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Judgment
By this petition filed under Article 226 of the Constitution of India, the petitioners are challenging the legality of the demand notice dated June 14, 1983, copy of which is annexed as Ex. "K" to the petition, issued by the Assistant Collector of Customs, Bond Department, calling upon the petitioners to pay duty u/s 72(1) of the Customs Act, 1962 (hereinafter referred to as the "Act") and the interest thereon at the rate of 6% per annum upto May 12, 1983 and 12% with effect from May 13, 1983. The facts giving rise to the issuance of the demand notice are required to be started to appreciate the grievance of the petitioners.
The petitioners are a Company registered under the Companies Act, 1956 and manufacture several varieties of textile goods. In the process of manufacture, the petitioners utilise Polyster Filament Yarn as a raw material. Polyster Filament Yarn when partially drawn is a variety known in the trade as "Partially Oriented Yarn", i.e. "POY". POY is a delicate commodity and requires careful handling and storage in controlled conditions of humidity and temperature. Even under condition of proper storage and handling, POY has a shelf life of approximately 12 to 15 months before its deterioration in quality. The petitioners entered into contract with Bombay Holding Corporation in New York, U.S.A. on August 13, 1981 for import of total quantity of 100 tons of POY consisting of 888 cartons. The goods arrived by ship s.s. "PIONEER" and on November 26, 1981, the petitioners'' Clearing Agents filed Bill of Entry for warehousing. The value of the imported goods was about Rs. 27,86,000/-. On January 8, 1982, the petitioners applied u/s 58 of the Act requesting for a licence for private warehouse where the dutiable goods could be deposited without payment of duty. On March 15, 1982, the request for licence was granted for a period of one year and accordingly, the imported goods were deposited in private warehouse. Till the licence was granted, the goods remained in the custody of the Bombay Port Trust and on grant of licence, the petitioners executed the requisite bond as per Section 59(1) of the Act.
As the goods remained in the warehouse without the proper facility for a considerable period, the petitioners secured 90 cartons on payment of Customs duty, so as to assess the suitability of POY in further manufacturing operations in the factory at Navsari. The petitioners requested their Insurance Agent to conduct the survey in respect of the balance consignments and, accordingly, surveys were conducted in April and May 1982 in the presence of the Customs authorities. The Survey Report indicated that the extent of damage to the POY was considerable and the imported goods were not suitable for manufacturing operations. The petitioners, after receipt of the report, addressed letter dated February 28, 1983 to the Assistant Collector of Customs, Bond Department, Bombay, informing that the petitioners do not wish to clear the balance 798 cartons of POY for home consumption and relinquished the title as prescribed u/s 23(2) of the Act. The petitioners pointed out that bill of entry for home consumption of 798 cartons has not been filed and consequently, no order for home consumption has been made by the Officer. The Customs authorities did not immediately act on this letter, but in the meanwhile, on March 18, 1983, the Estate Manager for the Bombay Port Trust, informing the petitioners that the Godown being No. C-7 at Cotton Depot, Mazgaon Sewri Reclamation Estate in which the goods were stored, is unsafe for occupation and has deteriorated structurally and, therefore, the petitioners should give vacant possession to the Bombay Port Trust. On May 3, 1983, the Assistant Collector of Customs, Bond Department, in answer to the letter of relinquishment written by the petitioners, sought information about the value of the goods, the duty payable, the date of warehousing, etc. from the petitioners and then stated that the request for relinquishing the title of would be considered only after receipt of the information. The petitioners then sent a detailed reply on May 6, 1983 giving the relevant information. The Assistant Collector of Customs, Bond Department, then issued the impugned show cause notice on June 14, 1983. The notice, inter-alia, recites that the warehousing period granted u/s 61 of the Customs Act has expired on March 26, 1983 and, therefore, the petitioners are liable to pay duty along with interest u/s 72(1) of the Act. The impugned notice has given rise to the filing of the present petition on September 14, 1983.
The petition was admitted on September 20, 1983 and the respondents were restrained from acting in furtherance or in implementation of the demand notice after hearing the counsel for the respondents. The imported goods were losing its efficacy very rapidly and the godown in which they were stored was in a hopelessly deteriorated condition and, therefore, the petitioners took out Notice of Motion No. 922 of 1984 for direction to the respondents to shift the goods to some other godown and then to sell the goods as the petitioners had relinquished their title to the goods. On April 19, 1984, the Motion was made absolute by consent of the parties. The respondents did not take any steps to implement the order and, therefore, the petitioners took out another Notice of Motion being Notice of Motion No. 767 of 1985 on April 9, 1985 for direction to the respondents to carry out the consent order passed in the earlier motion. When the second motion reached hearing before the learned judge on April 16, 1985, the Department agreed to give effect to the earlier order within 6 or 8 weeks. Even this promise given to the learned Judge was not honoured and that gave rise to the filing of the third Notice of Motion being Motion No. 491 of 1986 for further direction. The third motion came up for hearing on July 4, 1986 and realising the attitude taken by the Department, I directed expeditious hearing of the main petition itself. I was informed at the hearing by the counsel for the Department that the imported goods are no longer available because the godown in which they were stored had collapsed and the goods are not traceable. Accordingly, the petition now reached hearing before me.
Shri Shringarpure, learned counsel appearing on behalf of the respondents, sought adjournment of the hearing on two grounds. The first ground advanced by the learned counsel is that the Department has not filed any affidavit in answer to the petition and to enable the Department to do so, enough time should be granted. I enquired from the learned counsel as to why such affidavit was not filed when the petition was admitted on September 20, 1983 i.e. more than three years back and the hearing of the petition was expedited on July 4, 1986 i.e. more than four months before. Shri Shringarpure had no answer to give except saying that the Department has not filed any affidavit. The first ground advanced by the learned counsel for adjournment should be granted as the brief was given to him by the respondents'' Advocate only on Friday evening and Saturday and Sunday were not enough to prepare the brief as the Officer of the Department did not show his face. It is impossible, in my judgment, even to seek adjournment on such worthless grounds. Nobody had compelled Shri Shringarpure to accept the brief and nobody had told the respondents'' Advocate to give the brief only on Friday evening. It is futile even to suggest that the hearing of the petition should be adjourned till the Officer of the Department finds it convenient to contact his counsel and instruct him to argue the matter. In my judgment, in is high time that the respondents should realise that such useless applications will not be entertained any longer. The adjournment sought by Shri Shringarpure is, therefore, refused.
Shri Andhyarujina, learned counsel appearing on behalf of Department, submitted that the demand made by the Assistant Collector is wholly illegal and the Department is ignoring the clear-cut provisions of sub-section (2) of Section 23 of the Act. The submission of the learned counsel is correct and deserves acceptance. Section 12 of the Act, inter-alia, prescribe that customs duty shall be levied on goods imported into India, while Section 13 prescribes that the imported goods shall not be liable to pay duty if the imported goods are pilfered after the unloading and before the proper officer has made the order for clearance for home consumption. Section 17(1) of the Act demands that after the importer files the bill of entry, the Customs Officer without undue delay shall examine and test the goods and on completion of such examination and testing, the goods shall be assessed. Section 57, in Chapter IX of the Act provides that the Assistant Collector of Customs may appoint public warehouses wherein dutiable goods would be deposited without payment of duty. Section 58(1) provides for grant of licence to provide warehouses by the Assistant Collector of Customs, while Sections 59 prescribes for execution of bond by the importer when dutiable goods have been entered for warehousing. Section 23 of the Act deals with remission of duty on lost, destroyed or abandoned goods and Section 23(2) reads as under :
"The owner of any imported goods may at any time before an order for clearance of the goods for home consumption has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon".
The plain reading of sub-section (2) of Section 23 of the Act makes it clear that the owner of the imported goods is at liberty to relinquish his title to the goods at any time before an order for clearance of the goods for home consumption is passed and in cases of such relinquishment, the owner will not be liable to pay the Customs duty on such imported goods.
In respect of warehoused goods, Section 61 prescribes the period for which such goods can remain in warehouse. Section 72 deals with goods improperly removed from warehouse and it is necessary to set out Section 72 to ascertain the legality of the impugned notice :
"72. (1) In any of the following cases, that is to say, -
(a) where any warehoused goods are removed from a warehouse in contravention of Section 71;
(b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted u/s 61 to remain in a warehouse;
(c) where any warehoused goods have been taken u/s 64 as samples without payment of duty;
(d) where any goods in respect of which a bond has been executed u/s 59 and which have not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer;
the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent interest and other charges payable in respect of such goods.
(2) If any owner fails to pay any amount demanded under sub-section (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select."
Section 72(1)(b) of the Act provides that where any warehoused goods have not been removed from he warehouse at the expiration of the period fixed then the proper officer may demand the full amount of duty chargeable along with penalty, rent, etc. The impugned notice does not refer to Section 72(1)(b) of the Act specifically but on assumption that the demand is made under that sub-section, it is necessary to examine the legality of the same. Shri Andhyarujina submits, and in my judgment with considerable merit, that the demand is wholly illegal because the petitioners have relinquished the title to the goods in accordance with sub-section (2) of Section 23. It is not in dispute that the licence granted by the Assistant Collector for warehousing imported goods was to remain alive upto March 15, 1983 and before the expiry of that period, the petitioners had relinquished the title by letter dated February 28, 1963. It is, therefore, obvious on the undisputed facts of this case that Section 72(1)(b) of the Act is not attracted and the demand made by the Assistant Collector is without any authority. Shri Andhyarujina submits that even assuming that the period of licence for warehousing had expired, still the Assistant Collector could not have demanded or compelled the petitioners to pay duty u/s 72(1) of the Act. The submission is correct because Section 72(1) of the Act enables the proper officer to make demand of the duty, but recovery thereof is not permissible if the importer exercises the right conferred under sub-section (2) of Section 23 of the Act. The point of time before which this right can be exercised is passing of the order of clearance of the goods for home consumption and before that date, it is open for the importer to relinquish the title. Even in cases where a demand is made by the Assistant Collector u/s 72(1)(b) of the Act, it is open for the importer to relinquish the title to the imported goods, provided an order for clearance for home consumption is not passed. In my judgment, the impugned demand is totally unsustainable and is required to be quashed.
Accordingly, the petition succeeds and the rule is made absolute in terms of prayer (a). The bond dated March 16, 1982 executed by the petitioners in favour of the respondents stands cancelled and shall be delivered hack of the petitioners. The respondents shall pay the costs of the petitioners.