2013 (5) TMI 41 - HC - Customs

Customs Authorities' Good Faith Ruling Reverses Ex Parte Judgment

UNION OF INDIA Versus NAVSHAKTI INDUSTRIES P. LTD.

The court found that the Customs Authorities acted in good faith and set aside the ex parte judgment and decree in favor of the respondent. The appeal was ... Duty under the Customs Act - Remitting of demurrage/detention charges was declined - Acts of omission and commission - Consignment/goods imported by respondent were found to be as per the bills of entries - The respondent used to place orders and foreign suppliers sent the goods which reached the International Containers Deport - The goods used to be got released by the respondent from there on completing the formalities - Held that:- Learned Single Judge has only considered the statement of PW-1 that the goods were illegally detained by Custom Authorities, without caring to look into the documents produced especially the communication by respondent to its indenting agent and the description of the goods imported which necessitated the detention and testing. The bona fide of Custom Department can be gathered from the fact that 80% of the goods were released by the Custom Authorities without any delay. After the detention certificate was issued by the Custom Authorites, instead of getting the goods released without further delay, a three tier approach was adopted by the respondent - Firstly requesting the Shipper and CCI to release the goods without any detention charges/demurrage in view of the detention certificate issued by the Custom Authorities - Thereafter writing letters to them expressing inability to get the goods released on paying detention charges/demurrage which were more than the value of the goods - Finally getting the goods released on payment without prejudice - This conduct of the respondent resulted in further delay thereby incurring more liability to pay detention charges/demurrage which could have been minimized by promptly getting the goods released. Thus, we find that neither on facts nor on law, the impugned judgment can be sustained - We allow the appeal and set aside the ex parte judgment and decree dated 22-3-2002 Suit filed by the respondent is dismissed - Parties shall bear their own cost all throughout - Appellant is entitled to restitution. Issues Involved:1. Legality of the ex parte judgment and decree.2. Justification for detaining the imported goods.3. Liability for demurrage/detention charges.4. Good faith and bona fide actions of the Customs Authorities.5. Issuance and implications of the detention certificate.6. Respondent's conduct in mitigating detention charges.Detailed Analysis:1. Legality of the Ex Parte Judgment and Decree:The appellant, Union of India, challenged the ex parte judgment and decree dated March 22, 2002, which awarded the respondent, M/s. Navshakti Industries P. Ltd., a sum of Rs. 46,31,929/- with costs and interest. The judgment was impugned on its legality, with the appellant arguing that the ex parte evidence was a mere reproduction of the plaint's averments and lacked any contrary evidence.2. Justification for Detaining the Imported Goods:The respondent imported newsprint/printing paper during July-December 1997. The Customs Authorities detained 20% of the goods pending test reports, justified by the fact that the goods were labeled as 'Standard Newsprint,' creating confusion. The appellant argued that the detention was necessary to ascertain whether the goods were newsprint or printing paper, as newsprint could only be imported by actual users without a license.3. Liability for Demurrage/Detention Charges:The respondent paid Rs. 33,16,218/- to the Container Corporation of India (CCI) and the Shipping Company due to the detention. The appellant contended that the respondent could not recover these charges from the Customs Authorities, citing the Supreme Court's decision in Union of India v. R.C. Fabrics (P) Ltd., which held that the Customs Department is not liable for such charges.4. Good Faith and Bona Fide Actions of the Customs Authorities:The court examined whether the Customs Authorities acted in good faith. The respondent's own documents indicated that the labeling of goods as 'Standard Newsprint' necessitated the detention and testing. The court referred to Union of India v. Ashutosh Kumar Srivastava, emphasizing the presumption of good faith in administrative actions unless proven otherwise.5. Issuance and Implications of the Detention Certificate:The respondent relied on a detention certificate issued by the Customs Authorities, which stated that the importer was not at fault. However, the court clarified that the issuance of such a certificate does not automatically entitle the importer to claim demurrage charges from the Customs Authorities, as established in International Airports Authority of India v. Grand Slam International.6. Respondent's Conduct in Mitigating Detention Charges:The court noted that the respondent's conduct contributed to the delay in releasing the goods. Instead of promptly paying the charges and mitigating further costs, the respondent adopted a three-tier approach, resulting in additional detention charges. The court found that the respondent could have minimized these charges by acting more swiftly.Conclusion:The court concluded that the Customs Authorities acted in good faith and that the ex parte judgment could not be sustained on facts or law. The appeal was allowed, and the ex parte judgment and decree dated March 22, 2002, were set aside. The suit filed by the respondent was dismissed, with each party bearing its own costs. Additionally, the appellant was entitled to restitution of the decreetal amount already paid to the respondent.