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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 9831-32 OF 2017 [Arising out of SLP (C) Nos. 771-772 of 2017]

Mumbai Port Trust ... Appellant

Versus

M/s. Shri Lakshmi Steels and Ors. etc.     ... Respondents

With

CIVIL APPEAL NOS. 9833-34 OF 2017  (Arising out of SLP (C) Nos. 3418-3419 of 2017]

J U D G M E N T

Deepak Gupta, J.

Leave granted.

2. These  civil  appeals  filed  by  the  Union  of  India  and  the

Mumbai  Port  Trust  are  directed  against  the  judgment  dated

23.12.2016 passed by the High Court of  Punjab & Haryana at

Chandigarh in CWP No. 10021 of 2016 and CWP No. 10036 of

2016, whereby the High Court allowed the writ petitions and held

that  the  detention  of  the  goods  imported  by  the  writ

petitioners/importers  (respondent-importers  herein)  by  the

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Customs,  at  the  instance  of  the  Directorate  of  Revenue

Intelligence (for short ‘DRI’), was totally illegal.  The High Court

directed that the goods imported by the respondent-importers be

released to them on payment of custom duty.  It further directed

that the Port Trust was not entitled to charge any demurrage in

view of Regulation 6(1) of the Handling of Cargo in Customs Areas

Regulations, 2009 (in short ‘2009 Regulations’) since the Customs

had  issued  detention  certificate.   The  detention  charges

demanded by the Shipping Line were ordered to be borne by the

DRI and/or the Customs.  The writ  petitioners/importers were

also held entitled to costs of Rs.50,000/- each to be paid by the

Department.

3. The facts of the case are that the respondent-importers are

two sister concerns viz., – (1) Inder International, a partnership

firm,  and  (2)  M/s  Shri  Lakshmi  Steels,  a  proprietorship  firm.

These firms deal in the import and trading of cold rolled coils and

sheets  (primary  and  secondary).   Both  the  importers  had

imported  various  consignments  of  cold  rolled  coils.   We  are

concerned only with ten consignments imported on three dates.

The first batch of consignments of coils was imported vide bills of

entry dated 04.12.2015 and the goods imported were declared to

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be cold rolled sheets/coils.  The bills of entry for the second and

third  consignments  were  presented  on  11.12.2015  and

29.12.2015 respectively.   

4. On 14.12.2015, DRI wrote a letter to the Commissioner of

Customs  (Import),  Mumbai  to  place  the  consignments  of  the

respondent-importers, as well as some other importers, on hold.

The DRI was of the view that these consignments required 100%

examination  before  these  could  be  released.   On  28.12.2015,

another letter was written by the DRI to the Customs in which it

was mentioned that specific intelligence had been received that

the  firms  had  been  importing  consignments  in  violation  of

notifications  issued  by  the  Customs  to  evade  provisional  duty

imposed on their imports.  By this letter, the Customs Authorities

were  requested  to  get  the  goods  examined  100%  with  the

assistance of the Chartered Engineer with regard to the nature of

the  imported  goods,  including  the  description  thereof,  quality,

thickness and width, along with supporting safeguards.  In the

meanwhile, on 18.12.2015, the respondent-importers in respect

of the bills of entry dated 04.12.2015 and 11.12.2015 prayed that

the duty be assessed under Section 18 of the Customs Act, 1962

(for short ‘1962 Act’) and the goods be released, so as to avoid

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payment  of  demurrage  and  detention  charges.   Thereafter,  a

reminder in this regard was sent by the respondent-importers on

22.12.2015.    After  the  third  consignment  was  received  on

29.12.2015,  another  letter  was  written  by  the

respondent-importers on 31.12.2015 followed by one more letter

dated  01.01.2016,  praying  that  the  duty  be  assessed  and the

goods be released on payment of duty.

5. Since no action was taken by the Customs Authorities on

the letters  written by the  respondent-importers,  they filed  writ

petitions in the High Court of Punjab & Haryana praying that the

goods be released.  Thereafter, samples of the goods were drawn

between  05.01.2016  and  11.01.2016  and  sent  to  one  Shri

Rajendra  S.  Tambi,  Chartered  Engineer,  for  inspection.   Shri

Tambi  got  these  samples  tested  from a  Government  approved

laboratory  M/s  Perfect  Laboratory  Services  and,  as  per  the

certificates issued by Shri Tambi on 19.01.2016, it was certified

that the goods imported appeared to be cold rolled coils.  This

supported the case of the importers.    

6. On 19.01.2016,  DRI  wrote  to  the  Customs Authorities  to

assess the provisional custom duty.  Thereafter, on 28.01.2016,

the  Commissioner  of  Customs  sent  a  letter  to  the

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respondent-importers  asking  them  to  produce  PD  Bond  for

release of goods and also to furnish bank guarantee of 20% of the

provisional  duty  on  the  imported  goods.  Similar  letters  were

written  to  other  importers  also,  but  no  bank  guarantee  was

demanded from them and only PD Bonds were sought.   All the

other importers took advantage of this offer and after furnishing

PD Bonds they got the goods released after payment of customs

duty.

7.   The case of the respondent-importers herein is that they

were informed about the letter dated 28.01.2016 only in Court on

03.02.2016 when a copy of the letter was handed over to them.

According to the counsel  for  the respondent-importers,  by this

time,  lakhs  of  rupees  were  due  as  demurrage  and  detention

charges and, hence, they could not take advantage of the offer

given by  this  letter.   Moreover,  the  respondent-importers  were

asked  to  furnish bank  guarantee  whereas  the  other  importers

were not asked to do so.

8. It  would  also  be  pertinent  to  mention  that  DRI  was  not

satisfied with the report of the Chartered Engineer.   DRI was also

not satisfied with the report of M/s Perfect Laboratory Services;

according to DRI  the samples sent  to this  laboratory were not

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taken in the presence of the officials of DRI and the reports sent

by this laboratory were false.   Hence,  the Customs Authorities

decided  to  get  the  consignments  checked  again  from  another

laboratory.  Thereafter,  samples of  the goods were taken again

and sent to another laboratory M/s TCR Engineering Services (for

short  ‘TCR’)  on  20.01.2016.   On  28.01.2016,  this  laboratory

submitted its report.  It opined that out of the ten consignments,

the goods of eight consignments appeared to be hot rolled and

goods of two consignments appeared to be cold rolled.  However,

bill of entry numbers were not mentioned and a fresh report was

called from TCR and they were asked to give numbers of the bills

of entry.   Even the two consignments which were found to be

cold  rolled  were  not  released.    The  grievance  of  the

respondent-importers is that there was no provision for carrying

out a second test and, in any event, the laboratory in question did

not have any facilities to carry out test to distinguish between hot

rolled and cold rolled coils.   

9. On  01.02.2016,  the  respondent-importers  wrote  to  the

Commissioner of Customs for issuance of detention certificates so

that  they  could  secure  waiver  of  demurrage  and  detention

charges.   According  to  the  respondent-importers,  though  vide

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letter dated 28.01.2016, provisional release of the goods had been

permitted on furnishing of PD bond and bank guarantee, there

was no reason for discriminating between respondent-importers

and other importers, who were also under investigation and were

not asked to furnish any bank guarantee.  Further, according to

the respondent-importers,  on 04.02.2016, the Commissioner of

Customs sent a communication to the Deputy Commissioner to

the effect that he had received telephonic call from DRI directing

that  the  samples  should  be  drawn  again  from  all  the

consignments and, for this purpose, the name of the laboratory

would be informed later on.  He was also told that the goods be

released only after the process of  sampling was complete.   On

23.02.2016, the goods were seized and the respondent-importers

were directed to approach the concerned authority for provisional

release of the goods.   

10. In  the  meantime  on  05.02.2016,  DRI  wrote  to  the

respondent-importers  rejecting  the  request  for  issuance  of

detention certificate.   The DRI also directed that the thickness of

the  coils  be  also  measured  to  ensure  that  the

respondent-importers were not evading import duty.  However, on

05.03.2016, DRI sent another letter that provisional  release be

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allowed  without  waiting  for  measurement  of  goods.  The  fact

however is that for one reason or the other the goods were not

released.   Both the parties blamed each other for  the delay in

release of the goods.

11. On  04.04.2016,  the  High  Court  of  Punjab  and  Haryana

passed  orders  in  the  writ  petition  filed  by  the

respondent-importers  directing  the  Customs  Authorities  to

de-stuff  the  consignments  within  one  week  and  the

respondent-importers undertook to cooperate with the Customs

Authorities  during  this  process.    According  to  the

respondent-importers,  the  officials  of  the  DRI  with  a  view  to

harass  them  did  not  permit  release  of  the  goods,  whereas,

according to the Union of India and DRI, the representatives of

the  respondent-importers  did  not  cooperate  and  violated  the

undertaking.    Thereafter,  on  22.04.2016,  the  Shipping  Line

issued  notice  to  the  respondent-importers  that  it  proposed  to

auction  the  goods  to  recover  the  detention  charges.   On

09.05.2016, the respondent-importers withdrew the writ petitions

filed by them with liberty to file fresh writ petitions.   

12. Thereafter,  fresh  writ  petitions  were  filed.   An  order  was

passed by the High Court on 03.06.2016 directing that samples of

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the imported goods be sent to the Steel Authority of India Ltd. (for

short ‘SAIL’), Bokaro for testing.  After testing, it was opined that

the goods appeared to be cold rolled coils but there was also a

finding that the thickness of  the coil  was at variance with the

declaration given by the respondent-importers in respect of some

of the consignments.  Thereafter, the High Court, on 12.07.2016,

directed that the goods be released on payment of due duty and

the issue of detention and demurrage charges would be decided

later.    The  order  of  the  High  Court  dated  12.07.2016  was

challenged before this Court by way of SLP (C) Nos. 23479-80 of

2016, which was allowed on 15.09.2016 setting aside the order

dated 12.07.2016 passed by the High Court and the High Court

was requested to dispose of the writ petition at an early date and

release/auction  of  the  imported  goods  was  stayed  pending

disposal of the writ petition.

13. Respondent-importers had also levelled allegations of  mala

fide against the Officials of DRI. It was alleged that these officials

were  inimical  towards  respondent-importers  since  they  were

summoned  to  Court  and  the  Court  had  made  certain  oral

observations against such officials.  As far as the allegations of

mala  fide are  concerned,  the  High  Court  has  not  given  any

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clear-cut  finding.   The  High  Court  however  came  to  the

conclusion that the respondent-importers were harassed by the

officials of DRI and ordered that the respondent-importers were

not  liable  to  pay  any  demurrage  and,  even  with  regard  to

detention charges to be paid to the Shipping Line, held that it is

DRI or the Customs Authorities who are liable to pay the same.

The Port Trust was directed to waive the demurrage charges.

14. Two issues arise before us – (1) whether any direction could

be  given  to  the  Mumbai  Port  Trust  to  waive  the  demurrage

charges  and  (2)  whether  the  liability  to  pay  the

demurrage/detention charges  in  respect  of  the  imported goods

could be fastened upon the DRI/Customs Authorities.

15. As far as the first issue is concerned, it would be pertinent

to point out that the Mumbai Port Trust is a statutory authority

created under the Major Port Trusts Act, 1963 (for short ‘the Act’).

A  Major  Port  Trust  is  managed  by  the  Board  of  Trustees

appointed under Section 3 of the Act.  The works and services to

be provided by the Trust at the Major Ports are set out in Chapter

V of the Act.  Chapter V-A which was introduced with effect from

09.01.1997 provides for fixation of  tariff for Major Port Trusts.

The tariff  to be charged by the port trust is determined by an

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independent  statutory  authority,  called  the  Tariff  Authority  for

Major Ports, under Section 47A of the Act.   

16. Shri K.K. Venugopal,  learned senior counsel appearing on

behalf of the Mumbai Port Trust, submitted that the High Court

gravely  erred  in  relying  upon  Regulation  6(l)  of  the  2009

Regulations, framed by the Central Board of Excise and Customs.

He  submitted  that  this  subordinate  legislation  i.e.,  regulations

framed  by  the  Central  Board  of  Excise  and  Customs  cannot

supersede the statutory provisions of the Major Port Trusts Act

and the judgments of this Court.   The stand of the Mumbai Port

Trust is that it is entitled to recover the statutory tariff, including

demurrage charges, from the respondent-importers and neither

the High Court nor the Union of India, can direct it to release the

goods without  payment  of  such statutory charges.  The second

contention is that the High Court gravely erred in holding that the

Port  Trust  is  the  custodian of  the  Customs Department under

Section 45(1) of the Customs Act, 1962.   In the alternative, he

submitted, that even if the Port Trust is held to be a custodian, it

is  still  entitled to  charge demurrage on goods detained by the

customs.  Even if the Customs Authorities or DRI are at fault, the

Port Trust cannot be barred from claiming the charges which are

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charged statutorily.  It is submitted that Regulation 6(l) is subject

to other laws including the Major Port Trust Act and it was also

submitted that Section 160(9) of the Customs Act, 1962 provides

that nothing in the Customs Act shall affect any law for the time

being in force relating to the constitution and powers of any Port

authority in a major port as defined in the Indian Ports Act, 1908.

17. Shri  Maninder  Singh,  learned Additional  Solicitor  General

appearing for  the  Union of  India  submits  that  the  High Court

erred in directing the customs authorities and the DRI to pay the

demurrage  and  the  detention  charges.   He  submits  that  the

officials  did  not  act  mala  fide.   They  had  specific  intelligence

inputs  that  the  respondent-importers  were  misdeclaring  the

goods to avoid payment of duty.  He submits that even if  it is

found that the intelligence inputs were not correct, action cannot

be  said  to  be  mala  fide.   He  also  submits  that  the

respondent-importers  did  not  exercise  their  option  to  pay

provisional duty or get the goods de-stuffed.  Therefore, no relief

could have been given to the respondent-importers.

18. On the other hand the stand of the respondents is that once

a detention order is passed by the Customs Authorities, the Port

Trust has to waive the demurrage and reliance has been placed

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on Section 128 of the Act and 2009 Regulations.  The stand of the

respondent-importers is also that in terms of the regulations  the

Mumbai Port Trust is not entitled to claim any demurrage charges

for  the  period  when  the  goods  were  under  detention  of  the

Customs Authorities.  In the alternative, it is submitted that even

if,  for  any  reasons,  the  Mumbai  Port  Trust  is  held  entitled  to

recover the demurrage charges, the liability of the same should be

fastened upon the Customs Authorities/DRI.

19. Before dealing with these issues, it would be relevant to refer

to the provisions of  the Act.   As already mentioned above, the

Tariff Authority for Major Ports is constituted under Section 47A

of the Act and the imposition and recovery of rates at Major Ports

are fixed by the Tariff Authority.  Section 48(1) of the Act provides

that  the authority  shall,  by notification in the  Official  Gazette,

frame a scale of rates and a statement of conditions under which,

any of the services specified hereunder shall be performed by a

Board in relation to a port.  Sub-section (1)(d) of Section 48 deals

with wharfage, storage and demurrage of goods.   Section 53 of

the Act empowers the Board to exempt, either wholly or partially,

any goods or vessels or class of goods of vessels from the payment

of  any  rate  or  of  any  charge  leviable  in  special  case,  for  the

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reasons to be recorded in writing.  Section 58 deals with time for

payment of rates on goods. Section 59 of the Act provides that the

Board shall have a lien on the goods which are kept in the port in

respect of the amount due to the Board under the provisions of

the Act.   

Sections 48, 53, 58 and 59 of the Act read as follows:

“48.  Scales  of  rates  for  services  performed  by Board or other person.- (1) The Authority shall from time  to  time,  by  notification  in  the  Official  Gazette, frame a scale  of  rates at which,  and a statement of conditions under which, any of  the services specified hereunder shall be performed by a Board or any other person authorised under section 42 at or in relation to the port or port approaches-  

(a)  transhipping  of  passengers  or  goods  between vessels in the port or port approaches;  

(b) landing and shipping of passengers or goods from or to such vessels to or from any wharf,  quay, jetty, pier,  dock,  berth,  mooring,  stage  or  erection,  land or building in the possession or occupation of the Board or at  any  place  within  the  limits  of  the  port  or  port approaches;  

(c) carnage or porterage of goods on any such place;  

(d)  wharfage,  storage or demurrage of  goods on any such place;  

(e) any other service in respect of vessels, passengers or goods,  

(2) Different scales and conditions may be framed for different classes of goods and vessels.

53. Exemption from, and remission of, rates or charges.- A  Board  may,  in  special  cases  and  for reasons to be recorded in writing, exempt either wholly or partially any goods or vessels or class of goods or vessels from the payment of any rate or of any charge

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leviable  in  respect  thereof  according  to  any  scale  in force under this Act or remit the whole or any portion of such rate or charge so levied.

58. Time for payment of rates on goods.- Rates in respect  of  goods  to  be  landed  shall  be  payable immediately on the landing of the goods and rates in respect of goods to be removed from the premises of a Board, or to be shipped for export, or to be transhipped, shall be payable before the goods are so removed or shipped or transhipped.

59. Board's lien for rates.- (1) For the amount of all rates leviable under this Act in respect of any goods, and for the rent due to the Board for any buildings, plinths stacking areas, or other premises on or in which any goods may have been placed, the Board shall have a lien on such goods, and may seize and detain the same until such rates and rents are fully paid.  

(2) Such lien shall have priority over all other liens and claims, except for general average and for ship-owner’s lien upon the said goods for freight and other charges where such lien exists and has been preserved in the manner provided in sub-section (1) of section 60, and for  money payable  to  the Central  Government under any law for the time being in force relating to customs, other than by way of penalty or fine.”

The Union of India relies upon the provisions of Section 128 of

the Act, which read as follows:  

“128. Saving of right of Central Government and municipalities to use wharves, etc., for collecting duties and of power of Customs Officers.- Nothing in this Act shall affect-  

(1)   the  right  of  the  Central  Government  to  collect customs duties or of  any municipality to collect town duties at any dock, berth, wharf, quay, stage, jetty or pier in the possession of a Board, or  

(2)  any  power  or  authority  vested  in  the  customs authorities under any law for the time being in force.”

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As far as the Customs Act is concerned, we may refer to Section

45 and Section 160(9) of the Act, which read as follows:

“45.  Restrictions on custody and removal of imported goods. - (1) Save as otherwise provided in any law for the time being in force, all imported goods, unloaded in a customs area  shall remain in  the  custody of  such person  as  may  be  approved  by  the  Principal Commissioner of Customs or Commissioner of Customs until  they  are  cleared  for  home  consumption  or  are warehoused or are transhipped in accordance with the provisions of Chapter VIII.

(2)  The person having custody of any imported goods in  a customs  area,  whether  under  the  provisions  of sub-section (1) or under any law for the time being in force, - (a)   shall keep a record of such goods and send a copy thereof to the proper officer;

(b)   shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in  accordance  with  the  permission  in  writing  of  the proper officer.

(3)   Notwithstanding  anything  contained in  any law for  the  time  being  in  force,  if  any  imported  goods are pilfered after unloading thereof  in a customs area while  in  the  custody  of  a  person  referred  to  in sub-section (1), that person shall be liable to pay duty on  such goods at  the  rate  prevailing  on  the  date  of delivery of an import manifest or, as the case may be, an import report to the proper officer under section 30 for  the  arrival  of  the  conveyance  in  which  the  said goods were carried.”

“160. Repeal and savings.-

xxx xxx xxx

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(9) Nothing in this Act shall affect any law for the time being in force relating to the constitution and powers of any Port authority in a major  port as defined in the Indian Ports Act, 1908 (15 of 1908).”

Regulations 2(b) and 6(l) of the 2009 Regulations are also relevant

and the same read as follows:

“2. Definitions.- xxx xxx xxx

(b)  "Customs Cargo  Services  provider"  means  any person  responsible  for  receipt,  storage,  delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred to in section  45  of  the  Act  and  persons  as  referred  to  in sub-section (2) of section 141 of the said Act.”

“6.  Responsibilities of the Customs Cargo Service provider.-

(1) The Customs Cargo Service provider shall -  

xxx xxx xxx

(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.”

20. The issue whether an importer is liable to pay demurrage

charges even when the imported goods have been detained by the

Customs Authorities and later it is found that the version of the

importer is correct, has been the subject matter of a  number of

decisions.  In the case of Trustees of the Port of Madras v. M/s

Aminchand  Pyarelal1,  the  Customs  Authorities  had  issued

1  (1976) 3 SCC 167

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detention certificate of imported goods.   There was no fault or

negligence on the part of the importer. The Trustees of the Port of

Madras waived demurrage charges for the period of detention; the

importer paid the balance amount and cleared the goods.  Later,

the Board wrote to the Customs Authorities that the detention

certificate had been wrongly issued.  Thereafter, the Board sued

the importer for recovery of the balance demurrage charges.  It

was urged that the Board could not charge demurrage for the

period during which the goods had been detained for no fault or

negligence  of  the  importer  or  his  agent.    This  Court,  after

noticing the provisions of the Madras Port Trust Act, especially

Sections  42,  43  and  43A  thereof,  which  are  similar  to  the

provisions of the Major Port Trusts Act, 1963 referred to above,

held that the Board was entitled to claim the rates as framed

under the provisions of the said Act.   This Court held that the

Port Trusts were public representative bodies entrusted by the

Legislature  with authority  to  frame the  scale  of  rates and the

conditions subject to which these rates and services were to be

rendered.  These rates were approved by the Central Government

and, thereafter, the rates had the force of the law.  It was held

that the Port Trusts were under a statutory obligation to render

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services  of  various  kinds  in  the  larger  public  and  national

interest.  In case there is congestion in the port it would affect

the free movement of ships and of essential goods.    Therefore,

the scale of  rates had to be framed in such a manner that  it

worked both as an incentive to the importers to remove the goods

as expeditiously as possible from the transit areas and also acted

as a disincentive to keep the goods in the premises of the Board

for  a  long  time,  thereby  increasing  the  demurrage  charges

substantially with passage of  time.   This Court held that the

High Court  was in error  in holding  that  the Board’s  power to

charge demurrage was limited to cases where the goods were not

removed from its premises due to some fault or negligence on the

part of the importer.   

21. In  Board of Trustees of the Port of Bombay v.  Indian

Goods Supplying Co2, this Court held that it was the duty of the

Board to recover rates; the Board had a lien on the goods and the

right to seize and detain the goods, until the rates were fully paid

and to sell the goods if the rates were not paid and recover the

same.  It was held that certain concessions may be given taking

into account the hardship of the importers, but the legality of the

rates cannot be questioned.  This Court went on to hold that the

2   (1977) 2 SCC 649

20

importer of the goods was liable to pay the demurrage charges

even if the importer was not responsible for any delay, nor any

fault could be attributed to the importer.   

22. In Board of Trustees of the Port of Bombay v. Jai Hind

Oil Mills Company3, this Court noted that the provisions of the

Major Port Trust, 1963 were  pari materia to the acts governing

the  Individual  Port  Trusts  prior  thereto.   It  was held that  the

demurrage charges are levied in order to ensure quick clearance

of the cargo from the harbour and the rates are fixed in such a

way that they would make it unprofitable for the importer to use

the port premises as a warehouse.   

23. In all these cases, this Court took the view that the Board of

Trustees  of  the  Ports,  which  are  creations  of  a  statute,  are

entitled  to  charge  demurrage  and  other  charges  from  the

importer  even  in  respect  of  those  periods  during  which  the

importer  was  unable  to  clear  goods  from the  premises  of  the

Board, for no fault or negligence on the part of the importer.  It

was  further  held  that  the  Boards  were  entitled  to  charge

demurrage from the importer even when the importer was unable

the  clear  the  goods  because  of  the  detention  thereof  by  the

3  (1987) 1 SCC 648

21

Customs authorities,  which detention may later  on have  been

found to be unjustified.   

24. The  provisions  of  the  International  Airport  Authority  Act,

1971 are  similar  in  nature  and these  provisions  came  up for

consideration  before  this  Court  in  International  Airports

Authority v.  Grand Slam International4.    In that case, this

Court took note of Section 45 of the Customs Act and held as

follows:

“41. None of these provisions entitles the Collector of Customs to debar the collection of  demurrage for the storage of  imported goods. They do not entitle him to impose  conditions  upon  the  proprietors  of  ports  or airports before they can be approved as Customs ports or  Customs  airports.  Section  45 provides  that  all imported  goods  imported  in  a  customs  area  must remain  in  the  custody  of  the  person  who  has  been approved  by the  Collector  of  Customs until  they are cleared and such person is obliged not to permit them to be removed from the customs area or otherwise dealt with  except  under  and  in  accordance  with  the permission of the Customs Officer. Section 45 does not state that such person shall not be entitled to recover charges  from  the  importer  for  such  period  as  the Customs Authorities direct.

42. The purpose of  the Customs Act on the one hand and  the Major  Port  Trusts  Act and  the  International Airports Authority Act on the other hand are different. The former deals with the collection of Customs duties on  imported  goods.  The  latter  deals  with  the maintenance of  seaports and airports, the facilities to be provided thereat and the charges to be recovered therefor. An importer must land the imported goods at a seaport  or  airport.  He  can  clear  them  only  after completion of customs formalities. For this purpose, the seaports  and  airports  are  approved  and  provide

4   (1995) 3 SCC 151

24

Calcutta6, this Court, after referring to Section 58 of the Major

Port Trust Act, held as follows:   

“8.  ...........Thus the charges of the 1st Respondent are to  be  paid  before  the  goods are  removed.  The  High Court seriously erred in permitting removal of the goods without payment of the port charges. To be noted that it was never disputed that the charges were payable. The 1st Respondent was not concerned with the dispute as to who had to pay the charges.  It was the appellant who was interested in clearance of the goods. It was for him to have paid the charges and cleared the goods. Even if  it was the appellant’s case that the Customs Authorities  had  to  pay  the  charges,  the  appellant should have first cleared the goods by paying charges due  to  the  1st  respondent  and  then  claimed reimbursement from the Customs Authorities.”

26. The  High  Court  in  the  impugned  judgment  has  made

reference to the aforesaid judgments, but has distinguished them

only on the ground that these judgments were rendered prior to

the promulgation of  the 2009 Regulations and,  therefore,  held

these to be inapplicable.  We shall deal with this issue later on,

but we may first refer to the judgment of this Court in Shipping

Corporation of India v. C.L. Jain Woolen Mills7  relied upon by

the  High  Court.   It  would  be  pertinent  to  mention  that  this

judgment does not deal with the Major Port Trust Act, nor does it

deal with the International Airports Authority of  India Act.  In

that  case,  the  issue  before  this  Court  was  with  regard  to

6  2002) 3 SCC 168 7  (2001) 5 SCC 345

25

demurrage charges levied by the Shipping Corporation of India.

This Court in fact affirmed the law laid down in  Grand Slam

(supra).  It would be apposite to make reference to the following

portion of the judgment:

“7. .............. Having scrutinized the provisions of the Customs Act, we are unable to find out any provision which  can  be  remotely  construed  to  have  conferred power  on  the  Customs  Authorities  to  prevent  the proprietor  of  the  space  from  levying  the  demurrage charges  and,  thereby  absolving  the  importer  of  the goods from payment of the same. .......”

In that case, this Court gave certain directions in the peculiar

facts of the case, but the law laid down in Grand Slam (supra)

has not been whittled down.

27. The High Court also placed reliance on certain observations

made by this Court in the case of  Union of India v.  Sanjeev

Woolen Mills8,  wherein the directions were given by the Delhi

High Court that the demurrage and container detention charges

should be borne fully by the Customs Department.  It would be

pertinent to mention that the matter before this Court arose out

of the Contempt Proceedings and no challenge had been made to

the  earlier  judgment  of  the  Delhi  High  Court  directing  the

Customs  Authorities  to  pay  the  demurrage  and  container

detention charges.  That order had become final and it was under

8  1998 (100) ELT 323

26

these circumstances that this Court refused to interfere with the

orders  passed  in  contempt  proceedings.    This  case  has  no

bearing on the facts of the present case.   

28. The High Court has mainly relied upon Section 45 of the

Indian  Customs  Act  read  with  Regulation  2(l)  of  the  2009

Regulations while  issuing directions to the Mumbai Port  Trust

not to collect demurrage from the importers. The first contention

on behalf of the Trust is that the Port Trust is not a custodian of

the  Customs Department  under  Section 45(1)  of  the  Customs

Act.  We are not going into this issue in view of the fact that the

notification  dated  11.10.2000  issued  by  the  Commissioner  of

Customs under Section 45(1) of the Customs Act, 1962 approving

the  Mumbai  Port  Trust  as Custodian under  Section 48 of  the

Customs Act was challenged by the Mumbai Port Trust before the

Bombay High Court and the High Court by its judgment dated

22.07.2009 has quashed the said notification.  The judgment of

the  Bombay  High Court  is  under  challenge  before  this  Court.

For  the  purpose  of  this  case,  we  are  proceeding  on  the

assumption that the Mumbai Port Trust is a custodian within the

meaning of Section 45 of the Customs Act.  Regulation 2(b) of the

2009  Regulation  lays  down  that  the  Custom  Cargo  Service

27

Provider  is  a  person responsible  for  receipts,  storage,  delivery,

despatch, handling etc. of the imported goods and includes the

custodian referred to in Section 45 of the Customs Act.   

29. Assuming for the purpose of the decision of this case that

Mumbai Port Trust is a custodian or cargo service provider, the

question that arises is whether these Regulations apply to the

Mumbai Port Trust.  These Regulations have been framed under

Section 157 of the Customs Act.  Section 160(9) of the Customs

Act  clearly  lays  down that  nothing  in  the  Act  shall  affect  the

power of  the Port Authority in a Major Port,  as defined in the

Indian Major Port Trusts Act, 1963.  It is not disputed before us

that the Mumbai Port Trust is a major port.   

30. As already explained hereinabove, the Mumbai Port  Trust

has the power and authority to levy rates including demurrage as

fixed by the Tariff Authority under Section 47A of the Act.  This

right of the Port Trust is not affected either by the provisions of

the Customs Act or by the Regulations of 2009.  Section 160(9) of

the  Customs  Act  clearly  lays  down that  the  provisions  of  the

Customs Act shall not in any manner affect the constitution and

powers of any port authority in a major port.  This will include

28

the right of the major port authority that is a Major Port Trust to

levy and charge rates and demurrage.

31. As far  as  2009 Regulations are  concerned,  these  are  the

Regulations framed under the Customs Act.  Regulations are in

the nature of subordinate legislation.  There can be no manner of

doubt that subordinate legislation that too a legislation framed by

a Board under the Customs Act cannot in any manner affect the

power and authority of the Major Port Trust, statutorily vested in

it.

32. Neither the regulations nor the provisions of the Customs

Act can impinge or in any manner affect the statutory power of

the Major Port Trusts to levy rates under the Act.  In fact, the

Authority  that  framed the Regulations was itself  aware of  this

because Regulation 6(l) itself begins with the words “ subject to

any other law for the time being in force”.  It is, therefore, obvious

that the Regulations are subject to any other law including the

Major Port Trust Act.  Therefore, these Regulations cannot in any

manner affect the right of the Port Trust.  We are, therefore, of

the view that the High Court erred in holding that the law settled

by this Court in a catena of judgments referred to above was no

longer  applicable  in  view  of  the  2009  Regulations.   Reliance

29

placed by the Union of India on Section 128 of the Major Port

Trusts Act is totally misplaced.  This provision only deals with the

right  of  the  Central  Government to  collect  customs duties.   It

does not deal with the rights of  the Port Trust to collect rates

including demurrage.  

33. The next issue which arises is whether any direction could

be issued to the DRI/Customs Authorities to pay the demurrage

charges  to  the  Port  Trust  and  the  detention  charges  to  the

Shipping Line.

34. We have already referred to a number of decisions wherein

the law has been clearly laid down that even if the importer is not

at  fault,  it  is  the  importer  alone  who  is  liable  to  pay  the

demurrage charges.  As far as detention charges are concerned,

this is a private contract between the importer and the carrier,

i.e. Shipping Line.  The DRI/Customs authorities can be directed

to pay the demurrage/detention charges only when it has proved

that  the  action  of  the  DRI/Customs  Authorities  is  absolutely

mala fide or is such a gross abuse of power that the officials of

the DRI/Customs should be asked to compensate the importer

for the extra burden which he has to bear.  Even if an importer

feels that it has been unjustly dealt with, it must clear the goods

30

by paying the charges due and then claim reimbursement from

the customs authority.

35.  In the present case allegations of  mala fides were levelled

against  Respondent  Nos.  7  & 8,  Santokh Singh  and  Roopesh

Kumar.   The allegation is  that  since  the  respondent-importers

had filed writ petitions before the High Court wherein the said

officials  had  been  summoned  to  appear  in  person  these  two

officials had acted  mala fide  against the respondent-importers.

Charges of discrimination have also been levelled against them.

These persons were arrayed as Respondent Nos. 7 and 8 in the

writ  petition.   Initially,  a  written  statement  was  filed  by

Respondent Nos.1-3 and 5-8 which was not signed by these two

persons.  Thereafter, these two persons filed an application for

permission  to  file  written  statement  which  was  filed  on

07.11.2016 probably after arguments have been heard.  These

written statements have not been taken into consideration by the

High Court.  Charges of mala fide are serious and these charges

were denied in the first written statement and with the second

written statement, an affidavit was filed by Respondent Nos. 7 &

8  denying  the  same  charges.   Therefore,  the  second  affidavit

should not have been brushed aside.  In any event, it would be

31

important to note that the High Court itself did not go into this

aspect in detail and observed as follows :-

“…This  Court  is  not  going  into  much  detail  on  this aspect, but it can safely be opined that the action was not bona fide, if not strictly malafide…..”

Therefore, there is no specific finding of mala fides.  However, the

High Court  held that  the  respondent-importers  suffered a  loss

because of delay on the part of Revenue staff to clear the goods

and the executive instructions of the Department were violated.   

36. We  are  not  in  agreement  with  the  judgment  of  the  High

Court.  Both the respondent-importers imported consignments on

04.12.2015,  11.12.2015  and  29.12.2015.   The  case  of  the

Revenue  is  that  it  had  prior  information  that  the

respondent-importers  along  with  other  importers  of  Ludhiana

were evading safeguard duty imposed on hot rolled steel products

by mis-declaring their  goods to be cold rolled products.   They

were  also  allegedly  using  the  method of  pickling  and oiling  to

make the products appear like hot rolled products.  The Revenue

also  had  intelligence  reports  that  in  respect  of  previous

transactions  the  importers  had  declared  the  goods  to  be  cold

rolled to the Customs Authorities but hot rolled before the Excise

Authorities.   On  14.12.2015  search  was  carried  out  in  the

32

business  premises  of  one  of  the  importers  namely  M/s  Inder

International  and  cash  amounting  to  Rs.  63,30,000/-  was

recovered.  50 MT of imported sheets were also detected.  The DRI

had some intelligence  inputs  that  certain consignment of  coils

earlier cleared by the importers from Mumbai Sea Port and which

had been declared as secondary, defective CR coils were declared

to be hot rolled coils  before the Excise and Taxation Department.

Even  with  regard  to  the  thickness  of  the  sheets/coils  large

number of discrepancies were found in the earlier consignments

imported  by  the  same  importers.   These  may  be  separate

transactions but the Revenue was justified in apprehending that

the imported goods may have been mis-declared and, therefore,

they must be thoroughly checked and verified.

37. It would also be pertinent to mention that the DRI, Ludhiana

issued summons to Shri Indresh Jain, who is a partner in M/s

Inder International asking him to be present in the Office of the

DRI on 15.12.2015.  He did not appear and summons were again

sent to him on 17.12.2015 to appear on 18.12.2015 when again

he did not appear.  Meanwhile, a letter was sent on 14.12.2015

by DRI to Mumbai Customs asking them to withhold the release

of  the  imported  consignments.   A  letter  was  also  sent  to  the

33

Shipping Line on 17.12.2015 requesting them not to allow any

change in the description of the import of goods.

38. On 21.12.2015, search was conducted in the premises of the

respondent-importers  and,  according  to  the  Revenue  the

respondent-importers  allegedly  admitted  that  they  had  earlier

imported certain sheets of secondary and defective nature from

ICD,  Sonepat,  Haryana,  thereby  violating  the  Import  Licensing

Note.

39. On  22.12.2015,  the  respondent-importers  requested  that

their goods be released by assessing customs duty under Section

18  of  the  Customs  Act.   Since  the  respondent-importers

apprehended that the DRI had asked the Shipping Line not to

release the goods, a clarification was issued on 23.12.2015 by the

DRI to the Shipping Line that it had not instructed the Shipping

Line  not  to  issue  delivery  orders  but  had  only  asked  that  no

changes should be made in the Bill of Lading with regard to the

description of goods.

40. It would be important to note that the duty was discharged

by the importer in respect of Bills of Entry dated 04.12.2015 and

11.12.2015, only on 23.12.2015.  Therefore,  prior  to that date

there could not have been any release of goods.  In fact, in respect

34

of   one  of  the  Bills  of  Entry  dated 04.12.2015,  the  same was

presented to the Customs Authorities and customs duty was paid

after 30th December, 2015.

41. Shri Indresh Jain appeared before the DRI on 28.12.2015.

On the one hand the respondent-importers were praying for the

release of goods and on the other hand their representative was

not appearing before the Authorities.  Here it would be important

to  note  that  the  third  consignment  was  received  only  on

29.12.2015  and,  thereafter,  the  goods  were  examined  from

05.01.2016 to 11.01.2016.  In the meantime, the importer filed

writ petitions in the Punjab and Haryana High Court.   

42. The  Customs  Authorities  drew  the  samples  of  the  goods

from 05.01.2016 to 11.01.2016 .  These were sent to Mr. Tambi,

Chartered Engineer.   Shri  Tambi also procured the test  report

from  M/s  Perfect  Laboratories  and  issued  a  certificate  on

19.01.2016.  According to him the goods were cold rolled coils as

declared by the respondent-importers.  Therefore, we are of the

opinion till this stage there was no unnecessary delay on the part

of the DRI.   

43. After  19.01.2016,  there  are  allegations  and  counter

allegations made by both the parties against each other.   It  is

35

however clear that the DRI was not satisfied with the report given

by  Shri  Tambi.  Even  if  that  be  so,  now  since  the  Chartered

Engineer  appointed  by  the  Revenue  authorities  had  held  the

goods to be cold rolled goods, the DRI should have released the

goods.  It is the case of the DRI that on 25.01.2016 a decision

was  taken  that  these  consignments  and  future  imported

consignments  of  the  respondent-importers  be  released  by

resorting  to  provisional  assessment  under  Section  18  of  the

Customs Act.  A letter in this behalf was sent on 28.01.2016 and

it was received by the Customs Authorities on the same date i.e.

28.01.2016.   The  case  of  the  DRI  is  that  the  letter  was  also

communicated to the respondent-importers but, according to the

respondent-importers they came to know about the letter only on

03.02.2016.   

44. The  respondent-importers  did  not  take  the  benefit  of

provisional assessment offered on two grounds :- (1) that all other

importers  were  only  asked  to  furnish  PD  Bonds  whereas  the

importers  herein  were  asked  to  furnish  some  bank  guarantee

also.  (2)  That the demurrage and detention charges had piled

up.  The  stand  of  the  DRI  is  that  all  other  importers  were

importing  sheets/scrap  and  not  coil.   It  was  only  the

36

respondent-importers who were importing coils.  Safeguard duty

is applicable only in relation to coils and not in relation to sheets.

Therefore the original respondent-importers were asked to furnish

bank guarantees also.  The respondent-importers were required

to  furnish  bank  guarantee  only  to  the  extent  of  20%  of  the

provisional assessment and the bank guarantee demanded was

only Rs. 18.71 lakhs.  It is thus obvious that importers even at

this stage could have got the goods released only by furnishing

the bank guarantee for Rs.18.71 lakhs and furnishing PD Bonds.

All  other  importers  took  benefit  of  this  offer  given  by  the

DRI/Customs  and  got  their  goods  released  but  the

respondent-importers for the reasons best known to them did not

take the benefit of this offer.  We may also add that if they had

taken the benefit of this offer there could have been a reduction of

the demurrage as was done in the case of other importers.   

45. As  far  as  the  period  after  the  first  week  of  February  is

concerned, from the record it is apparent that the revenue sent

samples of the goods imported to M/s. TCR.  As per the reports of

TCR eight of  these consignments were hot rolled coils and not

cold rolled coils.  The allegation of the petitioner is that the report

of Mr. Tambi was not accepted and the goods sent to M/s. TCR

37

for  analysis  even though M/s.  TCR did not  have  the  requisite

facilities to carry out the tests.  The revenue cannot be barred

from asking for a second test.  Whether M/s. TCR were competent

to carry out the test or not is not for us to decide.  However, in

these tests, eight of the consignments were found to be violating

the import guidelines.  Even thereafter, offer were given to the

assessee to de-stuff the goods and also to get the goods released

for provisional assessment which offer was not accepted by the

assessee.   

46. We are, therefore, clearly of the view that even though there

may  be  some  delay  on  the  part  of  the  DRI  and  the  customs

authorities,  the  respondent-importers  have  also  been  guilty  of

delaying the matter and, therefore, they cannot claim that they

are not liable to pay demurrage and detention charges.  We may,

however,  clarify  that  the  respondent-importers  are  free  to

approach the Mumbai Port Trust in terms of Section 53 of the Act

for exemption and remission of demurrage and other charges and

the  Board  may  take  a  sympathetic  view while  considering  the

case of the respondent-importers under Section 53.

47. As  far  as  detention  charges  of  the  Shipping  Line  are

concerned, in addition to what we have observed above, we are of

38

the view that the High Court could not in writ proceedings have

directed the DRI/Customs to pay the  detention charges to the

Shipping  Line  since  these  were  to  be  paid  on  the  basis  of  a

contract between the respondent-importers and the shipping line.

In view of  the  above  discussion,  the  appeals  are  allowed.

The judgment of the High Court is set aside and the writ petitions

filed by the respondent-importers are dismissed.  No order as to

costs.  Pending application(s), if any, stand(s) disposed of.

……………………………J. (MADAN B. LOKUR)

……………………………J. (DEEPAK GUPTA)

New Delhi July 27, 2017