2009 (2) TMI 21 - HC - Customs

Court dismisses demurrage compensation claim; Customs acted in good faith; no mala fides found

The court dismissed the petitioner's claim for compensation for demurrage charges incurred due to delays in the clearance of imported goods. The court ... Petition invokes the writ jurisdiction of HC to direct the department to pay compensation to the Petitioner for the cost incurred by it by way of demurrage due to delay occasioned in the grant of a Clearance Certificate - burden to produce sufficient material to suggest mala fides of dept., not discharged by petitioner - Petitioner has failed to establish a case where this Court can grant any relief under the extraordinary powers vested U/A 226 of the Constitution of India – petition dismissed Issues Involved:1. Claim for compensation due to demurrage charges caused by delay in clearance of imported goods.2. Liability of Customs Department for demurrage charges.3. Interpretation of 'good faith' under Section 155 of the Customs Act.4. Presumption of bona fides in favor of the Administration.Comprehensive, Issue-Wise Detailed Analysis:1. Claim for Compensation Due to Demurrage Charges:The petitioner sought compensation for demurrage charges amounting to Rs. 7,14,043/- incurred due to the delay in the clearance of six consignments imported from Australia between October 1995 and January 1996. The delay was attributed to the Customs Authorities referring the case to the Special Investigation Bureau for investigation. The goods were eventually cleared on 30.01.1996.2. Liability of Customs Department for Demurrage Charges:The court referenced several precedents to address the liability of the Customs Department for demurrage charges. In *International Airports Authority of India vs. Grand Slam International*, it was held that an authority created under a statute, even if it is the custodian of the imported goods, is entitled to charge demurrages for the imported goods in its custody and make the importer liable for the same, even for periods during which the importer was unable to clear the goods due to the fault of the Customs Authorities.However, in *Union of India vs. Sanjeev Woolen Mills*, the Supreme Court held the Customs Department liable for demurrage charges due to illegal detention of imported goods, emphasizing that the specific circumstances and conduct of the Customs Authorities warranted such a decision.The dichotomy between these judgments was clarified in *Shipping Corporation of India Ltd. vs. C.L. Jain Woolen Mills*, where the Supreme Court concluded that the liability of the Customs Department for demurrage charges depends on the specific facts and circumstances of each case. The court also noted that there is no inconsistency between the judgments of *International Airports Authority of India vs. Grand Slam International* and *Union of India vs. Sanjeev Woolen Mills*.3. Interpretation of 'Good Faith' under Section 155 of the Customs Act:Section 155 of the Customs Act provides protection to the Customs Authorities from legal proceedings for actions taken in good faith. The court elaborated on the concept of 'good faith' as defined in various judgments, including *Express Newspaper (P) Ltd. vs. Union of India* and *Asstt. Commr., Anti-Evasion Commercial Taxes vs. Amtek India Ltd.*. Good faith implies honest intent, free from fraud or deceit, and actions taken with due care and attention.The court observed that the petitioner did not allege that the Customs Authorities acted without authority, in a mala fide manner, or by colorable exercise of power. The delay was attributed to a precautionary measure of referring the case to the Special Investigation Bureau.4. Presumption of Bona Fides in Favor of the Administration:The Supreme Court in *Union of India vs. Ashutosh Kumar Srivastava* opined that there is a presumption in favor of the Administration that its exercise of power is in good faith and for public benefit. The burden of proving mala fides lies on the individual alleging it, which is a heavy burden to discharge.In the present case, the petitioner did not provide sufficient material to suggest mala fides on the part of the Customs Authorities. The delay in clearance was not attributed to any unreasonable conduct by the Customs Authorities.Conclusion:Based on the observations and decisions of the Supreme Court and the High Court, the petitioner failed to establish a case warranting relief under the extraordinary powers vested under Article 226 of the Constitution of India. The court found no merit in the petition and dismissed it.