Demurrage charges refund ordered after customs authorities delayed issuing detention certificates for years

The Delhi HC allowed a petition seeking refund of demurrage charges under the Handling of Cargo in Customs Area Regulations, 2009. The petitioner's goods were initially detained but later released by DRI in 2010 upon payment of appropriate duty. Despite multiple requests starting in 2011, customs authorities failed to issue required Detention Certificates until court intervention in 2015. The respondent then delayed processing the refund application despite receiving the certificates and explanations. The HC found no delay or laches on petitioner's part, attributing delays to customs authorities' and respondent's inaction. The court directed the respondent to process the refund within four weeks.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the petitioner is entitled to a refund of demurrage charges paid under the Handling of Cargo in Customs Area Regulations, 2009 ("subject regulations") in respect of detained imported goods subsequently released without penalty or fine.

(b) Whether the petitioner's claim for refund is barred by delay or laches, considering the period between payment and submission of requisite Detention Certificates and subsequent refund claim.

(c) Whether the subject regulations, as subordinate legislation framed under the Customs Act, 1962, can override provisions of the Customs Act, particularly Section 63 (now repealed), relied upon by the respondent to justify charging demurrage.

(d) Whether non-joinder of Directorate of Revenue Intelligence (DRI) and Customs authorities, who were involved in detention and issuance of Detention Certificates, affects maintainability of the writ petition.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Entitlement to Refund of Demurrage Charges under Subject Regulations

The relevant legal framework comprises the Handling of Cargo in Customs Area Regulations, 2009, specifically Clause 6(1)(l), which states that the Custom Cargo Service Provider shall not charge any rent or demurrage on goods seized or detained by Customs officers. The subject regulations apply to goods handled in customs areas as defined under Section 8 of the Customs Act, 1962, including Inland Container Depots (ICDs) such as Tughlakabad, New Delhi, where the petitioner's goods were detained.

The Court noted that the subject regulations expressly exclude application to warehoused goods covered under Chapter IX of the Customs Act, which includes Section 63. The respondent's reliance on Section 63, which protects recovery of demurrage charges on warehoused goods, was found misplaced as there was no evidence of warehousing bond or order for warehousing in the present case. The goods were detained in a customs area but not warehoused under Chapter IX.

The Court relied on the Division Bench decision in Trip Communication P. Ltd. v. UOI, which distinguished between importers found innocent and those penalized for misdeclaration or undervaluation. The Trip Communication judgment held that importers whose goods are seized or detained but who are not subjected to any fine, penalty, or warning are entitled to consideration for waiver of demurrage charges, subject to compliance with waiver policies and issuance of a certificate by Customs authorities.

In the present case, the petitioner's goods were detained on DRI's directions but were subsequently found to conform with declarations and released on payment of duty. No penalty, fine, or warning was imposed. The petitioner obtained Detention Certificates from Customs authorities, confirming innocence and entitlement to refund. Thus, the petitioner falls within the category of importers entitled to waiver under the subject regulations and relevant policy.

The Court emphasized the distinction between innocent importers and those at fault, noting that the policy and regulations rightly treat them differently. The petitioner's entitlement to refund was therefore upheld.

(b) Delay and Laches in Claiming Refund

The respondent argued that the petitioner delayed in submitting Detention Certificates and filing the refund claim, relying on the waiver policy which requires application within three months of payment of charges. The respondent also cited prior rejection of waiver requests and appeals not disclosed by the petitioner.

The Court examined the factual matrix and found that the delay in obtaining Detention Certificates was due to the inaction and conflicting directions between DRI and Customs authorities, which repeatedly redirected the petitioner. The petitioner was compelled to file a writ petition to secure issuance of the certificates, which were eventually issued in compliance with the Court's order.

Once the certificates were received, the petitioner promptly communicated them to the respondent and followed up repeatedly over several years without response. The Court held that the delay was not attributable to the petitioner but to the respondent's failure to act. The petitioner's conduct was not dilatory or negligent.

Regarding the waiver policy's limitation period, the Court noted that the petitioner's claim was made as soon as the Detention Certificates were issued, which was beyond the petitioner's control. The Court further observed that the petitioner's claim was not time-barred given the circumstances and the respondent's failure to process the refund despite repeated reminders.

(c) Applicability and Hierarchy of Subject Regulations vis-`a-vis Customs Act

The respondent contended that the subject regulations, as subordinate legislation framed under Sections 141 and 157 of the Customs Act, cannot override the statutory provisions of the Customs Act, particularly Section 63. The respondent relied on Supreme Court and High Court precedents holding that subordinate legislation cannot prevail over the parent statute.

The Court analyzed the scope of Section 63, which applies only to warehoused goods, and found that it was not applicable to the present facts where goods were detained but not warehoused. The subject regulations apply specifically to handling of goods in customs areas, including ICDs, and expressly exclude warehoused goods.

Thus, the Court held that the subject regulations are applicable and operative in the present case, and the respondent's reliance on Section 63 was misplaced. The Court found no conflict that would invalidate the petitioner's claim under the subject regulations.

(d) Maintainability of Petition and Non-Joinder of DRI and Customs Authorities

The respondent raised a preliminary objection that the writ petition was not maintainable due to non-joinder of DRI and Customs authorities, who were necessary parties given their role in detention and issuance of Detention Certificates.

The petitioner countered that the challenge was limited to the respondent's failure to refund demurrage charges despite issuance of Detention Certificates, and that the petitioner was not disputing the veracity or issuance of those certificates. The Court accepted this reasoning, holding that since the petitioner was not challenging any act or omission of DRI or Customs authorities but only the respondent's inaction, non-joinder did not affect maintainability.

3. SIGNIFICANT HOLDINGS

The Court held:

"Clause 6(1)(l) of the Handling of Cargo in Customs Area Regulations, 2009, which proscribes charging of rent or demurrage on goods seized or detained by Customs officers, applies to goods handled in customs areas including Inland Container Depots, and is applicable to the petitioner's goods detained at Tughlakabad ICD."

"Section 63 of the Customs Act, 1962, relied upon by the respondent, pertains exclusively to warehoused goods under Chapter IX of the Customs Act and is not applicable to goods detained in customs areas but not warehoused. Therefore, the subject regulations prevail in the present facts."

"Where an importer's goods are detained or seized but no fine, penalty, personal penalty or warning is imposed by Customs authorities, the importer is entitled to be considered for waiver of demurrage charges under the relevant policy, subject to issuance of a certificate by Customs authorities and other compliances."

"Delay in submission of Detention Certificates and claim for refund caused by inaction and conflicting directions between DRI and Customs authorities cannot be attributed to the petitioner, and such delay does not bar the petitioner's claim for refund."

"Non-joinder of DRI and Customs authorities does not affect maintainability of the writ petition where the challenge is limited to the respondent's failure to refund demurrage charges despite issuance of Detention Certificates."

Accordingly, the Court directed the respondent to process and refund the demurrage charges to the petitioner within four weeks.

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