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R . C . Fabrics ( P ) Ltd . Vs . Union of India - Court Judgment

LegalCrystal Citation
Overruled ByUnion of India And others v. R.C. Fabrics (P) Ltd And Another (2002)1SCC718
SubjectCustoms
CourtDelhi High Court
Decided On
Case NumberCWP No. 3537 of 1990 and C.M. No. 8877 of 1993, (Special Leave Petition No. 46-47 of 1995 against this order admitted by the Hon
Judge
ActsCODE OF CIVIL PROCEDURE, 1908 - Section 144; CUSTOMS ACT, 1962 - Section 17, CUSTOMS ACT, 1962 - Section 45, CUSTOMS ACT, 1962 - Section 108, CUSTOMS ACT, 1962 - Section 110, CUSTOMS ACT, 1962 - Section 111, CUSTOMS ACT, 1962 - Section 112, CUSTOMS ACT, 1962 - Section 125; INDIAN CONTRACT ACT, 1872 - Section 72, INDIAN CONTRACT ACT, 1872 - Section 129D
AppellantR.C. Fabrics (P) Ltd.
RespondentUnion of India
Advocates:Shri K.S. Bindra, Sr. Adv. and Vivek Sood, Adv
Excerpt:
[anil dev singh and m. jagannadha rao, jj.] -- code of civil procedure, 1908 - section 144 -- the petitioner deals in export of polyester shorts. the cif value of the excess goods was placed by the assistant collector at rs. 17,0000/-. on february 18, 1991 the assistant director, dri, issued a show cause notice to the petitioner. collector of customs but the asstt. once the petitioner was given an option by the adjudicatory authority to redeem the goods on payment of fine, the goods were bound to be cleared by the customs on the petitioner complying with the conditions set out in the order. the goods ought to have been released by the customs authorities on being satisfied about the compliance of the order of the assistant collector of customs dated january 10/15, 1991 by the petitioner......anil dev singh, j.1. this is a writ petition whereby the petitioner, inter alia, seeks a direction to the respondents for release of the consignment of polyester fabric imported by it against duty free advance import license no. pk 3297494 and covered by bill of entry no. 151684 dated august 16, 1990 without payment of demurrage, ground rent and container charges of the fourth respondent central warehousing corporation and for payment of damages and interest thereon on the ground that goods were detained by the customs authority viz. second and third respondents, illegally and unauthorisedly at the container freight station, patparganj of the fourth respondent. briefly stated the facts giving rise to this writ petition are as follows :2. the petitioner deals in export of polyester shorts......
Judgment:

Anil Dev Singh, J.

1. This is a writ petition whereby the petitioner, inter alia, seeks a direction to the respondents for release of the consignment of polyester fabric imported by it against duty free advance import license No. PK 3297494 and covered by Bill of Entry No. 151684 dated August 16, 1990 without payment of demurrage, ground rent and container charges of the fourth respondent Central Warehousing Corporation and for payment of damages and interest thereon on the ground that goods were detained by the customs authority viz. second and third respondents, illegally and unauthorisedly at the Container Freight Station, Patparganj of the fourth respondent. Briefly stated the facts giving rise to this writ petition are as follows :

2. The petitioner deals in export of polyester shorts. He is said to have received export orders from Hongkong for the supply of 1,00,000 pieces and 60,000 pieces of polyester shorts on October 9, 1989 and November 3, 1989 respectively. It is claimed that the goods were exported to the foreign buyer, who remitted the requisite foreign exchange. On January 2, 1990 the petitioner applied to the Joint Chief Controller of Imports and Exports for advance import license for the import of duty free polyester fabric under Chapter XIX of the Import Policy for the period AM 1989-91. On January 31, 1990 the petitioner was issued Duty Exemption Entitlement Certificate (for short "DEEC" book No. 008053 and duty free advance import license No. PK/3297494. Under the Advance license the petitioner was allowed to import 80,000 meters of 100% polyester fabric of CIF value of Rs. 16,16,000/- as per the following details :

1. Width - 150 Cms.

2. Denier - 150-300

3. The import was subject to the condition that the petitioner would export 1,60,000 pieces of shorts made out of the imported 100% polyester fabric of the aforesaid denier of FOB value of Rs. 24,48,000/-. In accordance with the aforesaid policy all imports under export obligation are duty free.

3. The petitioner claims to have fulfilled the export obligation by exporting shorts of FOB value of Rs. 24,51,000/-. In order to avail the facility of duty free import under the advance license, the petitioner placed order for importation of polyester of CIF value amounting to Rs. 62,61,120/-. After arrival of the consignment at Container Freight Station, Patparganj, belonging to the Central Warehousing Corporation, which was covered under the Bill of Entry No. 151684 dated August 16, 1990 the petitioner sought duty free clearance of the same. Some percentage of the goods were examined and measured by the Customs Authorities and as a result thereof the goods were seized under Section 110 of the Customs Act, 1962 in the belief that they were liable to be confiscated on the ground of misdeclaration. The petitioner requested for adjudication on merits and waived the issue of show cause notice and personal hearing to him. The Assistant Collector of Customs, the adjudicating authority, confiscated the goods and gave an option to the petitioner to redeem the same on payment of redemption fine of Rs. 25,000/- and also imposed a personal penalty of Rs. 5,000/-. It is alleged in the writ petition that this order was passed on September 21, 1990 and on the same day the petitioner deposited the required sum of Rs. 30,000/- vide challan Annexure IX to the writ petition. It appears that the assertion of the petitioner that the order was passed by the Assistant Collector of Customs on September 21, 1990 is not correct as by a subsequent application. C.M. No. 959 of 1991, filed by the petitioner, it was revealed that the adjudication order was passed by the Assistant Collector of Customs on January 10/15, 1991. Copy of this order is Annexure B to the application. It is apparent from the order that 10% of the goods were examined on September 3, 1990 in the presence of the clearing and handling agent of the petitioner and Superintendent Customs, when it was found that the length of the fabric measured 3347 meters instead of 3255 meters as declared in the packing list. Besides the net weight of 10% goods was found to be 793 kg. instead of 769.49 kgs. as declared in the packing list. Thus on examination of 10% of the goods it was revealed that goods were in excess by 92 meters in length and 23.51 kgs. in weight. The petitioner agreed with the findings of the above examination and requested that 100% examination of the goods be not carried out as the fabric would be damaged. Since on the basis of the examination of 10% of the goods it was found that the fabric was in excess by 92 meters in length an 23.51 kgs. in weight, the Assistant Collector of Customs was of the opinion that the goods were misdeclared both in length and weight. According to the Assistant Collector (Customs) 100% examination of the goods was required to be done but this was not resorted to as the entire lot of goods was composed of a single item, namely, polyester fabric which was of a perishable nature. However, it was decided by him that another 10% of the goods should be measured and examined and weight of 100% goods should be taken. On examination by this method it was found that total excess length worked out to be 843.85 meters. The CIF value of the excess goods was placed by the Assistant Collector at Rs. 17,0000/-. The Assistant Collector therefore, held the view that the goods to the extent of the above quantity and value were sought to be cleared without valid license and without payment of duty by miss declaring the same and hence were liable for confiscation under Section 111(d) and (m) of the Customs Act, 1962.

4. Since the petitioner had waived the issue of show cause notice and personal hearing and asked for decision of the case on merits, the Assistant Collector of Customs on going through the record directed the confiscation of the excess quantity of the goods but allowed the petitioner to redeem the same under Section 125 of the Customs Act after payment of fine of Rs. 25,000/-. Besides he also imposed a personal penalty of Rs. 5,000/- under Section 112 of the Customs Act for the contravention of the Import Control Order, 1955. As is seen above, the petitioner is said to have deposited the fine and penalty on September 21, 1990, which fact is quite intriguing as how the amount was deposited when the adjudication order was passed only on January 10/15, 1991. But the fact of deposit of redemption fine and personal penalty is not disputed. Be that as it may, goods, however, were not released as clearance was not given by the customs to the Container Freight Station Patparganj, Delhi, where the goods were stored.

5. In the counter-affidavit of the Assistant Director, Directorate of Revenue Intelligence, Delhi Zonal Unit, New Delhi dated February 5, 1991, it was averred that the petitioner had violated the Import Control Order and evaded duty amounting to Rs. 16,01,279/-. It was also averred that the Directorate of Intelligence (for short "DRI") has received information that the export effected by the petitioner against DEEC Book No. 00853 dated January 31, 1990 was fraudulent and no test report regarding the goods was filed (paras 13 and 21 of the counter-affidavit). It was also pointed out that Shri Ashok Jain, Director of the petitioner firm was summoned on October 4, 1990, when his statement under Section 108 of the Customs Act was recorded and he also submitted certain bills issued by M/s. Image (Exporters, Manufacturers and Representatives), B-56, East of Kailash, New Delhi as evidence of the purchase of 80,000 meters of polyester fabric from it, which was claimed to be used for fabricating shorts, exported against the DEEC Book. It is further stated that Shri Shyam Lal Ghai, Proprietor of M/s. Image was summoned under Section 108 of the Customs Act, 1962 on October 23, 1990 and his statement was recorded which was to the effect that the bills regarding sale of 80,000 meters of polyester fabrics purported to have been issued to the petitioner, M/s. R.C. Fabrics Pvt. Ltd. had neither been issued by him nor had he ever sold any goods to it. In the counter-affidavit it is also pointed out that the statement of Shri Moti Singh, Proprietor of M/s. Fine Garments, G-52 Partap Nagar was recorded under Section 108 of the Customs Act. According to him, he had fabricated about 1,60,000 shorts for M/s. R.C. Fabrics but he was not aware whether the fabric used for stitching the shorts was polyester or some other material. With regard to the adjudicating order passed on January 10/15, 1991 it was stated that the same was irrelevant for the purpose of the present writ petition. Besides, it was denied that the goods were being detained arbitrarily and unauthorisedly or the authorities were acting in colourable exercise of their power.

6. After filing of the counter-affidavit, when the matter came before the Division Bench on February 11, 1991, a request was made on behalf of the respondents for grant of time to further investigate the matter. In accordance with the request this Court allowed the investigation to be completed within one week and also permitted the customs to issue a show cause notice to the petitioner. Liberty was also given to the petitioner to file a reply to the show cause notice within 48 hours of the receipt of the same, which period was subsequently extended at the request of the petitioner. Furthermore, the adjudication, if any, was required to be completed and concluded within one week after the completion of the investigation. The petitioner was also directed to appear before the adjudicating authority on February 12, 1991.

7. On February 18, 1991 the Assistant Director, DRI, issued a show cause notice to the petitioner. Thereafter on February 25, 1991 the Additional Collector passed an adjudication order whereby he ordered confiscation of 31,061 meters of polyester fabric valuing Rs. 6,26,120/- imported by the petitioner. He however, gave option to the petitioner to redeem the goods on payment of fine of Rs. 4 lakhs and duty amounting to Rs. 16,01,279/-. He also imposed a further penalty of Rs. 10 lakhs on each of the partners of the petitioner namely S/Shri Ashok Jain and Anil Jain under Section 112 of the Customs Act. This order was passed on the basis of a test report of the Central Revenue Control Laboratory dated November 26/December 4, 1990 according to which the polyester fibre was of a different denier age than what was declared in the invoice filed with the Bill of Entry and what was permitted to be imported under the duty free advance import license. However, while passing the order the Additional Collector did not take into account the reply of the petitioner on the ground that the same was filed on February 25, 1991 instead of February 19, 1991, i.e. beyond the time originally granted by the Division Bench. The petitioner questioned this order in the present writ petition by filing an application, being C.M. No. 1246 of 1991, on the ground that the Division Bench had extended the time to file the reply to the show cause notice and the same was filed within the extended time but despite this the Additional Collector failed to consider the same in violation of the direction of the court and the principles of natural justice. On January 6, 1993 the Division Bench set aside the order of the Additional Collector dated February 25, 1991 as the decision was rendered by him without considering the reply of the petitioner to the show cause notice. The Bench also directed him to decide the matter afresh on all points which the petitioner had raised in his reply. The petitioner was also permitted to file additional submissions before the Collector of Customs, who was to deal with the same including the question of his jurisdiction to proceed with the matter in view of the existence of an earlier order of adjudication dated January 10/15, 1991.

7A. On October 22, 1993 the Collector of Customs, on consideration of the matter including the reply of the petitioner and the additional submissions filed by it, passed an order upholding the contention of the petitioner that the show cause notice issued on February 18, 1991 was without jurisdiction as earlier adjudication proceedings had culminated in the order dated January 10/15, 1991. While upholding the contention of the petitioner the Collector also noticed that the test report dated November 26/December 4, 1990 was available when the adjudication order dated January 10/15, 1991 was passed by the Asstt. Collector of Customs but the Asstt. Collector made no mention of it in his order. He also found that the order of the Assistance Collector covered the entire consignment which was imported by the petitioner under Bill of Entry No. 151684, dated August 16, 1990. In the circumstances the Collector was of the opinion that no fresh adjudication could be held in respect of the consignment with regard to which earlier adjudication had already taken place.

8. The Collector therefore refused to go into the merits of the case. The petitioner on October 30, 1993 placed a copy of the order of the Collector on record of the present petition. Thereafter, on November 25, 1993 the petitioner filed yet another application, C.M. No. 8873 of 1993, whereby a direction was sought for release of the goods upon waiver of the demurrage, ground rent and container rent charges etc. A further direction was sought for payment of interest by the respondents on account of the loss suffered by the petitioner in regard to withholding of his consignment of over three years. It was further prayed that the respondents be directed to issue a detention certificate. Since the Warehousing Corporation, which was the custodian of the goods and with whom the same were stored was not a party to the writ petition, the petitioner made a further prayer for impleading the Central Warehousing Corporation as a party respondent. The prayer of the petitioner for impleading the Central Warehousing Corporation was allowed and accordingly it was added as the fourth respondent in the writ petition.

9. Mr. Bindra, learned Senior Counsel appearing for the petitioner submitted that the goods remained with the Warehousing Corporation at the instance of the first three respondents despite the fact that the adjudication order was passed on January 10/15, 1991 by virtue of which the petitioner was entitled to the release of the goods on making certain payments, which were duly said. He submitted that the action of the respondents is not releasing the goods in accordance with the order of the Assistant Collector dated January 10/15, 1991 was mala fide, arbitrary and without jurisdiction, which entitled the petitioner to the release of the goods unconditionally without payment of demurrage, container charges and ground rent. He also vehemently contended that the petitioner was entitled to receive compensation/damages and interest from the first three respondents.

10. Appearing for the first respondent Union of India, Mr. Chandrasekharan, Additional Solicitor General submitted that the Union of India was not liable for the payment of demurrage, container charges and ground rent on account of the goods in question which were lying with the fourth respondent Central Warehousing Corporation. He further submitted that the goods were not released as the same were the subject matter of investigation in order to ascertain whether the import trade formalities were complied with by the petitioner and whether the goods tallied with the import license. It was also contended that according to the test report dated November 26/December 4, 1990 polyester fibre of the goods was of a different denier age than what was declared in the invoice filed Along with the Bill of Entry. In view of these submissions, it was therefore, urged by him that the goods were not detained arbitrarily, unauthorisedly and in colourable exercise of their power by the respondents. He also denied the liability of the Union of India to pay the demurrage and other charges of the fourth respondent. Learned Additional Solicitor General canvassed that the petitioner can secure the release of the goods without payment of demurrage and other charges or at the concessional rates only on the issuance of a detention certificate.

11. Learned Counsel, Shri Manvendra Verma, appearing for the fourth respondent contended that the petitioner was liable to pay demurrage and other charges for the goods as the same were stored/kept in the warehouse of his client at the container freight station, Patparganj, Delhi and unless the payment was made the goods were not liable to be released. In support of his submission learned counsel referred to two decisions of the Supreme Court in Board of Trustees of the Port of Bombay v. Indian Goods Supplying Co. and The Trustees of the Port of Madras v. M/s. Aminchand Pyarelal and others .

12. Shri Verma further submitted that the learned Additional Solicitor General was not right in his contention that the goods could be released to the petitioner without payment of demurrage and other charges or on concessional rates on the issue of the detention certificate by the customs. He contended that according to the Procedures and Tariffs for container Freight Station there was no provision for remission of the charges or for charging concessional rates even on issue of a detention certificate by the customs authorities. The Tariff according to the learned counsel was charged in accordance with Annexure III to the Procedure and Tariff for Container Freight Station. He, however, pointed out that there is a provision for waiver for storage charges for the period of the detention certificate issued by the customs authorities in respect of cargo stored at Indira Gandhi International Airport but no such provision has been made in respect of the goods stored at the container freight station. Learned counsel therefore, concluded by submitting that the petitioner was liable to pay the charges irrespective of the fact whether it was responsible for storing the goods or the same were detained at the instance of the customs authorities.

13. On hearing the rival contentions advanced by the learned counsel for the parties, the first question which arises for determination is whether the customs authorities were justified in not releasing the goods after January 10/15, 1991, when the adjudication order was passed by the Assistant Collector of Customs and the petitioner paid redemption fine and personal penalty in accordance therewith.

14. It is not disputed that the goods covered under the Bill of Entry No. 151684 dated August 16, 1990 was examined and seized by the customs authorities under Section 110 of the Customs Act and on adjudication by the Assistant Collector of Customs the goods which were found to be in excess were confiscated and option was given to the petitioner to redeem the same on payment of redemption fine of Rs. 25,000/- and penalty of Rs. 5,000/-. This adjudication order was passed by the Assistant Collector on January 10/15, 1991. It is also not disputed that the petitioner complied with the order and paid redemption fine and the penalty. It is further not disputed that the adjudication order dated January 10/15, 1991 remained unchallenged and acquired finality. Therefore, once the conditions for the release of goods set out in the adjudication order were complied with by the petitioner, the goods could no longer be kept in detention. At this stage we may, however, mention that during the course of the proceedings in the writ petition, on the request made on behalf of the first and second respondents, the Division Bench on February 11, 1991 granted a week's time to them to complete the investigation; to issue a show cause notice to the petitioner; and to receive its reply and then to complete the adjudication proceedings and pass an order. As a result thereof the petitioner was served with a fresh show cause notice on February 18, 1991 and the adjudication order was passed on February 15, 1991. But the order was passed without considering the reply of the petitioner and therefore, was set aside by the Division Bench on January 6, 1993. Thereupon, the Collector of Customs passed a fresh order on October 22, 1993, after taking into consideration the reply of the petitioner to the show cause notice, holding that the second show cause notice dated February 18, 1991 was without jurisdiction as the earlier adjudication proceedings had culminated in the order dated January 10/15, 1991 and no further adjudication was permissible under law and the entire consignment imported by the petitioner under the Bill of Entry No. 161584 dated August 16, 1990 was covered by the earlier order. In coming to this conclusion the Collector relied upon the decision of Customs, Excise and Gold (Control) Appellate Tribunal in S. K. Nayyar and others v. Collector of Customs, . Accordingly the Collector refused to go into the merits of the case and discharged the show cause notice and dropped the proceedings. Therefore, on passing of the adjudication order dated January 10/15, 1991 permitting release of the goods on payment of the redemption fine and penalty by the petitioner, the withholding of the consignment was not justified when undoubtedly the requisite payment was made by the petitioner.

15. While discharging the notice, the Collector noted that the test report dated December 4, 1990 of the Central Revenue Control Laboratory relating to the denier age of the imported fabric was also available with the department even before passing of the earlier adjudication order by the Assistant Collector of Customs and the same could have been taken into consideration by him, but this was not done. Even the statement of Shri Shyam Lal Ghai Proprietor of M/s. Image, who allegedly supplied polyester fibre to the petitioner and Shri Moti Singh, Proprietor of M/s. Fine Garments, who fabricated the shorts for it, were available when the first adjudication order was passed by the Assistant Collector of Customs on January 10/15, 1991. Thus all the material which was sought to be relied upon in the second show cause notice was already available with the customs authorities on the date of the passing of the first adjudication order. It is surprising to note that this material was not referred to in the order of the Assistant Collector of Customs dated January 10/15, 1991. Irrespective of the reasons for overlooking the report of the Central Revenue Control Laboratory by the Assistant Collector of Customs, his order dated January 10/15, 1991 acquired finality, and it was not permissible to initiate fresh adjudication proceedings in regard to the same consignment which was covered by the earlier order. Once the petitioner was given an option by the adjudicatory authority to redeem the goods on payment of fine, the goods were bound to be cleared by the customs on the petitioner complying with the conditions set out in the order. The Customs authorities were not correct in ignoring the order of the Assistant Collector dated January 10/15, 1991 which had acquired finality as they failed to report to the procedure laid down in sub-sections (2) to (4) of Section 129D(2) of the Customs Act, 1962 for setting aside the same. Once the adjudicatory authority gives an option to the importer to redeem the goods on payment of fine, the said order should be given effect to unless the procedure as laid down under sub-sections (3) to (4) of Section 129D of the Act is resorted to and the order is set aside by the competent authority (See : S. Mohan Lal v. Collector of Customs, , Gujarat Electronics and

Others v. Union of India and Others, and Singh Radio and Electronics v. Collector of Customs, .

16. Therefore, the Collector vide his order dated October 22, 1993 was right in holding that he had no jurisdiction to pass a fresh order of adjudication in view of the earlier order dated January 10/15, 1991 covering the consignment in question. In any event this order of the Collector dated October 22, 1993 is not the subject matter of challenge before us. Therefore, subsequent show cause notice and adjudication proceedings were outside the jurisdiction of the customs and were null and void. The goods ought to have been released by the customs authorities on being satisfied about the compliance of the order of the Assistant Collector of Customs dated January 10/15, 1991 by the petitioner. Accordingly we hold that the customs authorities were not justified in keeping the goods in detention after passing of the order of the Assistant Collector of Customs on January 10/15, 1991 as redemption fine and penalty had been indisputably paid by the petitioner. As the detention of the goods was unjustified the petitioner cannot be saddled with demurrage and other warehouse charges and the said liability must be borne by the first three respondents. The petitioner cannot be made to suffer the consequences of the illegal act of the customs and as such the latter must bear the responsibility to pay the charges of the fourth respondent from the date of the order of the Assistant Collector of Customs viz. January 10/15, 1991.

17. In Trishul Impex v. Union of India and Others, a Division Bench of this court, while dealing with the case of an importer whose goods had been detained by the customs authorities, held that if the department succeeds in justifying the detention then the burden of payment of demurrage will necessarily fall on the importer. But if it is otherwise, the department must necessarily take on the liability of meeting the demurrage charges of the approved custodian. In this regard it was observed as follows :

"5. Admittedly, in the present case, the Container Corporation of India through the Inland Container Depot is the custodian of goods under Section 45 of the Customs Act. As the Inland Container Depot is the custodian for the Customs authorities and the detention certificate has been issued by the Customs, then the Inland Container is bound to release the goods to the importer and with regard to the demurrage charges and ground rent charges, it is the Customs Department which is liable to the Container Corporation of India.

6. Counsel for the Container Corporation of India submitted that the Shipping Corporation of India Ltd. vide its letter dated January 28, 1991, has asked the Container Corporation not to release the goods although they had issued delivery order earlier to the importer. The importer shall get the delivery order revalidated. The demurrage charges prior to the date February 27, 1988, will be borne by the importer on which the Bill of Entries were submitted by the petitioner and after February 27, 1988, till the goods are released, the Customs Department would be liable for the payment of demurrage charges and ground rent charges to Container Corporation."

18. Again in M/s. Sundeep Industries and another v. Collector of Customs, New Delhi and Others, the Division Bench

held as under :

"The petitioner's grievance is that despite the orders of the Collector, the goods have not so far been released. The order of the Collector has become final and as such the respondents were required to comply with the order of Collector of Customs passed on 11th July, 1990. It may be stated that when the import was lawful, the goods could not be confiscated and when the valuation has also been finally determined by the Collector, i.e. the declared value as accepted by the Collector, then there was no occasion for not releasing the goods and the petitioner cannot even be held liable for demurrage in these facts and circumstances."

19. Therefore, according to the decision in Sundeep Industries and Another (supra), once the duty was paid on the goods in accordance with the order of the Collector, which had become final, the Customs were bound to release the goods and thereafter the importer was not liable to pay the demurrage to the warehouse, if the goods were still not released. Against this decision, the Central Warehousing Corporation preferred a special leave petition but the same was dismissed by the Supreme Court.

20. Another decision in point is Sewing Systems Pvt. Ltd. v. Union of India, . In this case the Karnataka High Court held that there was no power or authority with the customs to withhold a consignment after the payment of duty, fine and penalty levied in respect thereof. It also held that once the duty, fine and penalty are paid by the importer, the detention of the goods is rendered illegal and the continued detention invariably has the effect of actionable conversion. Thus stating the principle the court observed as follows :

"12. None of the provisions of the Act disclose any power or authority reserved with the respondents to withhold a consignment notwithstanding the payment of duty, fine and penalty levied in respect of the same. It is an undisputed fact that the petitioner has paid a total sum of Rs. 65,836.82 on 5-8-1988 in respect of one consignment covered by Bill of Entry No. 201, dated 16-4-1986 in full settlement of the duty, fine and penalty. The moment the amount is paid by the petitioner and accepted by the competent authority as in the instant case, the respondents are divested of the right of detention of the goods and simultaneously the right to possession and dominion of the goods became automatically vested in the petitioner. This right cannot be taken away by the respondents unless there is any legal warrant under the provisions of the Statute. During the period of divesting and vesting, in my opinion, there is no transfer of ownership, but there is only a transfer of dominion over the goods. Until duty, fine and penalty liable to be paid remains unpaid, the divesting of the goods from the petitioner and vesting in the respondents may amount to justified detention; but the moment the said charges are fully paid by the petitioner, the detention becomes illegal. Though it is not the case of the petitioner that the continued illegal detention of the consignment in question amounts to conversion. I am of the opinion that it would invariably have the effect of actionable conversion. Insistence of the respondents that both the consignments in respect of which duty, fine and penalty have been paid and the consignment for which such charges have not been paid should be together cleared after payment of the charges due to the respondents, in my opinion, amounts to unjustified refusal of release of the consignment in question. As long as the refusal persists, the legal position is that it is not only a case of illegal detention but also actionable conversion."

"Once the duty, penalty and fine have been paid, the respondents in the instant case have no lien over the goods detained by them. The respondents by detaining the goods of the petitioner in the warehouse of respondent No. 4 are deemed to have possession of the petitioner's chattel and by refusing to deliver back the chattel to the petitioner have asserted a right which is inconsistent with the general dominion over it of the petitioner, and deprived him of the right to the use of it which at all times and in all places of his choice, he is entitled to make of it, have committed on act of conversion in tort."

21. Having regard to the above discussion, we are of the view that since the petitioner had paid the redemption fine and penalty in accordance with the adjudication order dated January 15, 1991 it was entitled to the release of the goods and their detention after January 15, 1991 by the customs authorities was illegal, without jurisdiction and null and void. In the circumstances the petitioner cannot be asked to pay the demurrage and other charges to the fourth respondent after January 15, 1991. Therefore, after January 15, 1991 the first three respondents would be liable to pay the said charges as the storage in the warehouse of the fourth respondent, which is the custodian of the goods, would be at the instance of the customs authorities and they must suffer the consequences thereof. The petitioner can only be asked to pay whatever is lawfully due from it in regard to storage and other charges of the fourth respondent. Accordingly, the liability of the petitioner to pay charges would be from the date of arrival of the goods at the Container Freight Station up to January 10/15, 1991, when the order of the Assistant Collector of Customs was passed.

22. Learned Counsel for the respondents, however, submitted that the petitioner cannot escape the liability to pay the entire amount of demurrage and other charges for storage of the goods. In support of the contention they relied upon the decision of the Supreme Court in Board of Trustees of the Port of Bombay v. Indian Goods Supplying Co., (supra) in which it was held that the importer would be liable for the payment of demurrage and other charges even though the delay in clearing the goods from the Port Trust was not due to the negligence of the importer. In that case the Supreme Court was mainly considering the question of legality of the scale of rates relating to demurrage etc. framed under Section 43 of the Bombay Port Trust Act, 1879 and the liability of the importer to pay the same when there was no evidence of the delay on the part of the port trust or of the persons for whom the port trust was responsible in releasing the goods. In this regard it was held as follows :

"14. The position therefore is that even though the delay in clearing the goods was not due to the negligence of the importer for which he could be held responsible yet he cannot avoid the payment of demurrage as the rates imposed are under the authority of law the validity of which cannot be questioned. The claim cannot be resisted as there is no evidence that the delay was due to any act of the Port Trust or persons for whom the Port Trust is responsible."

23. It needs to be noticed that unlike the present case, question about the liability of the customs authorities to pay the charges was neither pleaded nor argued before the apex court in the aforesaid case. It was not found by the Supreme Court that customs had stepped outside their jurisdiction in dealing with the imported goods or there was any undue delay in their release by them. The situation in the present case is different. The customs transgressed the limits of their authority in not clearing the goods even after the Assistant Collector passed the order on January 10/15, 1991 permitting the release of goods on payment of redemption fine and penalty. Thus the case cited by the learned counsel for the respondent is of no assistance to them.

24. Learned counsel for the respondents also relied upon another decision of the Supreme Court in the case of The Trustees of the Port of Madras v. M/s. Aminchand Pyarelal and Others, . The facts of the case were as follows :

25. The first respondent imported certain goods from Hungary pursuant to a contract with the State Trading Corporation of India, who held the import license and for whom the goods were meant. The first respondent was only to charge a commission for the import of the goods. The clearing agent of the first respondent filed a Bill of Entry with the Collector of Customs, Madras but the latter refused to clear the goods on the ground that the specifications of the goods mentioned in the import license did not tally with the description of the imported goods. Collector of Customs also issued a show cause notice to the first respondent. Pursuant to the notice the first respondent filed a reply. After considering the reply, the Collector of Customs confiscated the goods under Section 111(a) of the Customs Act, 1962. An appeal was then preferred before the Central Board of Excise and Customs, New Delhi by the first respondent against the order of the Collector of Customs. The appeal succeeded and the order of the Collector of Customs was set aside. The clearing agent of the first respondent sought a certificate from the Customs authorities for the remission of the transit dues for the period during which the goods were detained. A certificate was issued by the customs and the goods were released by the port trust without receiving demurrage charges for the period covered by the certificate. Subsequently the Trustees of the Port of Madras wrote to the Collector of Customs requesting him to reconsider the matter as the certificate was erroneously issued. The Collector of Customs accepted the mistake by stating that the certificate was incorrectly issued as the goods were detained in order to ascertain whether the import trade control formalities were complied with and not for examination under Section 17(3) and Section 17(4) of the Customs Act. The port trust ultimately had to file a suit against the first respondent before the High Court of Madras for seeking recovery of demurrage. The High Court held, inter alia, that the scale of rates of demurrage fixed by the Trustees of Port of Madras was unreasonable and beyond the power of the Board. As regards the claim of the Trustees of Port of Madras against the first respondent, the High Court was prepared to hold the latter liable to pay the demurrage except for the fact that the scale of rates was unreasonable and beyond the power of the Board of Trustees. Thereupon Trustees of the Port of Madras appealed to the Supreme Court and prayed that its claim against the first respondent should be upheld. The Supreme Court set aside the judgment of the High Court and held that the scale of rates was reasonable and intra vires the power of the board. In so far as the liability of the first respondent was concerned, the Supreme Court did not find sufficient material to hold that the first respondent was liable to meet the appellant's claim. The Supreme Court also took note of the following facts :

(1) The import license under which the goods were imported stood in the name of the State Trading Corporation of India.

(2) The first respondent was liable to deliver the consignment to the nominees of the State Trading Corporation.

(3) The first respondent was only entitled to charge commission for the work done by it in pursuance of the authorization of by the State Trading Corporation to import the goods.

(4) The first respondent had no title or interest in the goods except to deliver them in accordance with the instructions of the State Trading Corporation.

26. Having regard to the aforesaid facts the Supreme Court observed that if the appellants were to enforce their statutory line, the incident of the demurrage would have fallen on the State Trading Corporation in whom the title to the goods vested and not on the first respondent. The Supreme Court also observed that the Collector of Customs and Union of India could not be made personally liable to pay the demurrage. In that case there was no allegation that the action of the customs authorities was null and void, without jurisdiction and non-est. In the peculiar facts of the case, the Supreme Court did not consider the Union of India or the Collector of Customs to be liable for the demurrage. Besides, the claim against Union of India and Collector of Customs was not pressed by the appellant. Therefore, the decision is of no avail to the respondents as in the present case the action of the customs authorities in not releasing the goods after January 10/15, 1991 clearly lacks jurisdiction. Moreover, the Supreme Court was not dealing with a case where the goods were not released even after the termination of adjudication resulting in an order permitting importer to redeem the goods as is the case in the present writ petition.

27. The petitioner's claim must also succeed on the basis of the doctrine of restitution. The claim in this behalf is rooted both in equity and law.

28. The petitioner's goods having been seized by the customs authorities under a statutory power of seizure and kept in a warehouse and the seizure being void, subsequent to January 15, 1991, the date of the first adjudication order, the authorities are bound to restore the goods to the petitioner from the warehouse without petitioner having to pay the demurrage charge etc. to the warehouse. Property has to be released without any additional liability from the date when the justification of the seizure came to an end. This result is based on one of the facets of the general principle of Restitution. At this stage it will be necessary to discuss the principle in little more detail for considering the question of its applicability to the case in hand.

29. The doctrine of Restitution is a part of the Common Law. According to it money paid under mistake of fact or under duress is recoverable. But until recently money paid under mistake of law was irrecoverable in England. Thanks to the judgment of House of Lords in Woolwich Equitable Building Society v. Inland Revenue Commissioners, 1993 A.C. 70 which has reduced the rigour of the mistake of law rule by holding that money paid by a citizen of a public authority in the form of taxes or other levies pursuant to ultra vires demand by the authority, is prima facie recoverable by the citizen as a matter of right. The rule that money paid under mistake of law was irrecoverable subject to certain exceptions has been diluted. According to the reformulations and reinterpretation of the Law by the House of Lords, recovery of money paid by a tax payer under ultra vires demand is neither dependent upon mistake nor compulsion rule and the fact that the tax was exacted unlawfully by itself is, prima facie, enough to require its repayment.

30. In David Securities Pty. Ltd. v. Commonwealth Bank of Australia, (1992) 66 A.L.J.R. 768 the High Court of Australia noted the criticism of traditional rule which precludes the recovery of money paid under mistake of law and concluded that it would be logical to treat mistake of law in the same way as the mistake of fact.

31. In Mason and Another v. The State of New South Wales, (1959-60) 102 Commonwealth Law Reports 108 the High Court of Australia held that the payments purportly made under a statute which was subsequently discovered to be not applicable were liable to be returned to the person paying the same. It was further observed that it will not matter whether payments were made under compulsion or by a voluntary act as long as exactions were under colour of office.

32. In Hooper v. Mayor and Corporation of Exeter, (56 Law J. Reports 1887 QBD 457), which was a case of illegal exaction of money in the 19th century, the Queen's Bench while allowing the restitutionary claim held as under :-

"from the case cited in the course of the argument it is shown that the principle has been laid down that, where one exacts money from another and it turns out that although acquiesced in for years such exaction is illegal, the money may be recovered as money had and received, since such payment could not be considered as voluntary so as to preclude its recovery.

I am of opinion that that principle should be adopted here, and that accordingly the plaintiff is entitled to recover his money on the ground that he had paid it involuntarily."

33. The aforesaid decisions of the courts in England and Australia reflect their past and present approach while applying the doctrine of restitution. The present trend appears to be more liberal and flexible to free the restitutionary rights from the shackles of technicalities in order to do justice between the parties.

34. Now turning to the views of our own courts here in India, we find that in such matters the approach has been quite innovative and the courts have eschewed technicalities in applying the doctrine of restitution and the same is being extended to embrace cases where money or goods or something of value was wrongly delivered to or taken over by another.

35. Even payments made under mistake pursuant to an unlawful demand can be recovered from the recipient thereof irrespective of the fact whether the mistake in making the payment is one of fact or of law (See : Sri Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi and Another, L.R. Vol. LXXVI IA 244 and Sales Tax Officer, Banaras and Others v. Kanhaiya Lal Mukandlal Saraf, 1959 S.C.R. 1350).

36. It is also well established that in a case where the payment is demanded and made as consequence of an unconstitutional, invalid and ultra vires demand, the fact of coercion need not be proved as the same will be presumed (See : M/s. Tilokchand Motichand and Others v. H. B. Munshi, Commissioner of Sales Tax, Bombay and Another, at page 907 (Para 34).

37. Therefore the position is that if money is paid to the public authority which the person was not liable to pay, he can recover the same except where it would be inequitable to accept his claim. What applies to the claim for restitution on money also applied to claim for restitution of goods and any other thing of value.

38. The Supreme Court in M/s. Kavita Trehan and Another v. Balsara Hygiene Products Ltd., laid down that the

jurisdiction to make restitution is inherent in every court and will be exercised whenever the justice of the case demands and is not confined within the ambit of Section 144 of the Code of Civil Procedure. It was also of the opinion that even where the case may not strictly fall within the purview of Section 144, the aggrieved party can appeal to the larger and general powers of restitution inherent in every court. While laying down the principle the Supreme Court noticed the recent view of the House of Lords in Woolwich Equitable Building Society (supra) and other decisions rendered by various courts. This is what the Supreme Court laid down :

"18. The law of Restitution encompasses all claims found upon the principle of unjust enrichment. Restitutionary claims are to be found in equity as well as at law Restitutionary law has many branches. The law of quasi contract is "that part of restitution which stems from the common indebitatus counts for money had and received and for money paid, and from quantum Meruit and quantum vale bat claims" (See : "The Law of Restitution" Govt & Jones, 4th Edn. page 31). Halsbury's Law of England, 4th Edn. page 434 states :

"Common Law. Any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi contract or restitution.

For historical reasons, quasi contract has traditionally been treated as part of, or together with, the law of contract. Yet independently, equity has also developed principles which are aimed at providing a remedy for unjustifiable enrichment. It may be that today these two strands are in the process of being woven into a single topic in the law, which be termed "restitution."

19. Recently the House of Lords had occasion to examine some of these principles in Woolwich Equitable Building Society v. Inland Revenue Commissioners, (1993 A.C. 70).

20. In regard to the law of restoration of loss or damage caused pursuant to judicial orders, the Privy Council in Alexander Rozer Charles Carine v. The Acomptior D' Escompte Paris, 1869-71 (3) AC 465 at 475 stated :

".............. one of the first and highest duties of all courts is to take care that the act of the court does no injury to any of the Suitors, and when the expression "the act of the court is used, it does not mean merely the act of the Primary Court or of any intermediate Court of Appeal, but the act of the court as a whole, from the lowest court which entertains jurisdiction over the matter up to the highest court which finally disposes of the case."

"21. In Jai Berham & Others v. Kedar Nath Marwari & Ors. (AIR 1922 P.C. 269 at 271), the Judicial Committee referring to the above passage approval added :

"It is the duty of the Court under Section 144 of the Civil Procedure Code to "Place the parties in the position which they would have occupied, but for such decree or such part thereof as has been varied or reversed.

Nor indeed does this duty or jurisdiction arise merely under the said section. It is inherent in the general jurisdiction of the court to act rightly and fairly according to the circumstances towards all parties involved."

22. In Binayak Swain v. Ramesh Chandra Panigrahi and Another , this court stated the principle thus :

"........ The principle of the doctrine of restitution is that on the reversal of a decree, that law imposes an obligation on the party to the suit who received the benefit of the erroneous decree; and the court in making restitution is bound to restore the parties, so far as they can restored, to the same position they were in at the time when the court by its erroneous action had displaced them from........"

23. Section 144 CPC incorporates only a part of the general law of restitution. It is not exhaustive (See Gangadhar and Ors. v. Raghubar Dayal and Ors. and State Government of

Andhra Pradesh v. M/s. Manickchand Jeevraj and Co., Bombay .

24. The jurisdiction to make restitution is inherent in every court and will be exercised whenever the justice of the case demands. It will be exercised under inherent powers where the case did not strictly fall within the ambit of Section 144. Section 144 opens with the words "where and in so far as a decree or an order is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose......... The instant case may not strictly fall within the terms of Section 144; but the aggrieved party in such a case can appeal to the larger and general powers of restitution inherent in every court."

39. In may be pointed out that the aforesaid judgment of the Supreme Court was rendered in an appeal arising from the decision by one of us in Kavita Trehan and Others v. Balsara Hygiene Products Ltd., 1991 (3) Delhi Lawyer 54, in which the doctrine of restitution was applied in a situation where a party to the suit received benefit at the cost of the other party under an ex parte ad-interim order which was subsequently dissolved on dismissal of the suit. While applying the doctrine this court held as under :

"29. But it does not mean that the injury inflicted by the interim order of the court should remain untreated. Dismissal of the suit has the effect of automatic dissolution of the interim order. But what is the use of setting aside or reversing a wrong order of the court if a party who has suffered as a consequence thereof remains seething with pain of injustice even when the order is knocked down Healing touch in such a case is a must. The stain of injustice must be removed, at least bleached if it is not possible to totally eradicate it. In the present case, at least the money value of the goods which have been sold by the plaintiffs should be secure and available, in the event of the plaintiffs failure to establish their lien in a suit which Mr. Sahai, learned counsel for the plaintiffs says has been instituted by them in a court at Chandigarh or in any other appropriate proceedings which the parties may institute within the time imperative prescribed by law.

30. A litigant is not to suffer because of a wrongful act of the court. There are large number of authorities to support this doctrine. A few cases need be cited. In Jang Singh v. Brij Lal and Others, the Supreme Court held as follows :

" There is no higher principle for the guidance of the court than the one that no act of courts should harm a litigant and it is the bounden duty of courts to see that if a person is harmed by a mistake of the court he should be restored to the position he would have occupied but for that mistake.............."

34. The court while reversing or setting aside an order is bound to put the parties in the same position which they occupied in relation to each other anterior to passing of the erroneous order by it, is another fact of the same doctrines referred above. This is the principle of very wide application which is aimed at treating the parties justly, fairly, rightly and equitably so that no one is harmed or prejudiced by a wrong act of the court. A party can only get back what he had lost because of the mistake of the court and nothing more or nothing less than that. In a case where a person in possession of the property is dispossessed because of a wrong order, the sufferer must be relegated or put back in possession on order being set aside or reversed, if the property comes to the hands of the person at whose instance he lost possession pursuant to the order of the court or where the situation permits; for example when the property is bought by the auction purchaser with notice of the appeal by the judgment [debtor] ............."

40. In Johri Singh v. Sukh Pal Singh and Others, , the Supreme Court held that the courts had vast inherent power to do complete justice between the parties.

41. Therefore it is well settled that the courts have inherent power to order restitution. Apart from such a power the statutory recognition of the doctrine can be found in Section 144 of the Code of Civil Procedure, Section 72 of the Contract Act etc.

42. In the present case the stand of the fourth respondent is that the goods can be released to the petitioner only on payment of demurrage, container charges and ground rent by it whereas the stand of the petitioner, as already noticed is that it is not liable for the same after the passing of the order by the adjudicating authority on January 10/15, 1991 as the goods thereafter were wrongly detained at the instance of the first three respondents and it was they who were liable to pay the charges of the fourth respondent. The admitted position is that so far the payment of the charges has not been made to the fourth respondent for storage of goods of the petitioner at its Container Freight Station. In case the charges had been paid by the petitioner to the fourth respondent, we have no doubt whatsoever that the petitioner would have succeeded in its claim for recoupment of the amount against the first three respondents. Now the question which arises is whether the petitioner is entitled to restitution of the goods without payment of warehouse charges by it after January 15, 1991 and whether the first three respondents are bound to satisfy the demand of the fourth respondents in regard to demurrage and other charges after January 15, 1991 for the storage of goods in question in the Container Freight Station for the purpose of restoring of the goods to the petitioner. In order to appreciate the situation, the following example would be apposite.

43. Suppose "X" owes a debt to "Y". "X" forces "Z" to pay it for him to "Y" under duress. "Z" would be entitled to recoupment from "X" and it will make no difference that "Z" paid "Y" rather than X directly. Similarly when the importer pays the charges of a warehouse where the goods had been illegally and unauthorisedly detained by the customs, he will be entitled to recoupment of the amount paid by him from the latter, on the basis that customs must suffer the consequences of its unlawful act. In such a contingency the principle of fair play, justice and equity must provide immunity to the importer from the charges of the warehouse. Now if the customs is liable to reimburse the importer, there is no reason why it may not be asked to pay the charges of the warehouse directly without making the importer to pay the same to the warehouse. In fact, such charges must be borne by the customs as they are incidental to the restitution of the goods, which the customs are bound to restore to the importer. A person must get back money or goods which it had to part with under a void, wrongful or illegal act of the authority without having to incur any further expenditure to get it back. Therefore, on principle it seems to us that the first three respondents in the present case can be directed to make the payment of demurrage, container charges and ground rent on account of the goods of the petitioner stored at the container freight station after January 10/15, 1991 until the release of the goods.

44. Now turning to the claim of the petitioner for damages on account of the loss of business for wrongful detention of the goods and interest, it seems to us that such relief in the very nature of the claim cannot be granted in these proceedings as the same will have to be proved or disproved on the basis of evidence which may be adduced in a civil suit. The petitioner has, therefore, to be relegated to the remedy of a civil suit in regard to its claim for damages. The same would apply to its claim on account of interest.

45. Before parting with the matter we would like to observe that there are certain aspects of the case which are shrouded in mystery. They can be catalogued as under :

(1) How the petitioner deposited redemption fine and penalty on September 21, 1990 when the order of the Assistant Collector imposing the fine and penalty on the petitioner was passed on January 10/15, 1991 What was the source of its knowledge, when the fine and penalty had yet to be imposed and was so imposed three months later ?

(2) Despite the existence and availability of the test report of the Central Revenue Control Laboratory and the other material, namely, the statements of the various persons recorded under Section 108 of the Customs Act, 1962, no reference was made to the same in the order of the Assistant Collector dated January 10/15, 1991.

46. Neither the petitioner nor the respondents have explained the position.

47. There is another disquieting feature of the case. As noted by us in the earlier part of the judgment, the Assistant Director, DRI, Shri Shalinder Sharma in the counter-affidavit affirmed by him in November 23, 1990 stated in reply to para 4E of the petition that the goods were never verified from the angle whether the same were made from polyester fabric and the petitioner did not submit any test report in regard thereto. The affidavit in this regard reads as under :

"21. With reference to para 4-E of the petition, it is submitted that the goods are never verified from this angle whether the same are made of polyester fabrics and the petitioner have not submitted any test report in respect of their contention...................."

48. This assertion has not been made with due care and caution as is expected of an honest and forthright officer. From a perusal of the show cause notice dated February 18, 1991 which was issued to the petitioner under the signatures of the same officer, it is clear that the petitioner had submitted two test reports dated February 5, 1990 and March 16, 1990 and as per the test reports, the samples were made of polyester filament yarn of denier 152 and 180.8. The relevant portion of the show cause notice reads thus :

"The party submitted two test reports dated 5-2-1990 and 16-3-1990 for samples drawn from the two export consignments covered by shipping bill Nos. 599553 dated 10-1-1990 and 603168 dated 22-1-1990 effected against DEEC Book No. 008053 dated 31-1-1990. As per these test reports, the samples were Dyed Knitted Readymade Garments (shorts) made of polyester filament yarn of denier 152 and 180.8."

49. Thus, it is obvious that the aforesaid averment in the counter-affidavit was factually incorrect and was recklessly made. It is a matter of regret and anguish that officer took liberty with truth. However, this is our prima facie view on the conduct of the officer.

50. In view of the above discussion, we direct as follows :

(1) The second and third respondents will release the imported goods of the petitioner which are lying with the fourth respondent at its Container Freight Station forthwith on receipt of charges to be calculated by it and notified to the petitioner as well as to the first three respondents subject to the following conditions :

(a) The petitioners will pay demurrage, container charges and ground rent to the fourth respondent from the date of the storage of the goods till January 15, 1991;

(b) The first three respondents will pay the demurrage, container charges and ground rent to the fourth respondent on account of storage of goods of the petitioner from January 16, 1991 till the date of release of the goods.

(2) Mr. Shalinder Sharma, Assistant Director, Directorate of Revenue Intelligence will appear before this court on November 1, 1994 and explain the reasons for incorrectly stating that the petitioner had not filed test reports before exporting the goods when from the show cause notice dated February 18, 1991 it is clear that the petitioner had submitted two test reports dated February 5, 1990 and March 16, 1990.

51. The writ petition succeeds to the extent indicated above and is disposed of as such. Respondents 2 and 3 will pay costs in the sum of Rs. 5,000/- of this petition to the Petitioner.


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