TaxTMI 
TaxTMI 
1975 (9) TMI 170
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....eamer "A.P.J. AKASH" arrived at the Madras Port and landed, among other goods, a consignment of 202 bundles of black plain sheets of various sizes. The appellants received the goods and stored them in transit sheds. The goods were imported by the 1st respondent under an authorisation issued by the State Trading Corporation of India which held a licence dated June 16, 1962 to import the goods from Hungary. The Clearing Agents of the 1st respondent filed a Bill of Entry with the 3rd respondent but the customs authorities detained the goods as the specifications in the import licence did not tally with the description of the imported goods. The Customs authorities then issued a show cause notice to the 1st respondent and after considering its explanation the 3rd respondent passed an order on November 12, 1963 confiscating the goods under section 111 (a) of the Customs Act, 1962. The 1st respondent preferred an appeal against that order to the Central Board of Excise and Customs, New Delhi, which was allowed by the Board on July 27, 1964. On August 21, 1964 the Clearing Agents of the 1st respondent requested the customs authorities to issue a certificate for the permission of the trans....
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....ts is that it had contravened the Import Trade Control regulations, that it was fully aware of the true facts that it was not open to it to take advantage of the wrong certificate issued by respondent 3 and that therefore it was also liable to pay the demurrage. The 1st respondent disputed its liability to pay the demurrage contending that it could not be penalised either for the delay caused by the Customs authorities in clearing the goods or for the issuance by them of a wrong certificate. According to the 1st respondent, the consignment imported in April, 1963 was one of a series of consignments which the 1st respondent had imported under a con tract with the State Trading Corporation for a fixed remuneration. The 1st respondent had not authority to deal with he imported goods - but was bound to hand them over at the agreed price to the State Trading Corporation or its nominee The 1st respondent further stated that the only controversy raised by the Customs authorities related to a difference in the size of the sheets imported under the import licence and that if the appellants had called upon it to pay by way of demurrage a sum as large as over rupees 3 lakhs, the 1st respon....
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....ral Manifest" which contains a description of the goods which are at board for landing at the Port. The Dock Labour Board supplies the labour to the Master of the ship for unloading the goods and for putting them on the quay-side so as to enable the Port Trust authorities to take charge of the goods. The Port Trust labour handles the goods on the shore and when the Port Trust takes charge of the same, it is obliged under section 39(3) of the Madras Port Trust Act, 1950, to give a receipt to the Master of the Ship. With few exceptions, all goods received by the Port Trust are kept in the transit sheds. The Port Trust charges Harbour Dues for receiving the goods, handling them and keeping them in tile transit sheds. The importer then files the Import Application and the Steamer Agent's Delivery order which is in the nature of an authority from the Steamer as bailor, to the Port Trust as the bailee, to deliver the goods to the importer or his agent. Section 45 of the Customs Act, 1962 forbids the person having the custody of any imported goods in the customs area from permitting their removal except under and in accordance with the written permission of the Customs authorities. Th....
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....ustees one is elected by the Madras Municipal Corporation and the remaining by such provincial or local bodies representing commercial interests as the Central Government may, from time to time, by notification in the official Gazette, specify. Such notification may also specify the number of trustees that each of such bodies may elect. Section 10 which lays down disqualifications for the trustee's office provides, inter alia, that a person shall be disqualified to be a trustee if, inter alia, he holds any office or place of profit under the Board. This provision does not, however, apply to the Chairman. ex-officio Trustees and Trustees appointed by virtue of office. Section 23(1) lays down the procedure governing the proceedings of the Board while section 23 (2) provides that the Board may, from time to time, appoint committees consisting of not less than five of its members for carrying into effect any part of the provisions of the Act with such powers and under such instructions, directions or limitations as shall be defined by the Board. By section 39 the Board is under an obligation, according to its powers, to provide all reasonable facilities for, and has the power to....
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....odify the scales according to the directions of the Central Government. Section 44(2) confers power on the Board, in special cases, for reasons to be recorded in writing, to remit the whole or any portion of the rates or of any charge leviable according to any scale. Under section 50 rates in respect of goods to be landed are payable immediately on the landing of the goods; rates in respect of goods to be removed from the premises of the Board are payable before the goods are removed. Under section 51 the Board has a lien on the goods for the amount of all rates leviable under the Act on the goods and it may seize and detain the goods until the rates are fully paid. This lien has by section 52 priority over all other liens and claims except for general average and the ship-owner's lien for freight and other charges where such lien exists and has been preserved in the manner provided in section 53. Under section 56, if the rates payable to the Board remain unpaid, it is competent to the Board to sell the goods by public auction after expiry of two months from the time That the goods have passed into its custody and in the case of perishable goods after the expiry of a shorter pe....
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....t under section 44 of the Act. We are concerned with the rates framed under section 42 which are contained in Chapter IV of the Scale of Rates. The various scales of rates arc divided into three parts: Book I, Book II and Book III. Chapter IV is headed "Demurrage " and it occurs in Book I called "Charges for certain 16-L925SupCI/75 services which the Board is prepared to render to the public". The introductory part of Chapter IV says: "Demurrage is chargeable on all goods left in the Board's transit sheds or yards beyond the expiry of the free days. After demurrage begins to accrue no allowance is made for Sundays or Board's holidays. The free days are fixed by the Board from time to time." Scale 'A' of Chapter IV prescribes conditions governing "Free Days", the normal rule being that two working days in the case of coast cargo and three working days in the case of foreign cargo excluding Sundays and the Board's holidays arc treated as free after complete discharge of a vessel's cargo, or the date when the last package was put overside. Rule 13(b) is the focus of controversy between the parties and it would be used to read along, with it clause (a) as ....
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.... Board between the two kinds of cases is therefore arbitrary and unreasonable; (5) 'Demurrage', being a charge for wilful failure to remove the goods within the free period can be believed only if the failure to remove the goods is due to the fault or negligence of the importer or his agent; (6) Having regard to this well accepted meaning of the word 'demurrage', the authority give to the Board by section 42 of the Act to frame the scale of rates can be exercised only for the purpose of levying charges where the importer was not prevented by any lawful authority from clearing the goods from the transit area and he had defaulted or was negligent in clearing the goods; (7) Since Rule 13(b) empowers the Board to charge demurrage even when the goods are detained for no fault or negligence of the importer or his agent, it is beyond the authority conferred by section 42 and is therefore void; (8) All the same, if two views are reasonably possible" a construction which favours the validity of a rule or statute should be preferred to that which renders it void Therefore, under the scale of charges for demurrage provided in Chapter IV, the appellants can levy demurrage only ....
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....e power which it did not possess" a power which the Board has not even purported to exercise. Making these unfounded assumptions, the High Court invalidated Rule 13 (b) on the basis that it was a bye-law and a bye-law could be declared ultra vires on the ground that it is unreasonable. We are unable to accept the High Court's view that the scale of rates prescribed by the Board under sections 42, 43 and 43-A consists, as it were, of so many bye-laws or that Rule 13 is in the nature of a bye-law. A bye-law has been said to be an ordinance affecting the public. Or some portion of the public, impose by same authority clothed with statutory powers, ordering something to be done or not to be done, and accompanied by some sanction or penalty for its non-observance.(1) The Board's power to frame the scale of rates and statement of conditions is not a regulatory power to order that something must be done or something may not be done. The rates and conditions govern the basis of which the Board performs the services mentioned in sections 42, 43 and 43-A. Those who desire to avail of the services of the Board are liable to pay for those services at prescribed rates and to perfo....
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....merely because the court thinks that it goes further than is necessary or that it does not contain the necessary qualifications or exceptions. In Kruse v. Johnson([1898] 2 Q.B, 91, at pp. 98. 99.) a question was raised as to the validity of a bye-law made by a county council for regulating street music. I Lord Russell of Killowen observed in that case . "When the Court is called upon to consider the bye-laws of public representative bodies clothed with the ample authority which I have described, accompanied by the checks and safeguards which I have mentioned. I think the consideration of such bye-laws ought to be approached from a different standpoint. They ought to be supported if possible. They ought to be, as has been said, benevolently interpreted' and credit ought to be given to those who have to administer them that they will be reasonably administered." The learned Chief Justice said further that there may be "dases in which it would be the duty, of the court to condemn by-laws made under such authority as these were made (by a county council) as invalid because unreasonable. But unreasonable in what sense ? If, for instance, they were found to be partial and unequ....
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....ch the goods have been landed. The responsibility of the Board for the loss, destruction or deterioration of goods of which it has taken charge is, under section 40 of the Act, that of a bailee under sections 151, 152 and 161 of the Contract Act, subject to some modifications. Thus rates which the Board levies are a consolidated charge for the various services it renders and the liability which it is compelled by statute to undertake. The Board of Trustees is a representative body consisting of 21 Trustees out of whom eleven are elected. The Collector of Customs the Municipal Commissioner, the General Managers of Railways, a representative each of the Mercantile Marine Department and the Defence Services of the Central Government, and two representatives of labour are the other members of the Board. Out of the eleven elected Trustees, one is elected by the Municipal Corporation and the remaining by provincial or local bodies representing commercial interests. The Board of Trustees is thus a broad- based body representing a cross-section of variety of interests. It is the Board thus constituted that frames the Scale of Rates and Statement of Conditions under which the services sh....
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.... technical matter like the fixation of rates which has been considered by an expert Board of Trustees and whose decision has been confirmed by the Central Government. Equating the two classes of cases dealt with by clauses (a) and (b) of Rule 13 may seem to the court a more prudent or reasonable way of fixing scales of rates but that is not a correct test for deciding the validity of the impugned provision. There is a fundamental aspect of the fixation of rates which the High Court has overlooked. What is the object and purpose of the rates which the Board charges to the importer ? Port Trusts do not do the business of warehousing goods and the rates which the Board charges for storage of goods are not levied as a means of collecting revenue. The Board is under a statutory obligation to render services of various kinds and those services have to be rendered not for the personal benefit of this or that importer but in the larger national interests. Congestion in the ports affects the free movement of ships and of essential goods. The scale of rates has therefore to be framed in a manner which will act both as an incentive and as a compulsion for the expeditious removal of the goo....
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....t of passengers or goods, cranage or porterage of goods and wharfage or storage of goods. It is these services in respect of which section 42 authorises the Board to frame a scale of rates and the statement of conditions. The circumstances that the Board has used the expression 'Demurrage' as a heading for Chapter IV of the Scale of Rates or that it has used that expression in Rules 13(b) and (c) cannot constitute a fetter on its powers to fix the rates. The validity of the exercise of that power has to be judged on the language of section 42 which is the source of the power. The High Court has cited many texts and dictionaries bearing on the meaning of 'Demurrage' but these have no relevance for the reason that demurrage being a charge and not a service, the power of the Board is not limited to fixing rates of demurrage. Besides, it is plain that the Board has used the expression 'Demurrage' not in the strict mercantile sense but merely to signify- a charge which may be levied on goods after the expiration of Free Days Rule 13(b) itself furnishes a clue to the sense in which the expression 'demurrage' is used by the Board. It provides, inter alia....