By TIOL News Service

NEW DELHI 28, JULY 2017:  THE petitioner imported several packages of defective/secondary cold rolled steel between 4.12.2015 and 11.12.2015.

Vide letter dated 14.12.2015, DRI, Ludhiana directed the Port Trust to put on hold the imported consignments. These were to be examined 100% by DRI/Customs.

Vide letter dated 22.12.2015, the petitioner sent a reminder to DRI, Ludhiana as well as Customs requesting for provisional assessment of the imported consignments and release of the goods within 48 hours, as the consignments were incurring detention and demurrage charges.

Vide letter dated 28.12.2015, DRI, Ludhiana directed customs that it had put on hold the imported consignments on a specific intelligence input that import was being made to come out of the rigors of notification No. 2/2015-Cus (SG) dated 14.9.2015. It was further directed that imported consignments be examined 100% by customs officers with the assistance of local Chartered Engineer and a detailed report be prepared and sent to DRI, Ludhiana.

On 30.12.2015, the petitioner sent another reminder to DRI, Ludhiana as well as Customs and also informed that they are not liable to pay charges. A request was also made for early examination of the material and release thereof within 48 hours.

Another reminder was sent by the petitioner to the same effect on 1.1.2016, but no action was taken by the department.

The inspection report, as submitted by the Chartered Engineer clearly opined that the goods imported by the petitioner were cold rolled sheets/coils, as claimed by the petitioner in the bills of entry. It was not a case where the goods were prohibited, which could not be imported. In any case, release could be permitted after provisional assessment to avoid demurrage and detention charges.

Be that as it may, the matter continued for many more months and finally, the High Court in its order dated 23 December 2016 inter alia held thus -

Responsibility for detention and demurrage charges

+ for detention of goods, the petitioner was not at fault. It was the illegal action of customs and DRI, Ludhiana on account of which goods remained in their custody. De-stuffing was not offered and allowed immediately, as a result of which detention and demurrage charges have accumulated, which are much more than even the value of the goods.

+ in view of the enunciation of law by different High Courts including this court,  once it is found that detention of goods was not on account of any fault of the petitioner, rather, found to be illegal action on the part of DRI and customs, the petitioner cannot be burdened for detention and demurrage charges and the liability has to be put on customs department , who shall be at liberty to seek waiver thereof.

Payment of detention charges of Shipping Line

+ No doubt, the 2009 Regulations are not applicable on the Shipping Line, however, once it is found that detention of goods for inordinate period was not on account of any fault on the part of the petitioner, he is not liable to be burdened with that cost.  It is only the DRI and customs, who should bear the cost, demanded by the Shipping Line. The DRI or customs may get those charges waived off or reduced from the Shipping Line, however, whatever is payable in addition to the freight agreed between the importer and the Shipping Line shall be borne by DRI or customs.

The writ petitions were allowed. The writ petitioners/importers were also held entitled to costs of Rs.50,000/- each to be paid by the Department.

We reported this order as 2016-TIOL-3106-HC-P&H-CUS.  

Civil Appeals have been filed by the Union of India and the Mumbai Port Trust against this order.

After extracting the facts involved and the sections 48, 53, 58 and 59, 128 of the Major Port Trusts Act, 1963 and sections 45 and section 160(9) of the Customs Act, Regulations 2(b) and 6(l) of the 2009 Regulations, the Apex Court observed that the issue whether an importer is liable to pay demurrage charges even when the imported goods have been detained by the Customs Authorities and later it is found that the version of the importer is correct, has been the subject matter of a number of decisions.

The Supreme Court held -

++ In the case of  Trustees of the Port of Madras v. M/s Aminchand Pyarelal (1976) 3 SCC 167, the Customs Authorities had issued detention certificate of imported goods. There was no fault or negligence on the part of the importer.

++ This Court held that the High Court was in error in holding that the Board's power to charge demurrage was limited to cases where the goods were not removed from its premises due to some fault or negligence on the part of the importer.

++ In Board of  Trustees of the Port of Bombay v. Indian Goods Supplying Co (1977) 2 SCC 649 , this Court held that it was the duty of the Board to recover rates; the Board had a lien on the goods and the right to seize and detain the goods, until the rates were fully paid and to sell the goods if the rates were not paid and recover the same. This Court went on to hold that the importer of the goods was liable to pay the demurrage charges even if the importer was not responsible for any delay, nor any fault could be attributed to the importer.

++ In Board of  Trustees of the Port of Bombay v. Jai Hind Oil Mills Company (1987) 1 SCC 648 , it was held that the demurrage charges are levied in order to ensure quick clearance of the cargo from the harbour and the rates are fixed in such a way that they would make it unprofitable for the importer to use the port premises as a warehouse.

++ In all these cases, this Court took the view that the Board of Trustees of the Ports, which are creations of a statute, are entitled to charge demurrage and other charges from the importer even in respect of those periods during which the importer was unable to clear goods from the premises of the Board, for no fault or negligence on the part of the importer. It was further held that the Boards were entitled to charge demurrage from the importer even when the importer was unable the clear the goods because of the detention thereof by the Customs authorities, which detention may later on have been found to be unjustified.

As regards the High Court distinguishing the referred judgments on the ground that these judgments were rendered prior to the promulgation of the 2009 Regulations and, therefore, inapplicable, the Supreme Court inter alia observed -

++ Mumbai Port Trust has the power and authority to levy rates including demurrage as fixed by the Tariff Authority under Section 47A of the Act. This right of the Port Trust is not affected either by the provisions of the Customs Act or by the Regulations of 2009. Section 160(9) of the Customs Act clearly lays down that the provisions of the Customs Act shall not in any manner affect the constitution and powers of any port authority in a major port. This will include the right of the major port authority that is a Major Port Trust to levy and charge rates and demurrage.

++ As far as 2009 Regulations are concerned, these are the Regulations framed under the Customs Act. Regulations are in the nature of subordinate legislation. There can be no manner of doubt that subordinate legislation that too a legislation framed by a Board under the Customs Act cannot in any manner affect the power and authority of the Major Port Trust, statutorily vested in it.

++ Neither the regulations nor the provisions of the Customs Act can impinge or in any manner affect the statutory power of the Major Port Trusts to levy rates under the Act. In fact, the Authority that framed the Regulations was itself aware of this because Regulation 6(l) itself begins with the words  "subject to any other law for the time being in force" . It is, therefore, obvious that the Regulations are subject to any other law including the Major Port Trust Act. Therefore, these Regulations cannot, in any manner, affect the right of the Port Trust.

Conclusion: The High Court erred in holding that the law settled by this Court in a catena of judgments referred to above was no longer applicable in view of the 2009 Regulations.

++ Law has been clearly laid down that even if the importer is not at fault, it is the importer alone who is liable to pay the demurrage charges. As far as detention charges are concerned, this is a private contract between the importer and the carrier, i.e. Shipping Line. The DRI/Customs authorities can be directed to pay the demurrage/detention charges only when it has proved that the action of the DRI/Customs Authorities is absolutely mala fide or is such a gross abuse of power that the officials of the DRI/Customs should be asked to compensate the importer for the extra burden which he has to bear. Even if an importer feels that it has been unjustly dealt with, it must clear the goods by paying the charges due and then claim reimbursement from the customs authority.

++ In the present case allegations of mala fides were levelled against Respondent Nos. 7 & 8, Santokh Singh and Roopesh Kumar…Charges of mala fide are serious and these charges were denied in the first written statement and with the second written statement, an affidavit was filed by Respondent Nos. 7 & 8 denying the same charges. Therefore, the second affidavit should not have been brushed aside. …Therefore, there is no specific finding of mala fides. However, the High Court held that the respondent-importers suffered a loss because of delay on the part of Revenue staff to clear the goods and the executive instructions of the Department were violated.

++ The respondent-importers did not take the benefit of provisional assessment offered…. All other importers took benefit of this offer given by the DRI/Customs and got their goods released but the respondent-importers for the reasons best known to them did not take the benefit of this offer. We may also add that if they had taken the benefit of this offer there could have a reduction of the demurrage as was done in the case of other importers.

++ We are, therefore, clearly of the view that even though there may be some delay on the part of the DRI and the customs authorities, the respondent-importers have also been guilty of delaying the matter and, therefore, they cannot claim that they are not liable to pay demurrage and detention charges.

++ We may, however, clarify that the respondent-importers are free to approach the Mumbai Port Trust in terms of Section 53 of the Act for exemption and remission of demurrage and other charges and the Board may take a sympathetic view while considering the case of the respondent-importers under Section 53.

++ As far as detention charges of the Shipping Line are concerned, …, we are of the view that the High Court could not in writ proceedings have directed the DRI/Customs to pay the detention charges to the Shipping Line since these were to be paid on the basis of a contract between the respondent-importers and the shipping line.

The appeals were allowed.

The judgment of the High Court 2016-TIOL-3106-HC-P&H-CUS was set aside and the writ petitions filed by the respondent-importers were dismissed.

(See 2017-TIOL-270-SC-CUS)