingfisher Airlines as the importer. It was immediately detained; initially by the Service Tax department, which wished to exact amounts due. Later, the service tax proceedings were dropped. The customs authorities now moved in and detained the engine. Then ILFC, (the owner of the engine) filed the W.P.(C) 2937/2013. That writ petition was disposed of by order dated 11.02.2014. To avoid deterioration of functionality of the engine, the petitioner was permitted to furnish a bank guarantee in the sum of Rs. 8 crores, of which Rs. 1 crore was to be deposited within six weeks of the order, (directing release of the engine). The Customs Authorities were enjoined to adjudicate the proceedings and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released to for petitioner for re-export. The said payment made by the petitioner shall be without prejudice to the rights and contentions of the petitioner and it would be open to the petitioner to challenge the adjudication order as well as the demurrage charges levied by CELEBI in accordance with law. If it is ultimately decided by the customs authorities or* by any other court that no fine, penalty, personal penalty, a warning could have been imposed by the custom authorities, the above amount of demurrage paid by the petitioner to CELBI as indicated above shall be refunded by CELEBI to the petitioner in terms of the policy for waiver of demurrage charges notified by Airport Authority of India in 1999. This direction been given in terms of the judgment delivered by this court in Trip Communication Pvt. Ltd. Bearing W.P.(C) No. 7438/2012 decided on 28.03.2014." 4. Aggrieved by the Commissioner's decision assessing the aircraft to duty and proposing confiscation, ILFC appealed to the Tribunal [CESTAT], which by its order dated 23.06.2017, accepted its plea and allowed the appeal as regards penalty and confiscation. However, it was held liable for payment of duty since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions including furnishing of bank guarantee etc. Those orders were modified and the petitioner paid Rs. 17.09 crores. The Customs Authorities assessed the Show Cause Notice and raised the demand; they also imposed penalty and sought to confiscate the goods i.e. the aircraft engine. Eventually CESTAT set aside the penalty and confiscation. Even at that stage, the Customs Authorities were recalcitrant and did not refund the penalty amount, which had been deposited way back in 2014. The amounts were released to the petitioner eventually after the direction of this Court in W.P.(C) 6544/2018. 10. If one sees the matter from the above aspects, the issue which this Court has to address itself to is whether the petitioner can claim entitlement to the duty drawback under Section 74 of the Customs Act, which reads as follows: ....... 11. The Revenue's stand is premised upon the applicability of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 [FEMA Regulations of 2000]. It is interesting to note that although the definition of 'Export' in Regulation 2(iv) is inclusive, the drift of that Regulation perhaps deals with exports envisioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion deserves to and accordingly succeeds. A direction is given to the respondents to process the drawback claim of the petitioner and release the amounts to the extent permitted in law, within four weeks. Interest on the said amount, due to the petitioner shall be payable, as permissible under Section 75A. 15. As in the directions in W.P.(C) 6544/2018, in the present case too, the respondents are directed to ensure that the refund of the amount with interest be remitted to the petitioner's account, the details of which should be disclosed within next one week to the Customs Authorities. Furthermore, in case the account is an overseas account or if the petitioner per se, does not have any account in India but seeks remittance into an account in India of another entity, the respondents shall ensure that the amount would be remitted into that account in the foreign currency or its equivalent in the Indian rupees." 7. ILFC's argument in support of its writ petition is that firstly, demurrage could not have been validly collected; in this regard it is stated that with the CESTAT's findings in its order dated 23 June 2017, the illegality in the order of detention is undeniable. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel also highlighted CELEBI's position in its Counter Affidavit filed in the previous proceedings and contended that it is estopped from now saying that the policy does not allow it to waive demurrage charges. The relevant extract of the affidavit is as follows: "E. As such, the importer/Petitioner is under and obligation to secure the demurrage charges payable to answering Respondent from the date it was imported and handed over to the custody of Celebi/ Respondent No.6 till the date it is physical released, be it on a provisional basis, by furnishing a Bank Guarantee and/or bond and/or security as may deem fit by this Hon'ble Court securing/ stating that in case any fine, penalty, personal penalty and/or warning is imposed by the customs authorities, the Importer/Petitioner would pay the demurrage charges. F. That it shall be against the established principles of Law, in case the engine under dispute is released to the importer/ Petitioner without securing demurrage charges payable by the Petitioner. G. That it is therefore in the interest of justice that the Petitioner be directed to furnish appropriate Bank Guarantee and security bond securing the demurrage charges and u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the license in ordinary course of appraisal. 37. Section 156 of the Customs Act lays down the general rule making power of the central government to make rules to carry out the purposes of the Act and Section 157 lays down the power of the Board to make regulations to carry out the purposes of the Act. Under the customs Act, the custom authorities are concerned with the setting up of public or private warehouses and for storage, removal and handling of imported goods in a customs area. 38. The Handling of Cargo under Customs Area Regulations, 2009 have been framed to provide for the manner in which the imported goods/export goods shall be received, stored, delivered or otherwise handled in a customs area. The regulations also prescribe the responsibilities of the persons engaged in aforesaid activities. 39. The custom authorities are concerned with the receiving, storing, delivering and handling of cargo in a custom area. The custom authorities are not concerned with the upgradation, modernisation, finances, operation and maintenance and management and provision of services at the Cargo Terminal of the Airport, which is the function of the AAI. The custom authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult would be that in no case where there is a fine, penalty, personal penalty and/or warning imposed by the customs authorities CELEBI would be able to charge demurrage charges. Custom authorities are issuing waiver directions even in cases where the importers are clearly at fault and fine, penalty, personal penalty and/or warning has been imposed by the customs authorities. Even in cases of mis-declaration, undervaluation and concealment, the certificates are being issued. This is clearly giving premium to dishonesty. The waiver should be granted in genuine cases where the importers are ultimately found not at fault. It cannot be that all importers honest and dishonest are treated equally. 46. In cases where the importer is found innocent and there is no imposition of any fine, penalty, personal penalty and/or warning by the customs authorities, the Policy for Waiver would be applicable and the importer would be entitled to be considered for its benefit provided a certificate entitling him to be so considered is issued by the custom authorities. The importer would not be automatically exempt but would be covered under the Policy for Waiver and eligible for waiver which would be g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position. The Customs Authorities in New Delhi acted as per the request of another wing of the same Department who are having confirmed tax arrears of crores against the importer, who filed the bill of entry in pursuance of the detention notice issued for recovery of confirmed arrears, the Customs Authorities, New Delhi acted by detaining the said import cargo. This is a revenue recovery action permissible under law and not a seizure in terms of Customs Act which is for contemplated punitive action against the goods/importer. The detention for revenue recovery is entirely different from seizure under Customs Act. As such, we find no merit in the contention of the appellant on this ground." 12. It is further pointed out by CELEBI that no importer can claim a right to waiver of demurrage charges, since those are because of the service rendered for storage of detained goods, in terms of provisions of the Customs Act. Such being the case, the third-party service provider has to be compensated for the work done. The 1999 policy envisioning waiver, is firstly premised on the exercise of discretion; crucially, that discretion cannot be exercised where waiver is not permissible and is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to be provided thereat and the charges to be recovered therefor. An importer must land the imported goods at a seaport or airport. He can clear them only after completion of customs formalities. For this purpose, the seaports and airports are approved and provide storage facilities and Customs officers are accommodated therein to facilitate clearance. For the occupation by the imported goods of space in the seaport or airport, the Board or the Authority which is its proprietor is entitled to charge the importer. That until customs clearance the Board or the Authority may not permit the importer to remove his goods from its premises does not imply that it may not charge the importer for the space his goods have occupied until their clearance. xxx xxxxxx 44. It cannot be gainsaid that, by reason of unjustified detention of his goods by the Customs Authorities, the importer is put to loss by having to pay demurrage charges for the periods of such detention. The Central Government is empowered by Section 35 of the International Airports Authority Act, 1971, and Section 111 of the Major Port Trusts Act, 1963 to issue to the Authority and the Board of Trustees, respectively, direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importer- even if the detention were to result in no revenue. In Union of India v. R.C. Fabrics (P) Ltd. (2002) 1 SCC 71, the Supreme Court applied Grand Slam (supra). Yet later, in Om Shankar Biyani v. Board of Trustees, Port of Calcutta 2002 (3) SCC 168, the Supreme Court, after referring to Section 58 of the Major Port Trust Act, ruled: "8............ Thus the charges of the 1st Respondent are to be paid before the goods are removed. The High Court seriously erred in permitting removal of the goods without payment of the port charges. To be noted that it was never disputed that the charges were payable. The 1st Respondent was not concerned with the dispute as to who had to pay the charges. It was the Appellant who was interested in clearance of the goods. It was for him to have paid the charges and cleared the goods. Even if it was the Appellant's case that the Customs Authorities had to pay the charges, the Appellant should have first cleared the goods by paying charges due to the 1st Respondent and then claimed reimbursement from the Customs Authorities." 16. The Supreme Court had, earlier, in Shipping Corporation of India v. C.L. Jain Woolen Mills (2001) 5 SCC 345 - in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and argued that it was exempted from payment of duty. Resultantly a show cause notice was issued. The show-cause notice was confirmed after due adjudication; besides penalty and confiscation (in lieu of which redemption fine was proposed) customs duty too was payable- of course, in the event of redemption. The appeal to CESTAT resulted in the invalidation of the penalty and confiscation, not the duty liability. In fact CESTAT concluded that detention- with the aim of revenue recovery was legal and valid. 20. Clause 10.1.10 of the 1999 policy relied upon by ILFC reads as follows: "10.1.10 Demurrage charges shall not be waived where: (a) Any fine/penalty/personal penalty/warning is imposed by the Customs Authority. (b) Delay arose by reason of dispute in the assessable value or for revalidating or correcting the license in ordinary course of appraisal." In this case, no doubt the penalty imposed by the Customs authority contemplated by clause 10.1.10 (a) was set aside by CEGAT. However, that per se in the opinion of the court is not conclusive of the issue, because Clause 10.1.10 (b) visualizes a situation that is answered by the facts of this case. It states, in effect that d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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