Weldekar Laminates Private Ltd. vs Union of India

Pendse, J.—Both these Notices of Motion can be conveniently disposed of by common order and the facts to be set out hereinafter would indicate the reliefs sought in the two motions. The petitioners, M/s. Weldekar Laminates Private Limited field Writ Petition No. 1996 of 1991 in this Court under Article 226 of the Constitution of India seeking direction to the respondents to refund the amounts which were recovered without any authority of law. The petition came up before a Division Bench and on July 1, 1991 the relief sought by the petitioners was granted. The Division Bench directed that the respondents shall refund the amount within four from the date of order. It was further directed that in case of failure the respondents shall pay the amount with interest at the rate of 15% per annum from the date of order till payment. The respondents failed to pay the amount within the stipulated period.

The respondents took out Notice of Motion No. 388 of 1991 seeking extension of time of two weeks to make the payment. The request was granted by the Division Bench by order dated August 16, 1991 and accordingly, the respondents were required to refund the amount before end of August 1991. The respondents again failed to refund the amount. On September 19, 1991 and the prayer made was :

" that the respondents be granted extension of time limit till the Hon''ble Supreme Court decides SLP No. 10313 of 1991 filed against Bombay High Court judgment dated April 19, 1991 in Writ Petition No. 46 of 1991 filed by M/s. Vidarbha Veneer Industries, Nagpur."

The respondents claimed that the order passed by the Supreme court on June 6, 1991 was in the following terms :

" Issue notice. Mr. Lahoty accepts notice. Stay of refund ad interim. Counter-affidavit to be filed within two weeks from today. Rejoinder, if any, within a week thereafter. List this matter on July 19, 1991."

Shri Sethna, learned counsel appearing on behalf of the respondents, informs that the hearing of the SLP is not taken up in view of the pendency of some other matters. The respondents claimed that in view of the ad interim stay of refund granted by the Supreme Court in case of Vidarbha Veneer Industries, Nagpur, the respondents are not liable to make refund and the time to make refund should be extended.

As the refund was not made within the stipulated period, i. e. end of August 1991, on September 5, 1991, the petitioners took out Notice of Motion No. 453 of 1991 for committing the respondents under the Contempt of Courts Act of wilfully refusing to obey the orders passed by this Court. The petitioners seek direction that the respondents should be directed to pay an amount of Rs. 30,18,893.34 together with interest thereon at 15% per annum from July 1, 1991 till payment in addition to committing under the Contempt of Courts Act.

Before examining the Motion taken out by the petitioners for committing the respondents for wilfully disobeying the orders of the Court, it would be convenient to taken up for consideration Notice of Motion No. 481 of 1991 taken out by the respondents for extension of time to make payment in view of the order of the Supreme Court. It is required to be stated that this Motion is taken out on September 19, . 1991, i. e. long after the Bill was introduced in the Parliament providing for amendment of provisions of Central Excise Act in respect of claim for refund of duty. Section 11B of the Act was introduced after the Parliament approved the Bill effect from September 20, 1991. In support of the Motion for extension of time to make payment on the ground that the Supreme Court has passed ad interim order in some other matter, S. K. Tiwary, Assistant Collector of Central Excise filed affidavit sworn on September 17, 1991. In paragraph 6 of the affidavit, the Assistant Collector claims :

"I say that the documents have been verified with regard to the refund claim and it is found that petitioners are entitled to only Rs. 18,86,885.90 and not Rs. 30,18,893.94. The balance amount is time barred and fortuitous gain."

Shri Sethna, learned counsel appearing on behalf of the respondents, submitted that the extension sought by the respondents for making refund by taking out Notice of Motion No. 481 of 1991 must be granted as a matter of course. According to the learned counsel as the Supreme Court has passed an ad interim order in respect of some other matter withholding refund granted by the High Court, in every matter wherever refund is directed to be made, the respondents are entitled to deny refund. The submission is only required to be stated to be rejected. It is not in dispute that the respondents did not prefer any appeal against the order passed by the Division Bench in favour of the present petitioners. The writ issued by this Court has to be executed forthwith or within the stipulated period as directed by this Court and the respondents cannot decline to do so on the ground that the order for refund in some other matter has been stayed by the Supreme Court while granting add interim relief. It is necessary also too state that even admitted amount of Rs. 18,86,885.90 as mentioned in Paragraph 6 of the affidavit of the Assistant Collector is not paid. In our judgment, the Motion taken out by the respondents for extension of time to make refund is without any substance and must be dismissed.

The petitioners have taken out Notice of Motion No., 453 of 1991 for a period not exceeding six months and by the Board for such further period as it may deem fit :

Provided further that when the licence for any private warehouse is cancelled, the owner of any goods warehoused therein shall, within seven days from the date on which notice of such cancellation is given or within such extended period as the proper officer may allow, remove the goods from such warehouse to another warehouse or clear them for home consumption or exportation.

(2) Where any warehoused goods remain in a warehouse beyond the period of one year or three months specified in clause (a) or clause (b) of sub-section (1) by reason for the extension of the aforesaid period or otherwise, interest at such rate not exceeding eighteen per cent per annum as is for the time being fixed by the Board, shall be payable on the amount of duty on the warehoused goods for the period from the expiry for the period of one year or, as the case may be, three months, till the date of the clearance of the goods from the warehouse."

The controversy in this petition centres round on the right to demand interest on the amount of duty on the warehoused goods from the expiry of the period stipulated under sub-section (2) of Section 61 of the Act, till the date of clearance.

The petitioners claim that in the business of Ship Chandlers, it is necessary to stock all type of goods in origin which are likely to be demanded by the ships touching the Port of Bombay. The petitioners claim that the petitioners stocked over 500 items taking into consideration the divorce demands made by the ships which touch the Port of Bombay. The petitioners claim that it is impossible to exactly estimate the future demands because there are number of variable factors such as, number of ships calling at the port, the congestion in the Port, the number of crew on the ships and the intensity of the competition from other Ports. The petitioners claim that the provisions of Section 85 of the Act is a departure from the normal rule in respect of warehousing of imported goods as set out u/s 59,61 of the Act. The petitioners claim that in respect of imported goods covered u/s 85 of the Act, it is not permissible to levy any amount of interest under sub-section (2) of Section 61.

The petitioners imported consignment of Cheddar Cheese and Cream Cheese Spread in January 1983 and on import, the goods were bonded in the warehouse on January 20, 1983 after the petitioners filed bills of entry for warehousing. On January 20, 1983, the Customs Officer passed order for warehousing the consignment and the initial period fixed u/s 61 was six months and the period expired on July 19, 1983 the petitioners had applied for extension of bond period by further period of six months. On July 30, 1983, the bond period was extended by the Customs Officer subject to payment of interest as prescribed u/s 61 of the Act. The petitioners sought further extension without payment of interest but that demand having been turned down, the petition was filed on September 13, 1983 under Article 226 of the Constitution of India to challenge action of the Officer in granting extension only on condition of payment of interest. During the pendency of the petition, the provisions of Section 61 of the Act were further amended by Customs (Amendment ) Act, 1991 with effect from December 23, 1991. Thee petitioners thereafter sought amendment of the petition to challenge the amended provisions. The amended provision varies the rate of interest from 12% to not below 20% and not exceeding 30% to be fixed by the Board. The amended provision also adds a provision which reads as follows:

"Provided that the Board may, if it considers it necessary so to do in the public interest, waive, by special order and under circumstances of an exceptional nature to be specified in such order, the whole or part of any interest payable under this sub-section in respect of any warehoused goods."

Shri Doctor, learned counsel appearing on behalf of the petitioners, submitted that in respect of goods warehoused u/s 85 of the Act, the provisions of Sections 59, 60 and 61 are not applicable and consequently, the petitioners are not liable to pay interest as demanded under sub-section (2) of Section 61 of the Act. It is not possible to accede to the submission of the learned Counsel Section 85 of the Act provides that (a) where any imported goods are entered for warehousing, and (b) the importer makes and subscribes to a declaration that the goods were to be supplied as stores to vessels, then the Customs Officer may permit the goods to be warehoused without he goods being assessed to duty. The expression "stores" has been defined u/s 2(38) of the Act and means goods for use in a vessel or aircraft and includes fuel and spare parts and other articles of equipment, whether or not for immediate fitting. There is some dispute between the parties as to the exact ambit of the goods covered by expression "stores" but for the purpose of this case we will proceed on the assumption that the expression "stores" covers all kinds of goods imported by the petitioners for supply of the vessels. Shri Doctor submitted that the expression " may permit the goods to be warehoused without the goods being assessed to duty" should be construed as shall permit the goods to be warehoused without the goods being assessed to duty. It was urged that once the two requirements of the Section ar satisfied, then the Customs Officer has no discretion not to permit the goods to be warehoused without assessment. In other words, the submission is that the Customs Officer is duty bound to direct warehousing and that too without assessing the goods for duty. The submission was advanced to claim that the provisions of Section 59 of the Act are not attracted to the cases covered by Section 85 of the Act. As mentioned hereinabove Section 59 of the Act requires the importer of any dutiable goods which have been entered for warehousing and ''assessed to duty'' under Sections 17 and 18 of the Act to execute a bond binding himself to observe all the provisions of the Act and the Rules. Shri Doctor submits that as the goods falling u/s 85 of the Act are not liable to payment of any duty, the question of assessment u/s 17 and 18 of the does not arise and consequently the importer is not required to execute bond as contemplated u/s 59 of the Act. it is not possible to accede to the submission of the learned counsel because it overlooks that there is no provision apart from Sections 59 to 61 under Chapter IX of the Act dealing with warehousing of the imported goods. Section 85 merely provides that the goods are not liable to payment of import duty if the goods are warehoused and the importer makes a declaration that the goods were supplied as stores to the ship. The fact that import duty is not payable does not necessarily mean that the Customs Officer is not required even to assess the goods. The assessment of duty is one thing. while the liability to pay duty is another. what Section 85 of the Act prescribed is that the importer will not be liable to pay duty and it confers a discretion upon the Customs Officer to permit the goods to be warehoused without the goods being assessed to duty. It is impossible to accede tot the contention that the expression "may" should be read as "shall" and the Customs Officer has no jurisdiction to assess the goods when the conditions u/s 85 of the Act are complied with Apart from this consideration, Shri Doctor has to concede that there is no provisions under the Act or the Rules which provides for modalities or the conditions under which the imported goods can be warehoused, even if the conditions u/s 85 of the Act are complied with. The only provisions for warehousing of imported goods can be found under the provisions of Sections 59 to 61 of the Act. In our judgment, the contention that in respect of the goods imported and covered by Section 85 of the Act the rules of warehousing u/s 59 to 61 are not applicable cannot be accepted as stores to the vessels are bound by the provisions of Sections 59 to 61 of the Act.

Shri Doctor then submitted that the provisions of Section 61 of the Act are ultra vires of the fundamental rights guaranteed to the petitioners and, therefore, the requirement of payment of interest under sub-section(2) of Section 61 should be struck down. The learned counsel very fairly stated that the petitioners are not challenging the Legislative competence of the Parliament to enact the provisions of sub-section (2) of Section 61 of the Act. The only contention to challenge the vires of the sub-section is that it would deprive the petitioners of the right to carry on the business under Article 19 of the Constitution of India. It is difficult to find any merit in the contention. Before examining the ambit of sub-section(2) of Section 61 of the Act, it is necessary to set out that the petitioners are permitted to import diverse goods by government of India releasing foreign exchange. The foreign exchange is released because the petitioners import the goods for sale to vessels and thereby earned some additional foreign exchange to the country. The petitioners are given advantage of exemption from payment of import duty because the goods imported are not released for home consumption butt are sold as stores to the vessels and which, in other words, as Section 88(a) provides means exported to any place outside India. The foreign exchange is released in favour of the petitioners and the goods imported are exempted from payment of Customs duty with the expectation that the petitioners will sell the imported goods to the vessels within reasonable period and the foreign exchange released by the country will be brought back. The Legislature in its wisdom provided that in case the imported goods which are warehoused are not sold by the petitioners to vessels within a stipulated period, then an extension can be granted by Collector of Customs for a period not exceeding six months and by the Board for such period as it may deem fit. It is obvious that the Collector of Customs or the Board will grant extension provided there is a reasonable ground for the importer in not supplying the goods as stores to the vessel. The consequence of grant of extension is that the return of foreign exchange to the country is delayed and the Legislature there upon felt that such importer should pay certain amount as compensation. Sub- section (2) of Section 61 merely provides for the modalities to calculate the amount of compensation. The amount of compensation should have nexus to the goods in respect of which extension is sought and, therefore, the compensation is calculated on the amount of duty payable on the warehoused goods for which extension is sought. The amount is to be calculated with reference for the period from the expiry of the original period and till the date of clearance of the goods from the warehouse. The mere fact that the expression ''interest'' used in sub- section (2) of Section 61 of the Act should not cloud the reasoning that the amount liable to the paid by the importer is in the nature of compensation for the delay in disposal of the imported goods as stores to vessel and, therefore, delay in return of foreign exchange to the country. The submission of Shri Doctor that the amount charged under sub-section (2) of Section 61 of the Act is in the nature of penalty and such penalty is not permissible when the importer is not liable to pay customs duty cannot be accepted. The amount payable under sub- section(2) of Section 61 of the Act is compensatory in nature and cannot be treated as penalty. The amount is payable because the importer seeks an extension of are to be supplied as stores to vessel. We are unable to accede to the contention that the nature of payment under sub-section (2) of Section 61 of the Act is one of penalty and, therefore, no permissible.

A faint attempt was made to urge that when duty is not payable on the warehoused goods, it is not permissible to charge interest on the amount of duty. We are unable to find any merit in the submission, Sub-section 2) of Section 61 of the Act merely provides modality to calculate compensatory amount payable by the importer and while determining such amount, the Legislature could not ignore that there must be some nexus between the compensation claimed and the imported goods. To determine the figure, the imported goods in respect of which extension was sought should be taken as a base and demand should be made by charging certain percentage of amount on amount of duty payable but for provisions of Section 85 of the Act. The method was evolved by the Parliament with a view to avoid arbitrariness in determining the compensatory amount payable. In our judgment, the provisions of sub-section (2) of Section 61 of the Act do not suffer from any unreasonableness.

The submission of Shri Doctor that the provisions of sub-section (2) of Section 61 deprive the petitioners of the fundamental right to carry on business and thereby the provisions of Article 19 of the Constitution of India are violated, is merely required to be stated to be rejected. The petitioners are carrying on business on a large scale and the Government of India releases substantial amount of foreign exchange to enable the petitioners to import goods. We enquired from the learned counsel as to what is the approximate percentage of goods in respect of which extension is sought and the answer was, it varies from 10% to 15%. The learned counsel further submitted that after the period was reduced from three years to one year, even this percentage has been substantially reduced. It is, therefore, obvious that the claim that by levy of charge under sub-section (2) of Section 61 of the Act, the petitioners will be deprived of carrying on their business as ship chandlers is nothing but imaginary Shri Doctor then submitted that in some cases the importers suffer serious hardship and, therefore, the provisions of sub-section (2) of Section 61 of the Act should bee struck down. It is impossible to accede to the submission. Merely because some hardship may be caused in case of some importers, the statutory provisions cannot be struck down. The submission also overlooks that the proviso to sub-section (2) of Section 61 of the Act confers power upon the Board to waive the whole or the part of the amount payable under sub-section provided the Board is satisfied that it is in the public interest to do so. The expression ''Board'' u/s 2(6) of the Act means the Central Board of would certainly examine a case where genuine hardship is caused to a particular importer. The apprehension of the learned counsel that sub-section (2) of Section 61 of the Act would cause hardship to some of the importers no longer survives in view of proviso to sub-section (2) of Section 61 of the Act. In our judgment, the challenge to the provisions of sub-section (2) of Section 61 of the Act is without any merit and the petition must fail.

Shri Doctor referred to the decision of the learned Single Judge of Kerala High court reported in Thungabhadra Fibres Ltd. Vs. Union of India (UOI), and to the decision of Division Bench of Karnataka High Court reported in Bangalore Wire Rod Mills Vs. Union of India, , but it is not necessary to examine these decisions because they were not on the point raised by the petitioners.

Accordingly, petition fails and rule is discharged with costs. Shri Doctor applies for continuation of interim relief. Prayer refused.