M/s. Prabha Industries Proprietrix v Cochin Port Trust & Ors

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** # **THE HONOURABLE THE CHIEF JUSTICE MR.S.V.N.BHATTI** ## **&** ## **THE HONOURABLE MR.JUSTICE BASANT BALAJI** **FRIDAY, THE 23[RD] DAY OF JUNE 2023 / 2ND ASHADHA, 1945** ## **WA NO. 368 OF 2007** ## **AGAINST THE JUDGMENT IN WPC 25288/2004 OF HIGH COURT OF KERALA** ## **APPELLANT/S:** M/S.PRABHA INDUSTRIES PROPRIETRIX, A. SWAYAM PRABHA, 60,, PORT MAIN ROAD, SHEVAPET, SALEM-636 002. BY ADVS. SRI.R.D.SHENOY (SR.) SRI.S.B.PREMACHANDRA PRABHU ## **RESPONDENT/S:** - 1 COCHIN PORT TRUST THE CHAIRMAN, WELLINGDON ISLAND,, COCHIN - 682 009. - 2 COMMISSIONER OF CUSTOMS CUSTOM HOUSE, WELLINGDON ISLAND,, COCHIN- 682 009. - 3 SENIOR INTELLIGENCE OFFICER DIRECTORATE OF REVENUE INTELLIGENCE, VILAKUNNEL, PALARIVATTOM, COCHIN - 682 025. - 4 UNION OF INDIA, REP. BY THE SECRETARY DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NORTH BLOCK, **WA NO. 368 OF 2007** **-2-** NEW DELHI - 1. BY ADVS. SRI.AJITH KRISHNAN SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.BINU MATHEW SRI.ISAAC THOMAS SRI.TOM THOMAS KAKKUZHIYIL OTHER PRESENT: ADV. SUVIN R. MENON, CGC THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 23.06.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WA NO. 368 OF 2007** **-3-** ## **JUDGMENT** S.V.N. Bhatti, C.J. We have heard Mr S.B. Premachandra Prabhu, Mr Isaac Thomas and Mr Suvin R. Menon for parties. 2. The writ appeal arises from the judgment dated 25.09.2006 in W.P.(C) No.25288/2004. The petitioner is the appellant. The parties are referred to as arrayed in the writ petition. 3. The petitioner is a firm engaged in the import and trading of metals, scrap etc. In the writ petition **,** the dispute refers to the consignment imported by the petitioner from M/s. Norex International AB, Sweden. The imported consignment is stated as defective/rejected pre-painted sheet cuttings. On 11.11.2003, the Bill of Entry for the subject consignment was **WA NO. 368 OF 2007** **-4-** filed through clearing agent M/s. Worldwide Handling Agencies. The 3[rd] respondent has collected the documents to verify the unit price quoted in the documents for the subject import. For want of documents and the determination of duty payable by the petitioner, the consignment continued to remain with the Cochin Port Trust/1[st] respondent. The Customs Authorities detained the consignment from 11.11.2003 till 29.04.2004, and the customs authorities called upon the petitioner to pay duty at a rate specified by the Customs Department. The figures, duty paid etc., since are irrelevant, are not adverted to in the narration. 4. On 03.05.2004, the office of the Commissioner of Customs issued detention certificate No.2/2004 dated 03.05.2004. The detention certificate refers to the period from 17.12.2003 to 29.04.2004. The Senior Intelligence Officer, **WA NO. 368 OF 2007** **-5-** Customs, by letter dated 11.05.2004, communicated no objection for clearing the consignment subject to the customs formalities. At this stage, through Ext.P8 dated 12.05.2004, the 1[st] respondent determined the demurrage payable by the petitioner as follows: “We are in receipt of your above letter and would like to inform that the detention certificate No.2/2004 dt. 03.05.2004 issued by Customs does not contain on what ground the detention certificate is being issued. The detention certificate is considered only due to the following reasons: - a. Delay in chemical/Custom. Examination/under Section 17(1) of the Customs Act, 1962 read with Section 144 of Customs Act-62 - b. Operation of Import Trade Control Regulations But this certificate does not contain any specific reason. It is understood that the cargo was detained by DRI for certain investigation, which does not come under the purview of waiver of demurrage charges. Further, the period of 5 months is too long, a period for the above said examination. As you are aware that the Port is no way responsible for the delay in delivery of the cargo, this office is not in a position to consider the detention certificate for waiver of **WA NO. 368 OF 2007** **-6-** demurrage charges which is approximately about Rs.9 lakhs as on date”. The writ petition was filed challenging Ext.P8, P10 and P12. 5. It is contextual to note that the petitioner filed a writ petition challenging the demurrage, and the writ petition stood disposed of, and the writ appeal No.1756/2004 was filed against the interim order made in the pending writ petition, and the petitioner challenges the order of the Division Bench dated 12.04.2007 in WA No. 368/2007 before the Supreme Court. The Supreme Court finally disposed of the civil appeal. 6. The period of the demurrage covers two instances: Between 11.11.2003 and 29.04.2004, and 29.04.2004 till the consignment was cleared by complying with the conditions imposed by the Supreme Court. 7. The judgment under appeal rejected the case of the **WA NO. 368 OF 2007** **-7-** petitioner. However, on the quantum of demurrage, the learned Single Judge has set aside the order impugned and relegated the matter to the 1[st] respondent for consideration and disposal afresh in accordance with law. Aggrieved by the said remand through the impugned judgment, the appeal at the instance of the writ petitioner. 8. Mr S.B. Premachandra Prabhu contends that for the period, viz., 11.11.2003 to 29.04.2004, no demurrage, according to the guidelines, can be collected by the Cochin Port. 9. The next period commences from 12.05.2004 till the **.** actual custody taken in 2008 The petitioner argues that the 1[st] respondent-Cochin Port failed to apply the free period available in the case as the present. The petitioner did not retain the consignment in the custody of the 1[st] respondent on its own **WA NO. 368 OF 2007** **-8-** volition or by neglect. The Customs Authorities can collect the documents concerning the consignment and, on detailed verification and examination after 4 **½** years, direct the release of the scrap covered by the said consignment. Therefore, by granting the free period, the consignment should have been allowed to be transported by the petitioner without further delay. He refers to and relies on the following guidelines, which read as follows: 3.2 Demurrage Charges 3.2.1. Free Period Sl.No. Description Free Period 1. Import Cargo 7 days 2. Export & transhipment cargo 12 days Notes: (1) (i) Free period for import cargo shall be reckoned from the day following the date of last cargo discharged/landed from the vessel. (ii) Free period of export cargo shall commence from the date of admission of the cargo into the port. (iii) In case of salvaged goods free period shall commence from the day following the notification of salvage by the receiver of wreck. (iv) In the case of export cargo after the free period demurrage shall accrue till the date of commencement of loading. - (2) Both export and import cargo shall enjoy only one set of free period. **WA NO. 368 OF 2007** **-9-** - (3) Demurrage shall be chargeable on all goods/cargo left in the Port’s transit sheds or yards beyond the expiry of free days at the rates prescribed in the respective schedule. - xxx xxx xxx - (4) Free period of special cases: The following free periods are allowed in addition to the free periods applicable as per description of goods: - (a) Any period when the Commissioner of Customs/Head of the Customs Department at the Port certifies that the goods were detained for examination/ test under Section 17(1) of the Customs Act, 1962 (52 of 1962) read with Section 144 of the said act other than for the ordinary process of appraisement and that the detention was not attributable to any fault or negligence on part of the importers and exporters plus two working days. 10. By juxtaposing the said requirement, Adv. Premachandra Prabhu argues that Ext.P8 dated 12.05.2004 has completely proceeded with a wrong discretion, resulting in **.** What litigation between the importer and the 1[st] respondent is applicable to the Customs authorities is applicable with equal force to the 1[st] respondent as well. In other words, the detention certificate evidences that the consignment could not be moved from the Port area because of the orders of the Customs. Second **WA NO. 368 OF 2007** **-10-** limb of the consignment was not moved out because of the illegal order made by the Port. The demurrage demanded prevented the movement of consignment. Once the demand is held to be not legal, then the demand for demurrage is wholly illegal and arbitrary. The Port has denied a benefit legitimately due to the importer, therefore, the fault lies with the Port, and no incidence of demurrage is attracted. He relies on the judgments in _Shipping Corpn. Of India Ltd v. C.L. Jain Woolen Mills,[1] , Padam Kumar Agarwalla v. The Additional Collector of Customs, Calcutta and others[2] , International Airports Authority of India and others v. Grand Slam International and others[3] , Kumar Trading Co.LLC v. Union of India[4] , KVR Forgings Limited v. Commissioner of Central_ > 1 2001 (129) ELT 561 (SC) 2 AIR 1972 SC 542 3 (1995) 3 SCC 151 4 2001 (132) ELT 578 (Cal.) **WA NO. 368 OF 2007** **-11-** _Excise[5] , Mohan Bakers Pvt. Ltd v. Commissioner of C.Ex., Kolkata-IV[6] , Lloyds Steel Industries Ltd v. Commissioner of C.Ex Nagpur[7] , Anuma Precision Tool Pvt. Ltd v. Collector of Cus., Madras[8] , India Thermit Corpn. Ltd v. Commissioner of C.Ex , New Delhi[9] , Toyo Engineering India Ltd v. Commissioner of Customs, Mumbai[10] , Om Petro Chemicals v. Union of India[11]_ 11. Mr Isaac Thomas appearing for the 1[st] respondent, argues that even assuming without admitting that Ext.P8 suffers from an incorrect consideration of the free tariff period available to the importer. Still, nothing prevented the petitioner/importer from moving the consignment out by paying the ground rent and the demurrage charge to the 1[st] > 5 2001 (132) ELT 588 (AP) > 6 2008 (221) ELT 308 (Tri. Kolkata) > 7 2008 (221) ELT 310 (Tri. Mumbai) > 8 2000 (121) ELT 309 (Mad.) > 9 2000 (121) ELT 312 (Tribunal) > 10 2000 (122) ELT 315 (Tribunal) > 11 2002 (140) ELT 353 (Del.) **WA NO. 368 OF 2007** **-12-** respondent. According to him, the petitioner has unnecessarily indulged in litigation, which led to the detention of the consignment till 2008. Therefore, for the said period, the importer is under obligation to pay demurrage to the Port Trust. He relies on the following judgment in _International Airports . Authority of India and others v. Grand International and others_[12] 12. The judgment relied on by the counsel are often cited precedents on its point viz., who should pay the demurrage charges etc. In the case on hand, we are convinced the dispute is not on legal principles enunciated in these judgments. But according to us, by appreciating the admitted circumstances, we prefer to decide whether the levy of demurrage is correct and legal. Therefore, we take up the writ appeal for consideration > 12 (1995) 3 SCC 151. **WA NO. 368 OF 2007** **-13-** on facts-in-issue. 13. We have perused the record and taken note of the contentions urged by the counsel appearing for the parties. _Prima facie,_ we are of the view that the solitary point that comes up for consideration is whether the levy and collection of demurrage in terms of Ext.P8 dated 12.05.2004 is legal, valid and sustainable. 14. The circumstances are not in dispute. Therefore, let us first examine the circumstances that compelled the Customs Authority to investigate and, after that, order the release of the consignment subject to payment of the customs duty. 15. It is undoubtedly true that the arrangement between the petitioner and 1[st] respondent has reciprocal obligations for performance by the respective parties. The 1[st] round of the **WA NO. 368 OF 2007** **-14-** challenge is that the 1[st] respondent failed to extend the period available under the free period in special cases. The requirement under the free period in some instances does not insist upon the condition, namely: _‘As you are aware that the Port is no way responsible for the delay in delivery of the cargo, this office is not in a position to consider the detention certificate for waiver of demurrage charges which is approximately about Rs.9 lakhs as on date’._ 16. The 1[st] respondent, by imposing unavailable conditions and ignoring the detention certificate issued by the competent authority, has demanded the ground rent and **.** demurrage charges from the petitioner Now the argument is that the petitioner should have taken steps to get the consignment released immediately on receipt of Ext.P8. The argument of the 1[st] respondent literally takes away the scope of judicial review otherwise available to the orders made by the 1[st] **WA NO. 368 OF 2007** **-15-** respondent. The reasons stated in Ext.P8 are not contextual and available grounds for deciding the request made by the importer. The reasons stated in Ext.P8 are wholly unconvincing and unavailable, and rejection of petitioner’s claim for release without demurrage is illegal. Ext.P8 by a liberal standard of judicial review is unsustainable. Therefore, Ext.P8 automatically warrants interference and is liable to be set aside and accordingly set aside. 17. The next question is the payment of the demurrage and the date on which the consignment has been removed from the warehouse unit of the 1[st] respondent. The counsel for the petitioner contends that the Port Trust, either on account of ignorance or otherwise, did not release the consignment by accepting the normal rent but imposed demurrage. The 1[st] respondent ought not to expect the petitioner to accept the **WA NO. 368 OF 2007** **-16-** demurrage, deposit the amount, work out the remedy, and then claim the demurrage amount already paid. On account of the litigation between 2004 to 2008, the consignment has been detained by the 1[st] respondent. 18. We take note of the admitted circumstances and observe that by making Ext.P5 order which is, for the reasons already noted, illegal and unsustainable, the 1[st] respondent invited litigation and, during the litigation, insisted upon payment of demurrage for releasing the consignment. That be the case, to demand demurrage even for the period which had occasioned on account of the detention which otherwise illegal by the 1[st] respondent, cannot fasten to the petitioner. 19. This court, on 12.04.2007, after hearing both sides permitted the 1[st] respondent to put the goods in public auction **WA NO. 368 OF 2007** **-17-** and the amount realised to be kept in a separate account. This order was challenged by the writ petitioner before the Supreme Court, and the Supreme Court, by order dated 16.04.2008, disposed of the special leave petition permitting the petitioner to deposit an amount of Rs. 9 lakhs in fixed deposit in the name of Registrar (Administration), High court of Kerala and on deposit, the goods to be released in favour of the petitioner. On 25.04.2008, the petitioner complied with the directions of the Supreme Court and made a fixed deposit, and the goods were released. For the above reasons and discussions, we are of the view that the judgment under appeal is unsustainable accordingly, is set aside. Consequent to the above, Exts.P8, P10, and P12 are also set aside. The fixed deposit receipt kept in safe custody as per the directions of the Supreme Court shall be released to the **WA NO. 368 OF 2007** **-18-** petitioner within one week from the date of receipt of copy of the judgment. Writ appeal is allowed. No order as to costs. Sd/- **S.V.N.BHATTI CHIEF JUSTICE** Sd/- **BASANT BALAJI JUDGE** JS