The West Coast Paper Mills Limited vs Union of India

Anand Byrareddy, J.—Heard the learned Counsel for the petitioner and the respondent.

The petitioner is engaged in the manufacture of paper and paper products at its factory situated in Bangur Nagar, Dandeli, Uttar Kannada District. The plant of the petitioner is located in Dandeli and is served by the Ambewadi Railway Station of the respondents. The petitioner, is said to have procured timber waste as raw material from various sources within the State of Karnataka and outside the State of Karnataka. The timber waste is mainly available at Markapur Road, Cumbum and Ongole in the State of Andhra Pradesh. This raw material, consisting of small pieces of wood with a length less than six feet, from these places is transported to its factory through rail. The petitioner was said to be paying freight for 350 quintals per eight wheeled wagon, as per circular dated 15.11.1997. The controversy is that the demand was made by the Railways for 437.50 quintals instead of 350 quintals.

The petitioner is said to have moved 1068 numbers of wagons of timber waste from Cumbum Railway Station and 618 numbers of wagons of timber waste from Markapur Road station to the petitioner''s siding, totalling to 1686 number of wagons. The freight was collected at the loading station in respect of eight wheeled box open wagons and the freight was paid at two times the rate fixed for four wheeled wagons.

The Railways has, however, made a demand in accordance with the stipulated tariff, which was calculated at two and half times the rate for four wheeled wagon. This, the Railways has done in retrospect, on the footing that there was an error committed in the first instance while calculating the freight, which was limited to the minimum weight capacity of 350 quintals per wagon, whereas it ought to have been 437.5 quintals per wagon. It is on this basis that the Railways sought to impose the obligation to pay the freight at the said rate, or the difference thereof, which was in a substantial sum of Rs. 52,44,859/-.

The petitioner therefore was constrained to approach the Railways Rates Tribunal at Chennai, questioning the demand for so-called under charges and the refusal of the Railways in respect of refund of certain amounts collected in excess by the Railways. The Railway Rates Tribunal, on considering the matter at length, had framed the following issues:-

"1. Whether the undercharges raised for carriage of timber waste by box wagons by minimum freight condition of more than 350 quintals unreasonable?

Is the charge of carriage of timber waste by box and BCN, BCX wagons by any minimum weight condition more than 320 quintals unreasonable?

Should not the charge of carriage of timber Waster by box, BCN, BCX wagons be fixed at 320 quintals per wagon as minimum weight condition?

Whether the levy of Rs. 52,44,859/- on the basis of minimum weight condition made on the complainant by South Central Railway unreasonable?

To what relief, are the parties entitled? "

Insofar as issue no. 1 is concerned, the contention of the Railways that the notification relating to the minimum weight conditions pertains to the area of policy and therefore the same could not be challenged before the Tribunal was rejected following its earlier decision in the Andhra Pradesh Paper Mills Limited vs. The Union of India, 1974 RRT 51.

While dealing with a similar plea, the Tribunal had held as follows:

"On a careful scrutiny-(while keeping in view the special facts of each case)-it will be found that the two cases are reconcilable. A mere condition about loading which does not directly affect the rate will undoubtedly be outside the jurisdiction of the Tribunal in a complaint under Section 41(1)(b). But a condition, such as, minimum weight per wagon which directly affects the rate is inexplicably mixed up with the reasonableness of the rate and is therefor within the jurisdiction of this Tribunal."

The Tribunal found that the position in the present was the same and the multiplication factor of the minimum weight condition at two and half times the one applicable to four wheeled wagon, which had a direct relation and impact on the charges to be levied and collected as an inevitable consequence, was unreasonable. It was held that the petitioner was being charged for 350 quintals by the Railways, which all along was being paid without demur for a period prior to the date of complaint, including the one in dispute from November 1997 to June 1999. However, on an audit inspection, a mistake was brought to the notice of the Railways, that as per the Rules, for open wagons, the calculation for box wagon should be based on 2 1/2 times the minimum weight for loading of open four wheeled wagons i.e., 437.5 quintals. Accordingly, the petitioner was advised to pay the under charges which was opposed by the petitioner.

It is also noticed that the test weighments were conducted, and it was found that only 240 quintals could be loaded against the chargeable weight of 462.5 quintals for eight wheeled covered wagons. Based on the test weighment conducted, the Railways revised the minimum weight condition for the covered wagons with effect from 1.5.1998 for a period of one year for BCX wagons and BCN wagons only. No test weighments were conducted for the open wagons which were given to the party for loading after the Divisional Railway Manager contacted the party. It appears that the petitioner also did not thereafter seek test weighment of BOX wagons because they were being charged 350 quintals, with which the petitioner did not have any grievance till the demand based on the audit report was served and it is thereafter the complaint came to be filed.

Subsequently, in the year 2001-2002, test weighments were conducted for open box and also minimum weight condition was fixed at 350 quintals even for box wagons. On that basis, the Tribunal held that at any rate, the minimum weight which is for closed wagons cannot also be more than that and that there may not be any justification for insisting payment of charges even for the period in dispute on the basis of a chargeable weight of 437.5 quintals by applying the 2 1/2 times multiplicator.

Under the joint test weighment conducted pursuant to the directions of the tribunal in the presence of a Commissioner, (the Secretary of the Tribunal, was said to be appointed as the Commissioner), the minimum and maximum weight per open BOXC wagon was said to be 16.50 tonnes, and 26.72 tonnes, respectively, per wagon. The permissible carrying capacity was 53.9 tonnes for covered BCN, 57.3 tonnes for covered BCNA wagon and 55.6 tonnes for open BOXC wagon.

It was observed that the Railways being aware of the niceties and intricacies involved about the loadability of timber waste, should have conducted the loadability test in time. Had it been conducted and proper minimum weight condition fixed, like those of BCX wagons, the question of charging by multiplying 2 1/2 times the loadability of the four wheeled wagon would not have arisen. Therefore, the Tribunal felt it necessary to draw reference to the observations made by the Tribunal in its earlier judgment, reported in 1982 RRT 283, wherein it was opined as follows:

"that the weight for charge should be either the actual weight of the estimated weight closely related to the actual weight that can be loaded in a wagon is a well settled and generally accepted rating principle. Taking into account the materials gathered from the various test weighments conducted by the Railways as also the one conducted under the directions of the Tribunal, as also the variety of the wood normally procured for the transportation by the complainant and the possibility of achieving easily the minimum weight of 350 quintals when the other variety of wood of greater weight than the ''Subabul'' variety of softwood is transported, 350 quintals could reasonably and legitimately be considered and viewed as closely related to 324 quintals, which is the maximum that was considered to be loaded in the BCX/Box wagons and consequently charging on the basis of any weight beyond 350 quintals alone in our view would be unreasonable and unjustified."

It was thus held that it was unreasonable for the Railways to claim freight at the rate of 437.5 quintals when the original agreed rate was 350 quintals for eight-wheeled wagons.

Further insofar as issue nos. 2 and 3 are concerned, it was opined that the minimum weight for charge of timber waste by BCN and BCX wagons had been fixed by the Railways at 350 quintals based upon various trials conducted. The carrying capacity was also taken into consideration while fixing the minimum weight condition and for the years 1997-2002, the loading up to 324 quintals and 318 quintals, respectively, had also been recorded. Therefore, it was held that it could not be said that the minimum weight condition of more than 320 quintals was unreasonable. The Railways was at liberty to fix the minimum weight condition at an appropriate level higher than those found during test weighments on various loading considerations.

Hence, taking a pragmatic view of the overall circumstances and the various material available on record, the Tribunal considered that 350 quintals fixed as the minimum weight condition for box wagon by the Railways was reasonable and not unreasonable or extortionate.

In respect of issue no. 4 as regards the reasonableness of demand of Rs. 52,44,859/- is concerned, the Tribunal drew reference to the relevant rule 164(2)(1) of the IRCA Goods Tariff No. 41, Part I, Volume-I and the relevant portion of which, reads as follows:

"For the purpose of computing the minimum weight for change and for the levy of sidling charges:

(i) BCX, BCN, BOX, BOX-N, BKCXBFR (having carrying capacity of more than 44 tonnes) BOB, BRS, BRH and BOI types of wagons should be equated to 2 and 1/2 four-wheeled wagons"

The Tribunal found that the demand was raised only after the audit authorities observed that the Railway staff at Markapur road and Cumbum Railway Stations committed an error, in that, the minimum weight for charge of BOX-C wagon was worked out at twice that of the minimum weight for four wheeled wagons. Though the demand raised was as per Rules, was without consideration of the loadability, the goods transported and other relevant practical aspects.

The tribunal however pointed out that it was not appropriate for it to adjudicate on the question of reasonableness of the very demand raised, which pertains to a period anterior to the date of filing of the complaint. However, it was observed that the respondent-Railways would in their discretion consider it desirable to take a view on the demand raised with reference to the findings of the tribunal, in the light of the following circumstances:

"(i) the reduced minimum weight condition of 350 quintals for Timber Waste when loaded in BCX/BCN/BCNA/BOX wagons valid upto 30.4.2004 has been extended beyond 30.4.2004 for a period of one year i.e., with effect from 1.5.2004 to 30.4.2005 (marked as R-1 series) by the Railways themselves; and

(ii) the fact that in the latest I.R.C.A. Goods Tariff No. 44, Part-I, Vol. III containing the General Classification of the Goods as indicated in the Railway Board''s letter No. TCR/1708/2005/1 dated 23.3.2005 with effect from 01.04.2005 is found to have dispensed with minimum weight condition."

Consequently, the Tribunal stayed its hand insofar as granting any relief to the petitioner as regards the demand made by the Railways for a period anterior to the complaint.

As found by the Tribunal, the question is whether the demand made on the petitioner by the Railways of so-called under charges, on the footing that there was a mistake committed by its staff in computing the freight charges in respect of eight-wheeled wagons, can be sustained.

As found as a fact, though the demand is in terms of the Rule, the actual weighment tests had indicated that at no point of time, was the wagon loaded with 350 quintals of timber waste and hence the demand for payment of weight as being for the carriage of 437.5 quintals was unreasonable. That finding is adopted by this court.

Consequently, the demand made by the Railways is not sustainable and it would result in an unjust benefit being conferred on the Railways, when it is in hind sight that the Railway Rates Tribunal realised that the freight charges were inaccurately collected. In other words,'' there is no loss occasioned to the Railways as it was a fact that at no point of time did any wagon actually carry 437.5 quintals, for which the claim is made. When the carriage was only of goods less than 350 quintals per wagon, there is no justification in proceeding to lay claim in retrospect for the freight that was already delivered at the rate collected. For if the Railways had indicated that the freight charges would have been at 437.5 quintals per wagon, it is possible that the petitioner would never have availed the services. Therefore, the petitioner would not have been obliged to pay the said charges.

Insofar as the consequential withholding of certain amounts that are admittedly due to the petitioner is concerned, the Railways are not justified in withholding the same and the demand for under charges having been found to be unreasonable, the same is set aside by this court. The Railways are bound to release the excess amounts, which have been ascertained and which are withheld, and sought to be adjusted towards the alleged demand in respect of under charges.

Accordingly, the writ petition is allowed. The demand at Annexures-AC, AD, AE, AF, AG, AH are quashed. The amounts due to the petitioner are directed to be released in favour of the petitioner, forthwith, in any event, within four weeks from the date of receipt of a certified copy of this order.