2007 (2) TMI 158 - HC - Customs

Court quashes order, importer can relinquish goods title under Section 68 proviso. Importer remains liable for rent, interest.

The court allowed the petition, quashing the impugned order dated 17-3-2005. The petitioner was entitled to relinquish the title to the goods under the ... Proviso to Section 68 relinquishment of title - effect of relinquishment on liability to pay duty - interaction between proviso to Section 68 and Section 72(1)(b) deemed removal - prospective operation of statutory amendment - date of determination of rate of duty under Section 15Proviso to Section 68 relinquishment of title - effect of relinquishment on liability to pay duty - Application of the proviso to Section 68 to allow relinquishment of title and absolve the owner from liability to pay customs duty where no order for clearance for home consumption has been made and the owner validly relinquishes title. - HELD THAT: - The proviso to Section 68, inserted w.e.f. 14-5-2003, permits an owner of warehoused goods to relinquish title prior to an order for clearance for home consumption upon payment of rent, interest, other charges and penalties, and on such relinquishment the owner shall not be liable to pay duty. The proviso is prospective but may operate on facts which arose before its insertion if the statutory conditions for relinquishment exist when the application is made. The Court held that acceptance of relinquishment under the proviso is not rendered nugatory by the fact that a demand under Section 72(1)(b) has been raised; the two provisions operate in different fields. Section 72(1)(b) empowers the proper officer to demand duty where goods have remained beyond the permitted warehousing period, but Section 68 gives the owner an option to mitigate liability by relinquishing title before an order for clearance for home consumption is made. Where the owner validly exercises the option and the statutory conditions are satisfied, the owner is absolved of liability to pay duty, though other dues (rent, interest, charges, penalties) remain recoverable. The Court rejected the Revenue's contention that invocation of the proviso requires prior fulfilment of clause (b) of Section 68 as a condition precedent, observing that such a reading would render the proviso ineffectual. The court further explained that relinquishment vests title in the Revenue and that duty is not payable thereafter by the owner. [Paras 31, 32, 33, 36, 42]Proviso to Section 68 applies where its conditions are met and the owner validly relinquishes title prior to an order for clearance; such relinquishment absolves the owner from liability to pay duty while other dues remain recoverable.Interaction between proviso to Section 68 and Section 72(1)(b) deemed removal - date of determination of rate of duty under Section 15 - Whether a demand under Section 72(1)(b) (deemed removal for overstay) precludes invocation of the proviso to Section 68 and whether prior Supreme Court authority on Section 15/72 affects the scope of the proviso. - HELD THAT: - The Court held that Section 72(1)(b) and the proviso to Section 68 are not in conflict such that a demand under Section 72(1)(b) automatically bars invocation of the proviso. Section 72(1)(b) enables levy of duty by reason of overstay; Section 68 (and its proviso) provides a separate statutory option to the owner to relinquish title before an order for home clearance is made. The Supreme Court decision in Kesoram Rayon addressed the date for determination of the rate of duty under Section 15 in cases of deemed removal under Section 72 and did not consider or decide the ambit of the proviso to Section 68 (which was not then in force). Therefore that authority does not preclude application of the proviso. The Court emphasised that relinquishment does not dispense with statutory procedure for removal where required, but once relinquishment is validly effected the owner's duty liability ceases because title vests in the Revenue. [Paras 26, 37, 40, 41]A Section 72(1)(b) demand does not, by itself, preclude the owner from invoking the proviso to Section 68; the Kesoram Rayon decision on rate and date of duty under Section 15/72 does not govern interpretation of the proviso to Section 68.Final Conclusion: Writ petition allowed: the order refusing the petitioner's application for relinquishment is quashed; on valid relinquishment under the proviso to Section 68 the petitioner ceases to be liable to pay duty in respect of the warehoused goods, though other dues (rent, interest, charges and penalties) remain recoverable. Issues Involved:1. Application of proviso to Section 68 of the Customs Act, 1962.2. Relationship between Section 68 and Section 72 of the Customs Act, 1962.3. Liability of the importer for customs duty, rent, interest, and other charges.4. Interpretation of Supreme Court's decision in Kesoram Rayon v. Collector of Customs, Calcutta.Issue-wise Detailed Analysis:1. Application of Proviso to Section 68 of the Customs Act, 1962:The primary issue revolves around the petitioners' application under the proviso to Section 68 of the Customs Act, which allows the owner of warehoused goods to relinquish their title to the goods upon payment of rent, interest, other charges, and penalties, thereby absolving them from the liability to pay customs duty. The petitioners argued that since no order for clearance of goods for home consumption had been made, they were entitled to relinquish their title under the proviso to Section 68. The court agreed, noting that the proviso to Section 68, inserted on 14-5-2003, operates independently of Section 72 and allows for relinquishment of goods still lying in the warehouse without the need to pay customs duty.2. Relationship between Section 68 and Section 72 of the Customs Act, 1962:The court examined the interplay between Section 68 and Section 72. Section 72(1)(b) allows the proper officer to demand full duty on warehoused goods that have overstayed their permitted period. However, the court found no disharmony between Sections 68 and 72. It held that while Section 72 enables the proper officer to charge duty on overstayed goods, Section 68 provides the owner with an option to relinquish the goods before an order for home consumption is made. This relinquishment absolves the owner from paying customs duty, although other liabilities such as rent, interest, and penalties remain.3. Liability of the Importer for Customs Duty, Rent, Interest, and Other Charges:The court clarified that relinquishment under the proviso to Section 68 does not absolve the importer from all liabilities. While the importer is not liable to pay customs duty upon relinquishment, they remain liable for rent, interest, and other charges. The court emphasized that the relinquishment transfers the title of the goods to the revenue, allowing the revenue to recover other dues from the importer.4. Interpretation of Supreme Court's Decision in Kesoram Rayon v. Collector of Customs, Calcutta:The court addressed the Revenue's reliance on the Supreme Court's decision in Kesoram Rayon, which dealt with the rate of duty applicable to goods overstaying in a warehouse. The court distinguished the present case, noting that the Supreme Court's decision did not address the proviso to Section 68, which was inserted after the judgment. The court held that the Supreme Court's decision was not relevant to the issue of relinquishment under Section 68, as it focused on the rate of duty for goods deemed to be improperly removed under Section 72(1)(b).Conclusion:The court allowed the petition, quashing the impugned order dated 17-3-2005. It held that the petitioner was entitled to relinquish the title to the goods under the proviso to Section 68, thereby absolving them from the liability to pay customs duty. However, the petitioner remained liable for payment of rent, interest, and other charges.