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PETITIONER: KESORAM REYON (A UNIT OFM/S KESORAM INDUSTRIES LTD.)

       Vs.

RESPONDENT: THE COLLECTOR OF CUSTOMS,CALCUTTA

DATE OF JUDGMENT:       23/08/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) SEN, S.C. (J)

CITATION:  JT 1996 (7)   519        1996 SCALE  (6)123

ACT:

HEADNOTE:

JUDGMENT:                 THE 23RD DAY OF AUGUST,1996 Present:           Hon’ble Mr.Justice S.P. Bharucha           Hon’ble Mr.Justice S.C. Sen Mr.Dushyant Dave,  Sr. Adovocate, Mr. Shahid Rizvi, Mr.Aseem Malhotra Mr.  Darshan Singh,  Advocates  with  him  for  the appellants. Mr. M.G.Shanker  Murthy and Mr.V.K.Verma, Adovocates for the respondent.                       J U D G M E N T The following Judgment of the Court was delivered: Kesoram Rayon (a unit of M/s Kesoram Industries Ltd.) V. The Collector of Customs, Calcutta.                       J U D G M E N T BHARUCHA.J:      This is  an appeal  against an  order of  the  Customs, Excise &  Gold (Control)  Appellate Tribunal.  It  raises  a question of  some importance  relating to  the rate at which Customs duty  is to  be levied  on goods  that remain  in  a bonded warehouse beyond the permitted period.      The appellants imported and, on 25th May, 1984, filed a bill of  entry for  4832 bales  of rayon grade wood pulp for warehousing. The  4832 bales  were warehoused  on 16th June, 1984, in  a private  bonded warehouse  of the appellants. Of these, 4000  were cleared and we are concerned only with the remaining 832  bales (now  referred to as ’the said bales’). The period  of three  months for  which the  said bales were warehoused under  the provisions  of Section 61(1)(b) of the Customs Act,  1962 (hereinafter  referred to  as ’the  Act’) came to  an end  on 15th  September, 1984. On 8th May, 1985, the Assistant  Collector of Customs issued to the appellants a demand  notice under Section 72(1) of the Act. It recorded that  the  said  bales  remained  in  the  bonded  warehouse

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although the  period of  warehousing had  not been  extended beyond 15th  September, 1984. The appellants had, therefore, become liable  to pay  in respect  of the said bales Customs duty in  the sum  of Rs.6,73,885.80,  countervailing duty in the sum of Rs.1,63,657.98 and interest at the rate of 12 per cent per  annum in  the sum  of Rs.67,003.52  for the period 16th  September,   1984,  to   15th  May,  1985,  under  the provisions of Section 72(1)(b). Giving credit for the amount of  Rs.8,03,458.32   which  had   been  deposited   by   the appellants, the  appellants were  called  upon  to  pay  Rs. 1,01,88.98 plus interest after 15th May, 1985, till the date of removal  of the  said bales from the bonded warehouse. If the amount  was not  paid within  7 days  of receipt  of the demand notice, it was recoverable in terms of the provisions of Section  72(2), without  prejudice to  any other  mode of recovery. On  30th May, 1985, the appellants filed a bill of entry for  ex-bond clearance  of the  said  bales  for  home consumption. On  25th June, 1985, the appellants were served with an  order in  respect of  the bonded  warehouse  within which the  said bales  were stored.  The order  recalled the demand notice  dated 8th  May, 1985, and the deposit made by the appellants  thereunder. lt directed the Suprintendent of the bonded  warehouse to  allow clearance  of the said bales after realisation  of such amount as was due, It stated that the bonded  warehouse would  be treated  as de-licensed from the date  on which  the said  bales were  cleared and action regarding cancellation  of the  bond given  by the appellant was completed. The order concluded :      "It is  clarified  for  removal  of      doubts that  the  warehoused  goods      which will  be cleared on the basis      of the  instant order  will not  be      cleared on ex-bond Bill of Entry as      this is  not a  case  of  clearance      under Section  68 of  Customs  Act,      ’62 but  on realisation  of charges      under Section 72 ibid." Between 29th  June and  2nd July,  1985, the said bales were removed from the boned warehouse.      On  25th   May,  1984,  when  the  bill  of  entry  for warehousing the  said bales  was filed,  they were liable to Customs duty.  By virtue  of an exemption notification dated 17th March,  1985, pulp  derived from  vegetable  fibre  was exempted from the payment of Customs and additional duties.      The contention of the appellants before the authorities below and  the Tribunal was that the rate of Customs duty in force on  the date  of removal  of the  said bales  from the bonded warehouses  was the applicable rate, having regard to the provisions  of the  Section 15(1)(b),  and, by virtue of the  exemption  notification  aforementioned,  no  duty  was payable thereon. The Tribunal noted that the said bales were removed from  the bonded  warehouse after  the expiry of the bonding period. They had not been cleared from the warehouse under Section  68 but  had been  removed on the basis of the order under  Section 72.  No ex-bond  bill of entry for home consumption had  been filed  by the  appellants and no order for clearance  for home  consumption had  been made. Section 15(1)(b) became  applicable when  goods were  cleared from a warehouse  under   Section  68.  After  the  expiry  of  the warehousing period  the said  bales ceased  to be warehoused goods and  were removed under the order passed under Section 72. In such a case, the applicable rate of duty was the rate in force  on the  date of  filing of  the into-bond  bill of entry, as provided in Section 15(i)(b) read with the proviso to Section 15(1) and Section 46. The Customs authorities had

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charged duty  on the  said bales  at  this  rate  under  the provisions of Section 72. Interest was also recoverable from the appellants for storage of the said bales after expiry of the bonding  period. There  was, therefore, no illegality in the order  of the  Customs authorities  and the  appeal  was dismissed.      Section 2  of the  said Act  is its definition section. Under sub-section (43), "warehouse" means a public warehouse appointed under  Section 57  or a private warehouse licensed under Section  58. Under sub-section (44), "warehouse goods" means goods  deposited in  a warehouse.  Section 12 requires that Customs  duty shall  be levied,  at such  rates as  are specified in the Customs Tarrif Act or any other law for the time being  in force,  on goods imported into India. Section 15, insofar as is relevant, reads thus :      "SECTION 15. Date for determination      of  rate   of   duty   and   tariff      valuation of  imported goods. - (1)      The  rate   of  duty   and   tariff      valuation, if  any,  applicable  to      any imported  goods, shall  be  the      rate and valuation in force,      (a) ................ ;      (b)  in the  case of  goods cleared           from a warehouse under section           68, on  the date  on which the           goods  are   actually  removed           from the warehouse;      .................................."      Section 18  deals with  the provisional  assessment  of duty. Sub-section (2), so far as is relevant, reads thus :      "    SECTION     18.    Provisional      assessment of duty, -      (1)................................      2).................................      (a)................................      (b)  in   the  case  of  warehoused      goods,  the   proper  officer  may,      where the  duty finally assessed is      in   the   excess   of   the   duty      provisionally assessed, require the      importer to execute a bond, binding      himself in a sum equal to twice the      amount of the excess duty."      Section 46  requires the  importer of  goods other than goods intended  for transit  or transhipment,  to make entry thereof by  presenting to the proper officer a bill of entry for home  consumption or warehousing in the prescribed form. Section 47, sub-section (1) reads thus :      "47. Clearance  of goods  for  home      consumption. - (1) Where the proper      officer is satisfied that any goods      entered for  home  consumption  are      not  prohibited   goods   and   the      importer has  paid the import duty,      if any,  assessed thereon  and  any      charges payable  under this  Act in      respect of  the  same,  the  proper      officer   may    make   an    order      permitting clearance  of the  goods      tor home consumption."      Chapter IX  deals with  warehousing. Under the terms of Section 59  therein,  the  importer  of  goods  entered  for warehousing and assessed to duty under Section 17 or Section 18 is  required to execute a bond binding himself in the sum

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equal to twice the amount of the duty assessed on such goods to observe  all the  provisions of the Act and the rules and regulations in respect of such goods and to pay on or before the date  specified in  the notice  of demand all duties and interest payable  under Section  61  and  rent  and  charges claimable on account of such goods under the Act.      Section 61 reads thus :      "SECTION 61, Period for which goods      may  goods   may  be  left  in  the      warehouse   in   which   they   are      deposited or  in any  warehouse  to      with they may be removed,      (a) in the case of-      (i) non-consumable stores; or      (ii) goods intended for supply to a           foreign diplomatic mission; or      (iii)goods intended  for use in any           manufacturing process or other           operations in  accordance with           the provisions of section 65;      (iv) goods  intended for use in any           hundred   per    cent   export           oriented undertaking; or      (v)  goods   which    the   Central           Government  may,   if  it   is           satisfied that it is necessary           or  expedient  so  to  do,  by           notification in  the  Official           Gazette,   specify   for   the           purposes of  this clause, till           the expiry of one year.      Explanation.- For  the purposes  of      subclause (iv),  "hundred per  cent      export  oriented  undertaking"  has      the same  meaning as in Explanation      2 to  sub-section (1)  of section 3      of the  Central  Excises  and  Salt      Act, 1944 (t of 1944);      (b)  in  the   case  of  any  other           goods,  till   the  expiry  of           three months,  after the  date           on which  the  proper  officer           made an order under section 60           permitting the  deposit of the           goods in  warehouse;      Provided that :      (i)  in the case of any goods which           are likely to deteriorate, the           aforesaid period  of one  year           or three  months, as  the case           may be,  may be reduced by the           Collector of  Customs to  such           shorter period  as he may deem           fit;      (ii) in the case of any goods which           are not likely to deteriorate,           the aforesaid  period  of  one           year or  three months,  as the           case   may    be,   may,    on           sufficient cause  being shown,           be extended  by the  Collector           of Customs  for a  period  not           exceeding six  months  and  by           the  Board  for  such  further           period as it may deem fit;

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         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  subsection (1) by reason of      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 of 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 :           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."      Section 62  states that  all warehoused  goods shall be subject to  the control  of the  proper officer  and that no person shall  enter a warehouse or remove any good therefrom without has permission. Section 68 reads thus :      "SECTION    68.     Clearance    of      warehoused    goods     for    home      consumption. -  The importer of any      warehoused goods may clear them for      home consumption if -      (a)  a  bill   of  entry  for  home           consumption  respect  of  such           goods has  been  presented  in           the prescribed form ;      (b)  the import  duty  leviable  on           such goods  and all penalties,           rent,   interest   and   other           charges payable  in respect of           such goods have been paid; and      (c)  an order for clearance of such           goods for come consumption has           been  made   by   the   proper           officer."      Section 71  requires that  no warehoused goods shall be taken out  of a  warehouse  except  on  clearance  for  home consumption or  re-exportation or  for  removal  to  another warehouse. Section 72 reads thus :-

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    "SECTION   72.   Goods   improperly      removed from  warehouse, etc. - (1)      in any of the following cases, that      is to say,-      (a)  where any warehoused goods are           removed from  a  warehouse  in           contravention of section 71 ;      (b)  where  any   warehoused  goods           have not  been removed  from a           warehouse at the expiration of           the period  during which  such           goods  are   permitted   under           section  61  to  remain  in  a           warehouse ;      (c)  where  any   warehoused  goods           have been  taken under section           64 as  samples without payment           of duty ;      (d)  where any  goods in respect of           which a bond has been executed           under  section  59  and  which           have not been cleared for home           consumption or exportation are           not duty  accounted for to the           satisfaction  of   the  proper           officer,      the proper  officer may demand, and      the  owner   of  such  goods  shall      forthwith pay,  the full  amount of      duty chargeable  on account of such      goods together  with all penalties,      rent, interest  and  other  charges      payable in respect of such goods.      (2) If  any owner  fails tn pay any      amount demanded  under  sub-section      (1),  the   proper   officer   may,      without  prejudice   to  any  other      remedy, cause  to be  detained  and      sold, after  notice  to  the  owner      (any   transfer    of   the   goods      notwithstanding)  such   sufficient      portion of  his goods,  if any,  in      the warehouse,  as the said officer      may select."      Learned counsel  for the  appellants submitted that the said bales  were liable  to  the  rate  of  duty  under  the provisions of  Section 15(1)(b)  : they  had  been  actually removed from  a bonded warehouse and is was the date of such actual removal  which was  determinative of the rate of duty applicable to  them. He drew support for his submission from the decision  of this  Court in D.C.M. and Another vs. Union of India  and another,  1995 Supp.(3)  SCC 223, where it was held that  a reading of Sections 15, 46 and 68 made it clear that they  provided an option tn the importer either to file a bill  of entry for home consumption straightaway (in which case he  had to  pay the  duty determined  with reference to that date)  or to  file a  bill of entry for warehousing. In the latter  case, the  goods were  warehoused.  Import  duty would be  levied at  the  rate  and  on  the  basis  of  the valuation  determined  in  accordance  with  the  provisions prevailing on  the date  of clearance from the warehouse for which purpose the importer mad to file a fresh bill of entry home consumption.  In other words, it was the date of filing the bill  of entry for home consumption which determined the rate of  duty in clauses (s) and (b) of Section 15. Inasmuch

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as the  matter was  left to  the option  of the importer and also because  a uniform  principle was  adopted by  the Act, there  was   no  room   for  any   legitimate  grievance  of discrimination. There  was no  presumption that  the rate of duty always  went up.  It could  also go down, in which case the importer stood to gain.      Learned counsel  for the  appellants submitted,  in the alternative, that  the rate  of duty  applicable to the said bales was the rate in force on 8th May, 1985, being the date on which  the demand  notice under  Section 72 was issued to the appellants.      Learned counsel  for the  Customs authorities submitted that the permissible period of warehousing of the said bales being over, Section 15(1)(b) had no application, nor was the date of the demand notice under Section 72 relevant.      The Tribunal  proceeded on  the basis  that no  ex-bond bill of  entry for  home consumption  had been  filed by the appellants in the prescribed form and no order for clearance for home  consumption has been made by the proper officer on the bill  of  entry.  Learned  counsel  for  the  appellants however, drew  our attention  to a  letter dated  and  July, 1988, written  by the  Customs authorities  in reply  to  an inquiry by  the appellants about their ex-bond bill of entry for home  consumption filed on 30th May, 1988, in respect of the said  bales. The  letter state  that the  bill of  entry could not  be traced in the Customs records but, "As per our record, the  said Bill  of Entry  for ex-Bond  clearance for home consumption  for clearing  832 of  Wood Pulp  from  the Private Bonded  Warehouse at  Mogra  was  filed  by  you  on 30.5.1985."  By   reason  of  this  letter  of  the  Customs authorities, we  proceed upon  the basis that the appellants had filed  a bill of entry for home consumption on 30th May, 1985, in  respect of the said bales, but there is nothing to indicate that an order for clearance thereon had been made.      Section 61 prescribes the period for which goods may be warehoused. They  may be left in the warehouse in which they are deposited  for the  period of  one year if they are such goods as  are referred  to in clause (a) of sub-section (1), and for  the period of three months counted from the date of the order permitting warehousing if they are not such goods. The  first  proviso  to  sub-section  (1)  contemplates  the reduction of  the periods  aforementioned, of  one year  and three months respectively (now referred to as "the permitted periods"), if  the goods  are likely to deteriorate. It also permits, if  the goods  are not  likely to  deteriorate,  an extension of the permitted periods on sufficient cause being shown; the  Collector of  Customs can  extend the  permitted periods by  six months  and the  Central Board of Excise and Customs can  do so for as long as it deems fit. By reason of sub-section (2),  interest is  payable on the amount of duty on the  warehoused goods  for the  period from the expiry of the permitted  periods till the date of their clearance from the warehouse, regardless of whether the goods have remained in the  warehouse beyond  the permitted periods by reason of extension of such periods otherwise.      Put briefly,  so far as it is relevant for our purpose, warehousing is  permissible for  only a  stated period;  the period is  extendible if  cause for  doing so is shown; and, whether or  not the  permissible period  has been  extended, interest on  the amount  of duty  on the warehoused goods is payable for  the period subsequent to the permissible period upto their clearance.      Section 72  deals with  goods improperly removed from a warehouse. Goods  are improperly  removed from  a  warehouse under the  terms of  sub section  (1) if  they  are  removed

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without clearance under Section 71 (clause (a) ; if they are taken as  samples but  without payment of duty (clause (c) ; if a  warehousing bond  has been  executed in respect of the goods under  Section 59  but  they  are  not  satisfactorily accounted for  (clause (d)  ); and  if they  have  not  been removed  from   the  warehouse  on  the  expiration  of  the permitted period  or its  permitted extension (Clause (b) ). In all  such cases  the  Customs  officer  is  empowered  to demand, and  the importer shall pay, the full amount of duty chargeable on  the goods  and interest,  penalties, rent and other charges  thereon. If  payment as demanded is not made, it is  recoverable by sale of other goods of the importer in the warehouse.      Goods which are not removed from a warehouse within the permissible period  are treated  as goods improperly removed from the  warehouse. Such  improper removal takes place when the goods  remain in  the  warehouse  beyond  the  permitted period or its permitted extension. The importer of the goods may be  called  upon  to  pay  Customs  duty  on  them  and, necessarily, it  would be  payable at the rate applicable on the date of their deemed removal from the warehouse that is, the date  on which  the permitted  period or  its  permitted extension came to an end.      Section 15(1)(b)  applies to  the case of goods cleared under Section  68 from  a warehouse  upon presentation  of a bill  of  entry  for  home  consumption;  payment  of  duty, interest, penalty,  rent and other charges; and an order for home  clearance.   The  provisions   of  Section   68   and, consequently, of Section 15(1)(b) apply only when goods have been cleared  from the warehouse within the permitted period or its  permitted extension and not when, by reason of their remaining in  the warehouse  beyond the  permitted period or its permitted  extension, the goods have been deemed to have been improperly removed from the warehouse under Section 72.      The decision  in the  case of  D.C.M. and  another  vs. Union of  India and another cited by learned counsel for the appellants dealt  with, and upheld, the constitutionality of Section 15(1)(b).  It did  not deal  with a  situation where goods continued  to remain  in a bonded warehouse beyond the permitted per . It does not assist the appellants case.      The permitted  period for  warehousing the  said  bales came to  an end  on 15th September, 1984, but the said bales remained in the bonded warehouse thereafter. The said bales, by reason  of the  provisions of  Section 72, were deemed to have been  improperly removed  from the  bonded warehouse on that day  and subject to duty at the rate then in force. The demand  notice   dated  8th   May,  1985,  called  upon  the appellants to  pay such  duty. The  order dated  25th  June, 1985,  pertaining   to  the   appellants’   private   bonded warehouse, rightly made it clear that the said bales had not been cleared  therefrom on  an ex-bond  bill of  entry under Section 68  but under  Section 72.  While the appellants may have filed  an ex-bond  bill of entry pertaining to the said bales on  30th May,  1985, there  is nothing  on record that suggests  that   clearance  thereon  under  Section  68  was ordered. Section 15(1)(b) has, therefore, no application.      The  consequence  of  non-removal  of  warehoused  good within the  permitted period  or the permitted extension is, by virtue  of the  terms of Section 72, certain. The date on which it  comes to  end is the date relevant for determining the rate  of duty.  When the duty is in fact demanded is not relevant.  The  alternative  submission  on  behalf  of  the appellants must, therefore, also be rejected.      The tribunal  took the view that the rate applicable to the said bales was the rate applicable on the date the into-

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bond bill  of entry  in respect thereof was filed. This view does not take into account the fact that the said bales were permitted to  be warehoused  and that  during the  permitted period of  three months  the appellants could have sought an extension. It  also does  not take  note  of  the  terms  of Section 72(1)(b) : the said bales would be treated as having been improperly  removed from the bonded warehouse only when they were  not removed  therefrom on  the expiration  of the permitted period  of three months. Since there was no change in the  rate of  duty during those three months, there is no alteration of the appellants’ liability.      The appeal is dismissed with costs.