Muscles Fusion Fze vs The Principal Commissioner Of … on 2 August, 2017

$~13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P. (C) 3589/2017 CM APPL. 15768/2017
MUSCLES FUSION FZE ….. Petitioner
Through: Ms. Anjali J. Manish, Advocate.

versus

THE PRINCIPAL COMMISSIONER OF CUSTOMS
(IMPORT), AIR CARGO COMPLEX,
NEW DELHI ORS. ….. Respondents
Through: Mr. Amit Bansal and Mr. Akhil
Kulshreshta, Advocates for R-1 2.
Mr. Milanka Chaudhary, Mr.
Sarojanand and Ms. Satakshi Sood,
Advocates for R-3.
Mr. Rakesh Tiku, Senior Advocate
and Mr. Sarul Jain, Advocate for R-4.

CORAM: JUSTICE S.MURALIDHAR
JUSTICE PRATHIBA M. SINGH
ORDER
% 02.08.2017
Prathiba M. Singh, J.

1. The short question in the present case is – Whether the Petitioner is
permitted to re-export its consignment of health products without payment
of demurrage/rent charges owed to the Cargo handling company?

2. The Petitioner – a Dubai based trading company, exported a consignment
of health products against Airway Bill No.607-67933913 through Etihad
Airways, Abu Dhabi to Delhi. According to the Petitioner, the consignment
W.P.(C) No. 3589/2017 Page 1 of 17
consisted of 919 cartons packed in 11 pallets weighing 4325 kg. The invoice
dated 23rd April 2016, accompanying the consignment was raised on M/s.
Visha Enterprises, Delhi (hereafter ‘Visha Enterprises’). Upon the arrival of
the consignment in Delhi, the importer Visha Enterprises did not file any bill
of entry and also did not send any remittance for such consignment.

3. On 2nd May, 2016, the Directorate of Revenue Intelligence (‘DRI’)
requested the Deputy Commissioner (Import Shed) at the Indira Gandhi
International (‘IGI’) Airport, New Delhi to put the consignment on hold and
to examine the same in the presence of DRI officers.

4. The Petitioner sought permission from the Customs authorities to re-
export the goods – which request was forwarded by the Commissioner of
Customs (Import) on 25th May 2016. The DRI then sought a clarification if
the process of import with respect to the said consignment was completed.
This letter dated 24th June, 2016 was also sent to the importer Visha
Enterprises.

5. On 22nd July, 2016, the Petitioner through its Authorised Representative
(AR) requested both the DRI and the Customs authorities for grant of No
Objection Certificate (‘NOC’) or permission to re-export the consignment. It
is the case of the Petitioner that it continues to be the owner of the
consignment, as the importer Visha Enterprises was not aware of the
consignment as it had not placed an order for the said goods. The Petitioner
took the stand that the consignment was sent to India by mistake. On 29th
July/1st August, 2016 the DRI requested the Principal Commissioner of
W.P.(C) No. 3589/2017 Page 2 of 17
Customs (Import) to consider the Petitioner’s plea for re-export and also
ascertain the question of the importability of the said goods. The Petitioner,
on 2nd August, 2016, again sought a NOC from the DRI on the ground that
re-export was not being permitted without a NOC from the DRI. The
Petitioner further claimed that since the imported items were health products
having limited shelf life and being perishable in nature, the request may be
considered at the earliest. The DRI then informed the Petitioner that the
case of the Petitioner had been referred to the Principal Commissioner of
Customs (Import).

6. Since no permission for re-export was granted by the authorities, the
Petitioner filed W.P.(C) No.7309/2016 before this Court. In the said
petition, M/s. Visha Enterprises was also impleaded vide order dated 19th
August, 2016. Thereafter, the said writ petition was disposed of by this
Court on 14th September, 2016 in the following terms.

“W.P.(C) No. 7309/2016

The matter is listed today as 13.09.2016 was declared
holiday on account of ‘Id-ul-Zuha’.

The Petitioner’s grievance is that the respondents –
Customs authorities are not concluding their
proceedings expeditiously. It is contended that the
goods were never imported but were brought for
re-export purposes and that in any event the importer
had in fact abandoned the goods.

The materials on record show that the respondents
acted on the basis of the information by the DRI and
have seized the goods.

In the circumstances, the respondents shall take
steps to conclude the investigation and take
W.P.(C) No. 3589/2017 Page 3 of 17
appropriate follow-up action as is necessary having
regard to the outcome of the investigation at the
earliest convenience and preferably within four months
from today.

W.P. (C) 7309/2016 stands disposed of.”

7. Pursuant to the above order, a hearing was granted to the Petitioner on
10th January, 2017. Vide order dated 13th January, 2017, the Additional
Commissioner of Customs (Imports) (hereinafter `ACC (Imports)’) held that
the goods are liable to be confiscation under Section 111 (d) of the Customs
Act, 1962 (hereafter referred to the ‘CA’), as imports of health products
were barred under Section 22 of the Food Safety and Standards Act, 2006
(hereafter ‘FSSA’). However, rather surprisingly, he also accepted the
explanation of the Petitioner that the consignment had been wrongly
despatched to India and that this was a case of bona fide mistake. After
having been passed orders of confiscation, the ACC (Imports) did not levy
any fine or penalty.

8. On 18th January, 2017, the Petitioner, relying upon the said order of the
ACC (Imports) sought waiver of ground rent and demurrage charges. This
was followed with another request on 4th February, 2017 to CELEBI, the
customs cargo handler at the IGI Airport, for waiver of the said charges.
Upon not getting a positive response, the Petitioner filed a second writ
petition being W.P. (C) No.2773/2017 in which this court passed the
following order dated 27th March, 2017.

W.P.(C) No. 3589/2017 Page 4 of 17

“W.P.(C) 2773/2017

The Petitioner’s grievance is that despite the order
dated 14.09.2016 passed by this Court in
W.P.(C)7309/2016, the respondents have not issued a
detention certificate in accordance with law.
Mr. Amit Bansal, Advocate appearing on advance
notice submits that detention certificate has since been
issued on 25.03.2017 and that the same has been
despatched to the Petitioner through his counsel. A
copy of the said detention certificate has been shown to
the Court. Since it is unreadable, the same is not taken
on the record.

In view of the statement, the third and fourth
respondents shall take necessary consequential action
giving due effect to the re-export order having regard
to the detention certificate expeditiously.
The writ petition is disposed of in the above terms.
Order dasti.”

9. Almost simultaneously, the ACC (Imports) on 27th March, 2017 made a
request to CELEBI to consider the waiver of detention / demurrage charges.
Despite receiving the said letter, the Respondent CELEBI did not waive the
demurrage charges, which resulted in the Petitioner filing the present writ
petition seeking the following relief:

“(a) Issue a writ, order or directions in the nature of
Mandamus to the Respondent No.3 4 to allow the
re-export of the goods imported against Airway Bill
No.607-67933913 dated 23.04.2016 without
charging any demurrage/ground rent from the
Petitioner;…..”

W.P.(C) No. 3589/2017 Page 5 of 17

Petitioner’s Submissions

10. Ms. Anjali Manish, learned counsel appearing for the Petitioner, submits
that the export of the consignment by her client to India, being a bona fide
mistake, re-export deserves to be permitted without payment of demurrage
charges. Ms. Manish relied on Section 6 (1) (l) of the Handling of Cargo in
Customs Area Regulations, 2009, (hereafter `2009 Regulations’) which
reads:

“6. Responsibilities of Customs Cargo Service
provider:

(1) The Customs Cargo Service provider shall-..

(a)- (k)…….

(l) subject to any other law for the time being in force,
shall not charge any rent or demurrage on the goods
seized or detained or confiscated by the Superintendent
of Customs or Appraiser or Inspector of Customs or
Preventive officer or examining officer, as the case
may be;”

11. Ms. Manish further submits that the reason for this particular Regulation
was the Report of the Public Accounts Committee (2005-06), according to
which, demurrage was not to be charged if there was a lapse in the discharge
of responsibilities by the Customs officials. Ms. Manish submits that as per
the judgment of this Court in Trip Communication Pvt. Ltd. v. Union Of
India,2014 (320) E.L.T. 321 (Del.), the Petitioner would be entitled for
waiver as the ACC (Imports), in his order dated 13th January, 2017, had,
after evaluating the material available on record, held that the Petitioner’s
export of the consignment to India was a bona fide mistake.

W.P.(C) No. 3589/2017 Page 6 of 17

12. Ms. Manish, relying on Circular No. 4/2015-CUS dated 20th January,
2015, submitted that CELEBI and DIAL usually grant such waivers as per
the prevalent policy. She strenuously urges that since the competent
authority has held that the export to India was a bona fide mistake, the
Petitioner is entitled to the benefit of the said circular. Ms. Manish further
relies upon the judgments in International Airports Authority of India v.
Grand Slam International, (1195) 3 SCC 151 and Garden Silk Mills Ltd. v.
UOI (1999) 8 SCC 744 to state that the Petitioner continues to be the owner
of the goods and since the bill of entry had not been filed, there was no
import in the eyes of law. She further relies upon Union Of India v. Sampat
Raj Dugar, (1992) 2 SCC 66 in support of the Petitioner’s case. Ms. Manish
thus submits that permission for re-export having been granted, the
Respondent ought to be directed to waive the demurrage / rent charges.

Respondents’ Submissions

13. The Respondent Nos.1 2 are the Principal Commissioner of Customs
(Imports) and the Deputy Commissioner of Customs (Import Shed). The
Delhi International Airport Private Limited is the Respondent No.3 and
Celebi Delhi Cargo Terminal Management India Pvt. Ltd. is the Respondent
No.4.

14. Mr. Rakesh Tiku, learned Senior advocate appearing on behalf of
CELEBI submits that the reliance by the Petitioner on the order passed by
the ACC (Import) is misplaced. Mr. Tiku submits that CELEBI being the
party affected in this case ought to have been heard, inasmuch as, if waiver
W.P.(C) No. 3589/2017 Page 7 of 17
of demurrage charge/ground rent is granted, it would be put to a loss. As per
Mr. Tiku, since CELEBI was not heard prior to the passing of the order
dated 13th January, 2017, the same was not binding upon CELEBI.

15. Mr. Tiku further relied upon Section 125 of the CA to argue that once a
consignment is confiscated, the authorities did not have the power to waive
fine or penalty and under the said provision, fine had to be mandatorily
imposed in lieu of any confiscation. Mr. Tiku vehemently urges that the
Court cannot countenance a position wherein, while holding that the
consignment consisted of goods which were prohibited and hence
confiscated, the authority had waived the imposition of fine, by completely
ignoring the statutory provisions. Mr. Tiku further submits that even in the
judgment of the Supreme Court in Grand Slam International (supra), the
Supreme Court has clearly held that customs authorities would be entitled to
charge demurrage for the imported goods even if the fault of non-clearance
lies on the authorities.

16. The stand of the Respondent Nos.1 to 3 is that DIAL used to be the
custodian of the imported goods when they arrive at the IGI airport, but with
effect from 7th February, 2012, the services have been outsourced to
CELEBI. It is their stand that the waiver policy, as framed by the Airport
Authority of India (AAI), is no longer applicable after the appointment of
CELEBI as the custodian.

Analysis and Findings

17. The first and the most important question that needs to be ascertained is
W.P.(C) No. 3589/2017 Page 8 of 17
as to whether the export of the consignment to India was contrary to law or
was it a bona fide mistake.

18. The Petitioner has placed on record the following documents –

(i) Invoice dated 23rd April, 2016 showing the recipients of the
shipment as Visha Enterprises, B-6/4, 2nd Floor, Ramesh Nagar, New
Delhi – 110015.

(ii) Airway Bill No.607-67933913 dated 23rd April, 2016 showing the
consignee name and address of Visha Enterprises.

19. There is not a single document to support the Petitioner’s case that the
consignment was meant for Singapore and not for Delhi. The undated letter
written by the Petitioner to the Manager of the Etihad Airlines, New Delhi
reads:

“Dear Sir,
I would like to bring to your kind notice that by
mistake our dispatch team has released wrong
cargo to New Delhi Airport via Awb bill no 607-
67933913. As unfortunately pallets got exchanged
at the time of delivery.

Due to delay our order got cancelled So I request
you to pls arrange to bring back our cargo. We will
pay you all overhead expenses to bring back our
shipment.”

Even as per this letter the Petitioner is requesting Etihad Airlines to bring
back the cargo due to the delay and claims that there was an exchange of
pallets.

W.P.(C) No. 3589/2017 Page 9 of 17

20. There is nothing on record to support the case of the Petitioner that there
was a bona fide mistake or that the goods were meant for Singapore and
were wrongly brought to India. All the documents on record clearly reveal
that there was a proper detailed invoice for the health products, which was
raised on Visha Enterprises and was meant to be cleared by Visha
Enterprises.

21. It is not in dispute that the consignment consisted of the health products,
which at the relevant time were prohibited goods as per Section 22 of the
FSSA which reads as under:

“Save as otherwise provided under this Act and
Regulations made thereunder, no person shall
manufacture, distribute, sell or import any novel food,
genetically modified articles of food, irradiated food,
organic foods, foods for special dietary uses, functional
foods, neutraceuticals, health supplements, proprietary
foods and such other articles of food which the Central
Government may notify in this behalf.

Explanation.-For the purposes of this section,-

(1) “foods for special dietary uses or functional foods or
nutraceuticals or health supplements” means:

(a) foods which are specially processed or formulated to
satisfy particular dietary requirements which exist
because of a particular physical or physiological
condition or specific diseases and disorders and which
are presented as such, wherein the composition of these
foodstuffs must differ significantly from the composition
of ordinary foods of comparable nature, if such ordinary
foods exist, and may contain one or more of the following
ingredients, namely:-

W.P.(C) No. 3589/2017 Page 10 of 17

(i) plants or botanicals or their parts in the form of
powder, concentrate or extract in water, ethyl alcohol or
hydro alcoholic extract, single or in combination;

(ii) minerals or vitamins or proteins or metals or their
compounds or amino acids (in amounts not exceeding the
Recommended Daily Allowance for Indians) or enzymes
(within permissible limits);

(iii) substances from animal origin;

(iv) a dietary substance for use by human beings to
supplement the diet by increasing the total dietary intake;

(b) (i) a product that is labelled as a ―Food for special
dietary uses or functional foods or nutraceuticals or
health supplements or similar such foods‖ which is not
represented for use as a conventional food and whereby
such products may be formulated in the form of powders,
granules, tablets, capsules, liquids, jelly and other dosage
forms but not parenterals, and are meant for oral
administration;

(ii) such product does not include a drug as defined in
clause (b) and ayurvedic, sidha and unani drugs as
defined in clauses (a) and (h) of section 3 of the Drugs
and Cosmetics Act, 1940 (23 of 1940) and rules made
thereunder;

(iii) does not claim to cure or mitigate any specific
disease, disorder or condition (except for certain health
benefit or such promotion claims) as may be permitted by
the regulations made under this Act;

(iv) does not include a narcotic drug or a psychotropic
substance as defined in the Schedule of the Narcotic
Drugs and Psychotropic Substances Act, 1985 (61 of
1985) and rules made thereunder and substances listed in
Schedules E and EI of the Drugs and Cosmetics Rules,
1945;

(2) “genetically engineered or modified food” means
food and food ingredients composed of or containing
genetically modified or engineered organisms obtained

W.P.(C) No. 3589/2017 Page 11 of 17
through modern biotechnology, or food and food
ingredients produced from but not containing genetically
modified or engineered organisms obtained through
modern biotechnology;

(3) “organic food” means food products that have been
produced in accordance with specified organic
production standards;

(4) “proprietary and novel food” means an article of
food for which standards have not been specified but is
not unsafe: Provided that such food does not contain any
of the foods and ingredients prohibited under this Act and
the regulations made thereunder”.

22. Under Section 111 (d) of the CA, goods which are prohibited under any
law for the time being in force, are liable to be confiscated. Such goods fall
in the category of `prohibited goods’ under Section 2 (33) of the CA and any
import or attempt to import the same, entails confiscation. The ACC
(Imports), having confiscated the goods, could not have permitted the re-
export of the same, as per law, without the imposition of fine or penalty. The
confiscation of goods having not been challenged by the Petitioner, non-
imposition of penalty/fine is clearly erroneous and unsustainable. It is the
admitted position that the consignment consisted of prohibited goods and the
same having arrived in Delhi and having been confiscated, the Petitioner
being the owner of the goods, has to take the responsibility for the same.

23. The submission that the same was a bona fide mistake clearly appears to
be an afterthought. This stand of the Petitioner is not borne out from any
contemporaneous documents on record. There is no invoice, airway bill,
purchase order or any other document stating that goods were meant to be

W.P.(C) No. 3589/2017 Page 12 of 17
delivered to a Singapore based customer. The Petitioner has failed to make
out a case of bona fide mistake and the findings of the ACC (Imports) to the
said effect are unsustainable in law. The non-imposition of fine is also
contrary to a bare reading of Section 125 of the CA which reads:

“125. Option to pay fine in lieu of confiscation – (1)
Whenever confiscation of any goods is authorised by this
Act, the officer adjudging it may, in the case of any goods,
the importation or exportation whereof if prohibited under
this Act or under any other law for the time being in force,
and shall, in the case of any other goods, give to the owner
of the goods [or, where such owner is not known, the
person from whose possession or custody such goods have
been seized,] an option to pay in lieu of confiscation such
fine as the said officer thinks fit:

Provided that, without prejudice to the provisions of
the proviso to sub-section (2) of section 115, such fine
shall not exceed the market price of the goods confiscated,
less in the case of imported goods the duty chargeable
thereon.

[(2) Where any fine in lieu of confiscation of goods
is imposed under sub-section (1) of the owner of such
goods or the person referred to in sub-section (1) shall, in
addition, be liable to any duty and charges payable in
respect of such goods.”

24. Mere non-imposition of penalty/fine, which is the mandate under
Section 125 of the CA in case of confiscated goods, cannot automatically
result in letting the Petitioner go scot-free. The ACC (Imports) had no
discretion not to impose fine as the provision clearly provides that
“officers………. shall ……. give to the owner of the goods………. an option to
pay in lieu of confiscation such fine as the said officer thinks fit…………”.
Thus, the imposition of fine under Section 125 was a logical and mandatory

W.P.(C) No. 3589/2017 Page 13 of 17
consequence once the goods were confiscated. Once the fine is imposed, the
owner of goods is liable to any duty and charges payable in respect of the
said goods under Section 125 (2) of the CA.

25. The question that then arises is whether the Petitioner is entitled to
waiver of demurrage/rent charges. This issue is no longer res integra. In
Trip Communication (supra), this Court has discussed the law on the
subject after taking into account the various prevalent policies etc. The
Court has held as under:

“…..

44. The policy makes a distinction between the cases
where the importer is innocent but his imported goods
are seized and detained pending an enquiry and
adjudication and the case where the importers have
indulged in misdeclaration, misdescription,
undervaluation or concealment and fine, penalty,
personal penalty and/or warning is imposed by the
customs authorities. Importers who are innocent
cannot be equated with the importers who violate the
law and be given the same treatment. The AAI policy
makes a distinction between the two and in our view
rightly so.

…………

47. In cases where the importer is found innocent and
there is no imposition of any fine, penalty, personal
penalty and/or warning by the customs authorities, the
Policy for Waiver would be applicable and the
importer would be entitled to be considered for its
benefit provided a certificate entitling him to be so
considered is issued by the custom authorities. The
importer would not be automatically exempt but would
be covered under the Policy for Waiver and eligible for
waiver which would be granted subject to other
compliances.

W.P.(C) No. 3589/2017 Page 14 of 17

…………….

49. Where the importer is clearly at fault and fine,
penalty, personal penalty and/or warning is imposed
by the customs authorities, making the regulations
applicable and granting the benefits of waiver would
be clearly unreasonable and would grant benefit of
waiver, with the person who has provided space
suffering. This was and is not the intention and
purpose behind HCCAR. Regulation recognises and
accepts that any other law in force is not abrogated or
repealed. The existing provision applicable stands
protected.”

The above decision clearly holds that there would be no automatic
exemption of demurrage/rent charges.

26. In the present case, the arrival of the consignment in Delhi, which
contains prohibited goods, is clearly not innocent and is contrary to law.
The goods being prohibited goods and having been confiscated, even as per
Trip Communication, the Petitioner would not be entitled to waiver of
demurrage/rent charges. The Petitioner, having accepted the finding that the
consignment contained prohibited goods and was liable for confiscation,
cannot claim waiver of demurrage/rent charges to the detriment of CELEBI,
which was not even heard by the ACC (Imports). None of the decisions,
relied upon by the Petitioner, would support the position that is being
canvassed by the Petitioner.

27. The Regulations relied upon by the Petitioner do not come to the
Petitioner’s rescue as the same do not apply in the case of goods which are
confiscated and Regulation 6 (1) (l) is itself “subject to any other law for the
W.P.(C) No. 3589/2017 Page 15 of 17
time being enforced”. Thus, the Regulations are subject to the provisions of
the CA.

28. The judgment in Garden Silk Mills (supra) does not come to the aid of
the Petitioner, inasmuch as, para 18 of the said judgment relates to the
taxable event after import and does not deal with the payment of demurrage
/rent charges while the goods are under detention. Moreover, Section 111(d)
applies not just to `imports’ but even `attempts to import’. Even in the case
of Sampat Raj Dugar (supra), the Supreme Court while holding that the
exporter is the owner of the goods, permitted re-export “in accordance with
law and subject to payment of such dues or other charges as may be leviable
in that behalf”. In Grand Slam (supra) it was unequivocally held that that
the custodian of the goods would be entitled to charge demurrage for the
goods in its custody.

29. In fact, Grand Slam (supra) has been followed subsequently in
Trustees of Port of Madra v. Nagavedu Lungi Co., (1995) 3 SCC 730
wherein the Supreme Court held that the liability to pay demurrage charges
or incidental charges as per Grand Slam (supra) applies equally to
exporters/consigners of goods.

29A. In view of the above, this Court concludes that the consignment
having contained `prohibited goods’, which were confiscated in terms of
Section 111 (d) of the CA, the Petitioner is not entitled for re-export of the
same without payment of demurrage/ground rent.

W.P.(C) No. 3589/2017 Page 16 of 17

30. Accordingly, it is directed as under:

(a) Respondent no. 4 – CELEBI is directed to communicate to the Petitioner
the amount of demurrage/ground rent positively within a week.

(b) Upon payment of the same by the Petitioner, the Petitioner be permitted
to re-export the goods imported against Airway Bill No.607-67933913 dated
23rd April, 2016.

(c) Upon failure by the Petitioner to make payment of the demurrage/ground
rent, Respondent No.4 will proceed to deal with goods in accordance with
law.

31. The writ petition and the pending application are disposed off in the
above terms. In the facts and circumstances of the present case, there would
be no order as to the costs.

PRATHIBA M. SINGH, J

S.MURALIDHAR, J
AUGUST 02, 2017
dk

W.P.(C) No. 3589/2017 Page 17 of 17

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