Union Of India vs M/S. Associated Container … on 14 February, 2020


Supreme Court of India

Union Of India vs M/S. Associated Container … on 14 February, 2020

Author: L. Nageswara Rao

Bench: L. Nageswara Rao, Hemant Gupta

                                                            REPORTABLE

                 IN THE SUPREME COURT OF INDIA

                   CIVIL APPELLATE JURISDICTION


                  CIVIL APPEAL NO. 4490 OF 2008



UNION OF INDIA & ORS.                                     .....APPELLANT(S)

                                     VERSUS


M/S. ASSOCIATED CONTAINER TERMINAL LTD.                 .....RESPONDENT(S)




                         JUDGMENT

HEMANT GUPTA, J.

1. The order dated 28th November, 2007 passed by the High Court of

Delhi is the subject matter of challenge in the present appeal. Vide

the aforesaid order, the writ petition filed by the respondent was

allowed and the demand raised by the appellants vide letters

dated 17th February, 2005 and 19th April, 2005 were found to be

without authority of law and, thus, the appellant was directed to

refund a sum of Rs.27,47,146/- together with interest @12% per

annum.

2. One M/s. Kushang Apparel Ltd. had imported CTV kits and filed six

Bills of Entries, all dated 9th February, 2001. Such goods were

permitted by the Custom Department to be kept in warehouse for

1
one year in terms of Section 59 of the Customs Act, 1962 1 at ICD,

Faridabad. The Bond period expired on 28 th February, 2002 but the

importer did not clear the imported goods and also did not pay the

rent for the warehouse. The warehouse issued notices for the

recovery of its dues failing which it will be constrained to sell the

imported goods by public auction/tender sale. With the approval of

custom authorities, the imported goods were put for sale through

auction under Section 63(2) of the Act with a valuation of imported

goods at Rs.1,52,04,176/-. However, the goods could not be

successfully sold. The valuation was reduced for the second

auction held on 4th September, 2002 to Rs.1,36,83,759/- and

further reduced in the third auction held on 7th May, 2003 to

Rs.54,44,650/-. The highest bid of Rs.35 lakhs alone was received.

The auction was not confirmed.

3. Thereafter, tender sale was resorted to dispose of the goods in the

warehouse. The valuation of the imported goods in the warehouse

was fixed at Rs.33 lakhs for which tenders were invited upto 3 rd

December, 2003. Later, the valuation was reduced to Rs.30 lakhs

in the second tender sale up to 31 st August, 2004. In this sale

process, the highest bid received was of Rs.41,44,555/-. The

Assistant Commissioner passed an order on 12 th October, 2004

that the goods will not be cleared on ex-bond Bill of Entry as it is

not a case of clearance under Section 68 of the Act but on

realization of charges under Section 72 of the Act in terms of the

1 for short, ‘Act’

2
judgment of this Court in Kesoram Rayon v. Collector of

Customs, Calcutta2. The sale proceeds will be appropriated as

per Section 105 of the Act.

4. Subsequently, on 2nd February, 2005, the Assistant Commissioner

of Customs permitted the auctioned goods to be released to

auction purchaser on furnishing of bank guarantee in the sum of

Rs.27,47,146/- after paying a sum of Rs.2,05,329/- as expenses of

sale and payment of Rs.11,92,080/- as duty. The respondent

deposited the amount of duty and also furnished the bank

guarantee. Subsequently, on 4th March, 2005, the respondent was

called upon to deposit remaining amount of Rs.27,47,146/-

immediately failing which the bank guarantee was intended to be

invoked. Subsequently, on 19th April, 2005, the Additional

Commissioner informed the respondent that Chief Commissioner of

the Central Excise is of the view that the matter stands settled with

the Board’s clarification of 17th February, 2005 and the outstanding

arrears of custom duty is required to be recovered. The bank

guarantee was sought to be invoked which led the respondent to

invoke the writ jurisdiction of the Delhi High Court.

5. The High Court allowed the writ petition with the following findings:

“16. It appears that on the facts of the present case
the occasion to invoke Section 72 (1)(d) would arise
only if the goods in respect of which a bond has been
executed has not been cleared for home consumption.

In such event, the owner of the goods can be asked to
pay the entire duty. This obviously does not apply to the
warehouse-keeper like the petitioner and no demand of
2 (1996) 5 SCC 576

3
payment for customs duty can be made against the
petitioner.

xx xx xx

20. We therefore hold that the Petitioner was justified
in recovering the warehousing charges due to it from
the auction sale proceeds in terms of Section 63 (2) of
the Act. The balance amount deposited with the
Government Treasury can be adjusted by the customs
department towards part payment of customs duty as
computed by it.”

6. The argument of the learned counsel for the Revenue is that the

distribution of sale proceeds has to be in accordance with Section

150 of the Act as there is a specific provision concerning custom

duty charges which will have precedence over recovery of

warehouse charges under 150(2)(e) of the Act.

7. Before this Court, learned counsel for the appellants relied upon

the judgment of this Court in Kesoram. This Court considered

Section 15(1)(d) of the Act that if the goods which are not removed

from a warehouse within the permissible period (in terms of Section

61) are treated as goods improperly removed from the warehouse.

Such improper removal takes place when the goods remain in the

warehouse beyond the permitted period or its permitted extension.

The importer of the goods may be called upon to pay customs duty

at the rate applicable on the date of their deemed removal from

the warehouse. This Court held as under:

“13. Goods which are not removed from a warehouse
within the permissible period are treated as goods
improperly removed from the warehouse. Such
improper removal takes place when the goods remain in
the warehouse beyond the permitted period or its
permitted extension. The importer of the goods may be

4
called upon to pay customs duty on them and,
necessarily, it would be payable at the rate applicable
on the date of their deemed removal from the
warehouse, that is, the date on which the permitted
period or its permitted extension came to an end.

14. Section 15(1)(b) applies to the case of goods
cleared under Section 68 from a warehouse upon
presentation of a bill of entry for home consumption;
payment of duty, interest, penalty, rent and other
charges; and an order for home clearance. The
provisions of Section 68 and, consequently, of Section
15(1)(b) apply only when goods have been cleared from
the warehouse within the permitted period or its
permitted extension and not when, by reason of their
remaining in the warehouse beyond the permitted
period or its permitted extension, the goods have been
deemed to have been improperly removed from the
warehouse under Section 72.

xx xx xx

17. The consequence of non-removal of warehoused
goods within the permitted period or the permitted
extension is, by virtue of the terms of Section 72,
certain. The date on which it comes to end is the date
relevant for determining the rate of duty. When the duty
is in fact demanded is not relevant. The alternative
submission on behalf of the appellants must, therefore,
also be rejected.”

8. On the basis of the said judgment, it is contended that the duty

payable on the goods imported has to be assessed on the date of

deemed removal of goods from the warehouse for home

consumption i.e. on the expiry of one year of the warehouse period

i.e. 28th February, 2002. Therefore, the custom duty leviable as on

that day is to be recovered from the sale proceeds and in terms of

Section 150(2) of the Act, the custom duty has to be paid in

preference to the warehouse charges. Some of the relevant

provisions of the Act read as under:

5
“Section 63 . Payment of rent and warehouse
charges. – (1) The owner of any warehoused goods
shall pay to the warehouse-keeper rent and warehouse
charges at the rates fixed under any law for the time
being in force or where no rates are so fixed, at such
rates as may be fixed by the Principal Commissioner of
Customs or Commissioner of Customs.

(2) If any rent or warehouse charges are not paid within
ten days from the date when they became due, the
warehouse -keeper may, after notice to the owner of
the warehoused goods and with the permission of the
proper officer cause to be sold (any transfer of the
warehoused goods notwithstanding) such sufficient
portion of the goods as the warehouse-keeper may
select.

xx xx xx

Section 71. Goods not to be taken out of
warehouse except as provided by this Act. – No
warehoused goods shall be taken out of a warehouse
except on clearance for home consumption or export or
for removal to another warehouse, or as otherwise
provided by this Act.

xx xx xx

Section 150. Procedure for sale of goods and
application of sale proceeds. – (1) Where any goods
not being confiscated goods are to be sold under any
provisions of this Act, they shall, after notice to the
owner thereof, be sold by public auction or by tender or
with the consent of the owner in any other manner.

(2) The proceeds of any such sale shall be applied –

(a) firstly to the payment of the expenses of the sale,

(b) next to the payment of the freight and other
charges, if any, payable in respect of the goods sold, to
the carrier, if notice of such charges has been given to
the person having custody of the goods,

(c) next to the payment of the duty, if any, on the goods
sold,

(d) next to the payment of the charges in respect of the
goods sold due to the person having the custody of the

6
goods,

(e) next to the payment of any amount due from the
owner of the goods to the Central Government under
the provisions of this Act or any other law relating to
customs, and the balance, if any, shall be paid to the
owner of the goods.”

9. Learned counsel for the respondent refers to Chapter 21 of Central

Board of Excise and Customs Manual relating to disposal of

unclaimed/uncleared cargo. The relevant clauses from the Manual

read as under:

“7. Once the goods are sold, the Customs duty on the
goods is calculated. For calculation of Customs duty,
the sale proceeds from the sale of unclaimed/uncleared
goods is taken as cum-duty price (value + duty) and
customs duty is calculated working backwards on the
price realised.

Apportionment of sale proceeds of goods:

8. On the unclaimed/uncleared goods, liabilities towards
customs duty as well as carrier’s charges and storage
charges arise, which are to be recovered from the sale
proceeds. In addition, sales expenses incurred on sale
of such goods are to be recovered. In most of the
cases, the sale proceeds of such goods may not be
sufficient to meet liabilities of all the agencies. In such
cases, question arises as to which liability is to be met
first. To take care of such a situation, provisions have
been made in section 150(2) of the Customs Act. The
sale proceeds of any such sale of unclaimed/uncleared
goods is to be applied in following manners:

(a) first, to the payment of the expenses of the sale,

(b) next to the payment of the freight and other
charges, if any, payable in respect of the goods sold, to
the carrier, if notice of such charges has been given to
the custodians,

(c) next to the payment of the duty, if any, on the goods
sold,

(d) next to the payment of the charges in respect of the

7
goods sold due to the person having the custody of the
goods,

(e) next to the payment of any amount due from the
owner of the goods to the Central Government under
the provisions of this Act or any other law relating to
Customs.

After making above-said payments, if any balance
remains, that is to be paid to the owner of the goods.”

10. Reference is made to another Circular dated 28 th November, 2001

issued by the Central Board of Excise and Customs. The Circular

reads as under:

“A reference was received from the Container
Corporation of India (CONCOR) stating that there is a
divergence of practice in Custom Houses with regard to
apportionment of sale proceeds from disposal/sale of
unclaimed/uncleared goods under section 150 of the
Customs Act, 1962. It was reported that some Custom
Houses determine the Customs duty payable on
auctioned goods after deducting the sales expenses
from the sale proceeds of the goods whereas other
Custom Houses are determining duty on the basis of
sale proceeds without allowing any deduction.

2. The matter has been examined. It is clarified that –

(a) the Customs duty shall be determined by backward
calculation considering the sale proceeds of
unclaimed/uncleared goods as the cum-duty price. For
calculation of duty, total sale proceeds without allowing
any deduction towards sales expenses or any other
charge is to be taken as cum duty price.

(b) After determination of the Customs duty, sale
proceeds of unclaimed/uncleared goods is to be
appropriated in the manner as provided in section
150(2)
of the Customs Act, 1962.

3. These instructions may be brought to the notice of
all concerned by way of issuance of suitable Public
Notice/Standing Order.

4. Difficulties, if any, in implementation of these
instruction, may be brought to the notice of the Board.
Kindly acknowledge receipt of this Circular.”

8

11. The issue required to be examined in the present appeal is whether

the calculation of the custom duty would be assessed as on the

date of the deemed removal of goods from the warehouse in terms

of Section 61 as interpreted by this Court in Kesoram or on the

date of sale for the reason that the importer has failed to seek

clearance of the goods imported.

12. As per the appellants, the right to recover customs duty is superior

to the right to recover warehouse charges in terms of Section 150

of the Act and that sale was conducted under Section 72 and not

under Section 63 of the Act. If the contention of the Revenue is to

be accepted, the custom duty will be much more than the price

received in tender sale. However, if the date of calculation of

custom duty is treated to be the date of sale, the demand of sum of

Rs.27,47,146/- would be untenable.

13. The appellants have referred to a communication dated 16 th April,

2004 wherein the respondent was called upon to clear the goods

after the expiry of extended period failing which payment of full

amount of duty will be payable together with all rent, penalties,

interest and other charges.

14. Kesoram is a case where the importer claimed levy of custom

duty which remained in bonded warehouse beyond the permitted

period claiming that the duty as is applicable on the date the goods

were sought to be removed for home consumption, will be

9
chargeable. This Court found that the goods can be kept in a

warehouse in terms of the period specified under Section 61 of the

Act and, therefore, Section 68 and Section 15(1)(b) apply only

when the goods were cleared from the warehouse within the

permitted period or with permitted extension and not beyond the

permitted period or permitted extension.

15. The present case is not a case of levy of custom duty on the

importer. The importer has not sought the release of goods within

the permitted period of warehouse. Therefore, the judgment in

Kesoram will not be applicable in respect of the goods to be

auctioned on account of failure to seek the release of imported

goods by the importer though after the permission from the proper

officer.

16. Section 63 of the Act compels the owner of the warehoused goods

to pay rent and warehouse charges at the rates fixed under any law

for the time being in force or at such rates as may be fixed by the

Commissioner of Customs. If the rent or warehouse charges are

not paid, the warehouse-keeper is competent to sell the goods or

such sufficient portion of the goods as the warehouse-keeper may

select after permission from the proper officer. Section 63, thus, is

to ensure that the warehouse-keeper recovers the rent or

warehouse charges from the importer.

17. Section 150 deals with the distribution of sale proceeds if the goods

other than the confiscated goods are sold under any provision of

10
the Act. The Central Board of Excise & Customs had issued a

clarification on 28th November, 2001 keeping in view divergence of

practice with regard to apportionment of sale proceeds from

disposal/sale of unclaimed/uncleared goods under Section 150 of

the Act. It was communicated that the custom duty shall be

determined by backward calculation considering the sale proceeds

of unclaimed/uncleared goods as the cum-duty price. For

calculation of duty, total sale proceeds without allowing any

deduction towards sales expenses or any other charge is to be

taken as cum-duty price.

18. In view of the Circular issued by the Central Board of Excise &

Customs, the custom duty is to be calculated on the sale price and

not on the duty as is payable on the date of deemed expiration of

permitted period of warehouse. Such Circular of the Board is

binding on the Revenue. Therefore, the custom duty has to be paid

on the basis of sale proceeds realised from the sale of the goods

kept in a warehouse and not on the basis of the custom duty

payable at the time of filing the Bill of Entry or on the date of expiry

of permitted period of warehouse.

19. Consequently, the present appeal is disposed of with directions to

ascertain the customs duty keeping in mind the dispensation

indicated in the enabling provisions of the Customs Act, 1962 and

Chapter 21 of Central Board of Excise and Customs Manual read

with circular dated 20th November, 2011 and adjust the same as

11
per the priority specified in Section 150(2) of the stated Act.

Further, if the bank guarantee in the sum of Rs. 27,47,146/-

(Rupees twenty seven lakhs forty seven thousand one hundred

forty six only) has already been invoked by the appellants, the said

amount shall be made over to the respondent in terms of the

directions given by the High Court within three months from today

after making due adjustments of the proceeds of sale as indicated

hitherto.

20. The appeal is disposed of in the above terms with no order as to

costs.

………………………………………J.

(A.M. KHANWILKAR)

………………………………………J.

(HEMANT GUPTA)

………………………………………J.

(DINESH MAHESHWARI)
NEW DELHI;

FEBRUARY 14, 2020.

12



Source link