2013 (9) TMI 180 - HC - Customs

Court upholds importers' liability for demurrage charges despite seizure justification. Importers must pay charges.

M/s Dewan Steel Industries Versus Union of India & others

The court dismissed the petition, upholding the legality of demurrage charges imposed on the petitioner. Importers are held liable for demurrage charges ... Waiver of demurrrage charges - Confiscation u/s 11 - Penalty u/s 14 - Held that:- The petitioner could not refer to any provision under which the Customs Authorities can direct the Warehouse to waive off the demurrage charges. Admittedly, there was provisional release of goods on payment of redemption fine and penalty. The petitioner has not availed such option. Once the provisional release of goods ordered at the request of the petitioner itself has not been availed, therefore, the petitioner has taken a calculated risk of incurring demurrage charges as in the absence of release of goods, the Customs Authorities had to store the goods in safe custody. Decisions in Supreme Court in International Airports Authority of India etc. Vs. M/s Grand Slam International & Om etc. [1995 (2) TMI 70 - SUPREME COURT OF INDIA] and in Trustees of Port of Madras Vs. Nagavedu Lungi & Co. & others [1995 (4) TMI 70 - SUPREME COURT OF INDIA] followed. The guidelines framed vide Circular were in respect of allowing to open CFSs and ICDs in private sector, which were called as ‘Custodian’ - It was the Custodian, who was not to charge any rent or demurrage on the goods detained by the Customs Department - But the Customs Department was required to pay the rent to the Custodian after the ownership of the goods vested in the Revenue after confiscation - Such provision though was between the Custodian and the Revenue; still it does not absolve the petitioner to pay the demurrage charges - The payment of demurrage charges was not a pre-condition for storage of goods as per clause 15. But after the goods vests with the Revenue, the rent of the goods had to be paid by it - It does not contemplate the situation where after adjudication process the goods do not vests with the State, but vests with the importer - In such a situation, the importer would be liable to pay demurrage charges, as owner of the goods stored in the Warehouse - The guidelines do not provide for demurrage free storage even for the revenue. The scope of the Regulations is wider than the Circular, as it prohibit the Customs Cargo Service Provider to charge any amount on the goods seized or detained. But since the goods were seized in the year 2000, such Regulations will not come to the rescue of the petitioner. Even the said Regulations are to determine the relationship between the service provider and the Revenue and not in respect of services availed by the importer. - Decided against Petitioner. Issues Involved:1. Entitlement to return of goods or payment of value along with interest.2. Legality of demurrage charges imposed on the petitioner.3. Applicability and interpretation of Circular No.128/95-Cus and Handling of Cargo in Customs Areas Regulations, 2009.4. Impact of judicial precedents on the case.Detailed Analysis:1. Entitlement to Return of Goods or Payment of Value Along with Interest:The petitioner, engaged in the import and trading of Heavy Melting Scrap, sought a writ of mandamus for the return of goods or payment of their value with interest. The consignment, consisting of 133.573 MT Heavy Melting Scrap, was imported and filed under Bill of Entry dated 25.04.2002 at Container Freight Station (CFS), Ludhiana. The Revenue officers found one container containing serviceable material, leading to its seizure on 20.06.2000 for alleged mis-declaration. The petitioner was issued a show cause notice regarding the classification, assessment, confiscation, and penal action under various sections of the Customs Act, 1962. The Adjudicating Authority ordered the classification and confiscation of the goods, allowing redemption on payment of fines. The Tribunal later set aside the imposition of fines and ordered the release of goods after mutilation. The petitioner claimed the goods were scrap and sought their value due to a substantial increase in scrap value over ten years, alleging the material was not available with the respondents.2. Legality of Demurrage Charges Imposed on the Petitioner:The petitioner contended that the custodian should not charge any rent or demurrage on goods detained by the Customs Department, citing Circular No.128/95-Cus and Regulation 6(l) of the Handling of Cargo in Customs Areas Regulations, 2009. The respondents argued that the petitioner failed to discharge the ground rent liability and did not approach them for mutilation and release of goods. The additional affidavit by the Assistant Commissioner mentioned that the goods were allowed to be cleared on a provisional basis, but the petitioner did not act on it, thus incurring demurrage charges.3. Applicability and Interpretation of Circular No.128/95-Cus and Handling of Cargo in Customs Areas Regulations, 2009:The Circular and Regulations were examined to determine their relevance. The Circular aimed to involve the private sector in infrastructure development and set guidelines for custodians, including a clause that custodians should not charge rent/demurrage on goods detained by Customs, with the Customs Department paying rent post-confiscation. The Regulations prohibited Customs Cargo Service Providers from charging rent/demurrage on seized, detained, or confiscated goods. However, these provisions were found to govern the relationship between the custodian and the Revenue, not absolving the petitioner from paying demurrage charges.4. Impact of Judicial Precedents on the Case:The respondents cited Supreme Court judgments in International Airports Authority of India v. M/s Grand Slam International and Trustees of Port of Madras v. Nagavedu Lungi & Co., and an Andhra Pradesh High Court judgment in Sujana Steels Ltd. v. Commissioner of Customs & Central Excise. These cases established that importers are liable for demurrage charges even if the seizure is later found unjustified. The judgments emphasized that statutory authorities like custodians are entitled to charge demurrage for goods in their custody, regardless of the Customs Department's actions. The court concluded that the petitioner, having not availed the provisional release of goods, must bear the demurrage charges.Conclusion:The petition was dismissed, upholding the legality of demurrage charges imposed on the petitioner. The court found no merit in the petitioner's claims, reinforcing the precedents that importers are liable for demurrage charges irrespective of the seizure's justification. The Circular and Regulations did not absolve the petitioner from paying demurrage, as they primarily governed the relationship between custodians and the Revenue.