2025 (9) TMI 1226 - HC - Customs

Transfer of title can occur without bill of lading endorsement; offshore second sale unproven, market committee may levy fees

M/s. Parisons Milling Co Private Limited Versus State Of Karnataka, The Secretary, The Agricultural Produce Market Committee, Mangalore, The Agricultural Produce Market Committee Kannada.

HC held that transfer of title can occur without endorsement on the bill of lading and a second sale off-shore may be valid, but absent evidence that the ... Sale of 9000 metric tonnes of notified agricultural commodity (wheat) on high seas and outside market area as defined under Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966 - purchase of 9000 metric tonnes of notified agricultural commodity (wheat) on high seas and outside market area as defined under the Act, 1966 - purchase of 5000 metric tonnes of notified agricultural commodity (wheat) on high seas and outside market area as defined under the Act, 1966 - HELD THAT:- The Bills of Lading without “endorsement” by the seller in favour of the buyer for having transferred the rights and title to the goods, if interpreted holding that there is no concluded sale in favour of the buyer, the respondent-Committee does not get the jurisdiction to impose market fee and penalty. The reason is the APMC will have the authority to impose a market fee only if the sale transaction takes place within the market area. However, M/s Parisons Foods Private Limited and M/s Parisons Roller Flour Mills Private Ltd. have asserted that they have purchased the wheat on high seas, from M/s Parisons Milling Company Pvt. Ltd and AWB India respectively. The APMC also contends that the sale has taken place. The dispute is relating to place of sale - Under the Act, 1966, when the notified agricultural produce is found in the possession of a person who is not a consumer, and who is a trader, then the person has to establish as to why he is not liable to pay the market fee on the notified agricultural produce. The Court is of the view that, even if the endorsement on the Bill of Lading is treated as a condition of transfer, the absence of endorsement does not invalidate the contract since, no action is taken by the aggrieved party to repudiate the contract. Thus, the Court is of the view that second sale (beyond the jurisdiction of Australia) indeed has concluded without the endorsement by the seller as the parties are at ad idem. Both buyer and seller are asserting that the sale of wheat has taken place. And even if the APMC contends that a sale has taken place. The only difference is that, buyer and seller contend that the sale has taken place on high seas. APMC contends that the sale is within the market area - the Court is of the view that the sales under scrutiny are valid without the endorsement on the Bills of Lading by the seller in favour of the buyer. However, the question is when and where the sales are concluded, i.e., whether the sales took place on “high seas” or “within the market area”. Since, there is nothing on record to show that the endorsement is made on the Bills of Lading and it is delivered to the sellers on high seas, the Court is of the view that the sales are not completed on the high seas. It could have been held to have been completed, if the seller had made a statement and established that the Bill of Lading, though not endorsed, was handed over to the buyer on the high seas to conclude the sale transaction by waiving the condition relating to endorsement on the Bill of Lading. If so, the Court could have accepted that the sellers and buyers have waived the stipulation relating to endorsement, as the delivery of the Bill of Lading constitutes transfer of possession and title. This is so because delivery of the Bill of Lading is a recognised mercantile practice to deliver the title in goods. However, such a plea is not found. The order dated 17.11.2021 marked at Annexure-A in Writ Petition No. 14908/2022 has to be set-aside by clarifying the position that the petitioner in Writ Petition No. 14908/2022 is required to pay market fee and penalty in respect of 9000 metric tonnes of wheat ordered to be paid in terms of order dated 17.11.2021 marked at Annexure-A in Writ Petition No. 14950/2022 filed by M/s Parisons Foods Private Ltd. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the transactions asserted to be high-seas sales (sale of imported wheat) on specified dates were completed on the high seas and therefore outside the 'market area' under the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966, thereby attracting no market fee liability. 2. Whether endorsement on the Bills of Lading was a condition precedent to transfer of property (title) such that absence of endorsement precluded completion of sale on the high seas. 3. Whether the Bills of Entry and related customs records, together with other documentary material, establish delivery/transfer of Bills of Lading and completion of sale within the market area (port) for purposes of imposing market fee and penalty. 4. Whether the Authority/Committee under the Act, 1966 had jurisdiction to determine and impose market fee and penalty on the asserted transactions, given the contention that sales occurred outside the market area. 5. Whether imposition of market fee and penalty on both seller and buyer (double levy) is permissible, and the incidence and enforceability of joint and several liability in such circumstances. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Existence and locus of sale (high seas v. within market area) Legal framework: Place of sale determines applicability of market-fee jurisdiction under the Act, 1966; Customs practice and Bills of Entry inform import/clearance status. Precedent treatment: Prior authorities concerning market-fee liability where goods enter market area or are merely imported for processing were considered but found not directly on point because petitioners asserted completed sales outside market area rather than mere importation for processing. Interpretation and reasoning: Court examined contract documents, invoices, Bills of Lading, Bills of Entry and customs records. Relevant facts not disputed: cargo loaded in Australia; Bills of Lading and contracts dated while vessel en route; Bills of Entry filed at Mangalore in names of alleged purchasers; no evidence that Bills of Lading were delivered on the high seas or endorsed in favour of purchasers before arrival; agreements for sale executed on shore in India (dated when vessel was at sea) and payments partly made only after seizure. Absent pleading or proof of delivery/endorsement on high seas, logical inference is that Bills of Lading were delivered/endorsed at Mangalore and presented to Customs there; buyers thus functioned as importers before customs clearance. Court construed clause inconsistencies so as not to render clauses otiose and held that, on facts, completion occurred at port. Ratio vs. Obiter: Ratio - sale completion requires proof of delivery/endorsement on high seas; in absence of such proof, sale is treated as completed on shore/within market area if Bills of Lading and Bills of Entry indicate presentation at port. Obiter - observations about typical mercantile practice of delivery of Bills of Lading constituting title. Conclusions: The asserted high-seas sales were not established as completed on the high seas; the deliveries of Bills of Lading and presentation to Customs at Mangalore indicate completion within the market area for Act, 1966 purposes. Issue 2 - Effect of absence of endorsement on Bills of Lading (condition precedent) Legal framework: Sale of Goods Act, 1930 - Sections 4, 5 and 12 govern when property in goods passes and distinction between sale and agreement to sell; stipulations in contract may be conditions or warranties. Precedent treatment: Court considered general principles of construction under Sale of Goods Act and mercantile practices but did not rely on any authority that overrides parties' contractual stipulations. Interpretation and reasoning: Clauses in the agreements expressly tied transfer of rights and title to endorsement of Bills of Lading. These contractual stipulations are not prescribed by statute but are binding between parties. Court analysed whether such stipulation is a condition or warranty under Section 12. Even if endorsement is a condition precedent, contractual breach gives aggrieved party discretion (repudiate or waive). Here parties acted as if sale occurred; no repudiation by seller; buyers presented Bills of Lading and Bills of Entry. Thus, non-endorsement did not ipso facto preclude sale where parties waived/condoned the condition by conduct and delivery of Bills of Lading on shore concluded the transaction. Ratio vs. Obiter: Ratio - absence of endorsement does not necessarily prevent completion of sale where parties, by conduct and delivery of documents, treat the transaction as concluded and no repudiation occurs; whether a stipulation is condition/warranty depends on contract construction. Obiter - discussion on mercantile practice and potential effect of actual delivery of endorsed bills on high seas. Conclusions: Endorsement requirement, though a contractual condition, did not prevent a concluded sale here because parties' conduct and delivery at port effected transfer; absence of on-high-seas endorsement, and lack of proof of delivery on high seas, precludes finding of completed high-seas sale. Issue 3 - Evidentiary sufficiency of Bills of Entry, Bills of Lading and other documents Legal framework: Customs records (Bills of Entry) indicate an importer for clearance; evidentiary weight of customs computer records and xerox copies validated by Customs is relevant; burden on trader (non-consumer) to explain why market fee not payable if produce is found in possession. Precedent treatment: Court noted earlier remands and that administrative authority expressed doubts but did not record conclusive reasons; previous judgments on administrative remand not binding here. Interpretation and reasoning: Original Bills of Entry not produced (claimed custody with Customs and not traceable). Deputy Solicitor General produced computer printouts and confirmed xeroxes match Customs records. Discrepancies in invoice numbers and parties named in different documents were analysed but did not defeat the inference that Bills of Lading/Bills of Entry were presented at Mangalore by buyers. No evidence that Bills of Lading were delivered on high seas or that endorsements occurred prior to arrival. Payments made after seizure and mismatches in values raised doubts but did not negate contractual delivery/presentation at port. Customs' role does not require ascertaining whether a sale occurred on high seas; importer is the purchaser when goods are presented for clearance. Ratio vs. Obiter: Ratio - authenticated customs records and presentation of Bills of Lading/Bills of Entry at port are sufficient to infer completion of sale within the market area absent clear proof of on-high-seas delivery/endorsement. Obiter - remarks on the weight of missing originals and mercantile documentary practices. Conclusions: Documentary record supports conclusion that Bills of Lading/Bills of Entry were presented at port and sale completed within market area; petitioners failed to produce evidence proving on-high-seas transfer. Issue 4 - Jurisdiction of Authority/Committee under Act, 1966 Legal framework: Authority's jurisdiction under Act, 1966 attaches where sale occurs within market area; market-fee liability under Section 65 and duty of seller to collect and remit market fee. Precedent treatment: Court distinguished authorities dealing with imported goods processed without sale; those authorities were inapplicable because here parties affirm sale but dispute place. Interpretation and reasoning: Since sale was concluded within market area on the facts, Authority had jurisdiction to impose market fee and penalty. Earlier remands and administrative doubts did not preclude adjudication on merits by Court; jurisdictional challenge fails where sale is established within market area. Ratio vs. Obiter: Ratio - Authority properly exercises jurisdiction where evidence shows sale within market area; jurisdictional objection unsuccessful in this factual matrix. Obiter - none material beyond factual application. Conclusions: Authority had jurisdiction to levy market fee and penalty on the completed sales within the market area. Issue 5 - Double levy, incidence of liability and joint-several liability Legal framework: Under the Act, 1966 buyer bears primary liability to pay market fee; seller is under obligation to collect and remit fee; double levy on same transaction is impermissible. Precedent treatment: No binding authority displacing the statutory incidence here; Court accepted principle that double levy is not permissible. Interpretation and reasoning: Authority's order had directed payment from both seller and buyer in different orders. Court held seller was not liable to pay market fee already imposed on buyer; however, because seller had duty to collect and remit, seller remains jointly and severally liable for the amount imposed on buyer and entitled to recover from buyer if seller pays. Administrative recovery may be made from either or both debtors as liability is joint and several. Ratio vs. Obiter: Ratio - double levy on same market-fee obligation impermissible; where liability is imposed on buyer, seller may be made jointly and severally liable for recovery but retains right of indemnity/recourse against buyer. Obiter - practical remarks on recovery mechanics. Conclusions: Double levy quashed for the duplicate demand; seller held jointly and severally liable with buyer for market fee/penalty as determined against buyer, with right of recovery from buyer if seller pays; Authority may recover from either or both.