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CASE NO.: Appeal (civil)  1356 of 2008

PETITIONER: Union of India & Ors

RESPONDENT: Shakti LPG Ltd. & Anr

DATE OF JUDGMENT: 18/02/2008

BENCH: TARUN CHATTERJEE & HARJIT SINGH BEDI

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO 1356 / 2008 (arising out of S.L.P.(C) No. 15278/2006) WITH C.A No 1357 / 2008  (arising out of SLP) NO.18978/2007)

HARJIT SINGH BEDI,J.

1.      Leave granted. 2.          The facts have been taken from SLP) No.  15278/2006. 3.          These appeals filed by the Union of India arise out of  the following facts :  On 6.3.1996 the respondent Shakti  LPG Ltd.  imported 1714.5 MT of boiler steel plates worth  Rs. 4.79 crores claiming that the said goods would be  utilized for the extension of their storage terminal at  Kakinada.  As the said import could be entitled to a  concessional rate of duty on the production of the  appropriate certificates which were then not available with  the importer, the goods were warehoused in one of the  bonded godowns of the Central Warehousing Corporation  on 30th May 1996 for an initial period of one year.   The  respondent thereafter applied for the extension of the  warehousing period which was allowed by the  Commissioner, Customs on 5th September 1997 upto 31st  March 1998.  A security deposit of about Rs.10, 00,000/-  and an advance customs duty of about Rs.98, 00,000/-  were deposited with the department on 31st March 1998 but  the goods were still not cleared. From 1998 till 31st January  2001, several notices were sent to the respondent to clear  the goods or to pay the duty and during this period the  warehousing period was extended six times with the last  extension expiring on 31st January 2001.  As the  respondent sought no further extension thereafter, the  aforesaid period came to an end.  Several notices were  thereafter issued to the respondent under Section 72(1) of  the Customs Act, 1962 (hereinafter called the "Act") raising  a demand of duty etc. As no reply was forthcoming, a notice  under section 72(2) of the Act was issued to the respondent  on 3rd December 2001 for sale    of the goods by auction so  as to recover of the outstanding dues.  Interestingly,  however, the respondent vide his letter dated 31st December  2004 also surrendered the goods with the result that it  ceased to have any claim over them.  The auction of the  goods was duly advertised and it was actually held on the  28th of September 2005 and on the same day the  respondent made a request for permission to re-export the

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goods under section 69(1) of the Act and for the cancellation  of the auction sale.  The respondent also filed Writ Petition  No. 6907 of 2005 before the Bombay High Court for  permission to re-export the goods.  This petition was  disposed of by the Bombay High Court on 19th October  2005 directing the Commissioner to dispose of the  respondent’s application for re-export of the goods by a  reasoned order after hearing the petitioner.   The personal  hearing was given to the respondent on 28th November 2005  wherein it was proposed to export the goods to a unit  operating in the special economic zone (SEZ) Pithampur in  Madhya Pradesh.  The Chief Commissioner by his order  dated 3rd January 2006 rejected the request of the  respondent to clear the goods for export to the SEZ without  payment of the duty on  the plea that such an export  was  not envisaged as it was within the country.  This order was  challenged by the respondent in Writ Petition No.60 of 2006  before the Bombay High Court once again praying that it be  permitted to export the goods outside India.   This petition  was dismissed as being devoid of merit vide order dated  13th January 2006 and a Special Leave Petition against the  said order was dismissed by this Court on 3rd February  2006.  Undeterred the respondent then moved an  application before the Bombay High Court seeking a review  of the order dated 13th January 2006.   This application too  was dismissed on the 22nd February 2006.  The respondent  then approached the Customs, Excise and Service Tax  Appellate Tribunal (CESTAT) by way of an appeal  challenging the order of the Chief Commissioner dated       3rd January 2006.  This appeal too was dismissed as  withdrawn on the request of the respondent.  The  department thereupon initiated proceedings for the re- auction of the goods on which the respondent submitted a  letter dated 8th June 2006 for permission to re-export the  goods to the UAE though without any supporting  documents.  The re-auction was held on 14th July 2006 and  the petitioner received a bid of Rs.3.78 crores which was  sufficient to meet only a part of the demand.  On 18th July  2006 the respondent filed yet another Writ Petition No.  4655 of 2006 before the Bombay High Court for a direction  to re-export the goods.  This Writ Petition came up for  hearing before the High Court on 26th July 2006 and the  High Court directed the department to file a statement as to  the expenses that had been incurred by it till date.  The  department thereupon filed a detailed affidavit in the  Bombay High Court pointing out  the repeated defaults on  the part of the respondent and that the protracted  proceedings in one forum or the other had resulted in a  revenue loss of Rs.8.55 crores.  This Writ Petition was  disposed of by the order dated 9th August 2006 by accepting  the undertaking of the respondent to re-export the goods by  14th September 2006 without calling upon the respondent  to pay any duty.  This order has been impugned in the  present Special Leave Petition.  The respondent thereafter  moved an application in CWP No. 4655 of 2006 before the  Bombay High Court seeking a clarification that the order  passed on 9th August 2006 was with consent of both  parties.  The Division Bench in its order dated 14th February  2007 observed that though the order dated 9th August 2006  did not specifically say that it was an order by consent but  the understanding was that it was in fact so.  This order  has been impugned by the Union of India in the connected  Special Leave Petition No. 18978/2007 on the ground that  no consent had even been given by it at the time when the  order dated 9th August 2006 had been made by the High

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Court. 4.           Mr. Gaurav Agrawal, the learned counsel for the  appellants has raised several arguments before us during  the course of hearing.  He has pointed out that the Act itself  did not visualize the extension of the bond period beyond  one year as per Section 61(1)(b) of the Act and that the  repeated extensions given to the respondent were, therefore,  not authorized by law.  He has pleaded that once the  maximum period of the bond had expired, the goods vested  in the Union of India under Section 72 and the importers  were divested of all rights therein.  He has, in addition,  pointed out that vide letter dated 31st December 2004 the  respondent had in fact surrendered all rights in the goods.   He has also submitted that the High Court was not justified  in interfering in the present litigation in favour of the  respondent as all the  legal and factual issues raised by the  respondent in the series of the earlier litigation it had  initiated, had been decided against it.  In this connection,  the learned counsel has placed primary reliance on the  order of the Chief Commissioner dated 3rd January 2006.  It  has finally been pleaded that the respondent was not  entitled to claim any relief, either in law or in equity as its  conduct had been absolutely undesirable.  5.              Mr. Sunil Kumar, the learned senior counsel for the  respondent No.1 has, however, argued that the main order  impugned in SLP No.15278/2006 was indeed a consent  order and it had been so clarified by the High Court itself  and as such the question of any interference therein was to  be ruled out.  He has in this situation placed reliance on the  judgment of this Court in Roop Kumar vs. Mohan Thedani  (2003) 6 SCC 595.  It has also been urged by the learned  counsel that several circulars had been issued by the  department of Customs itself under section 151-A  of the  Act which authorized the Commissioner or the Chief  Commissioner to extend the bonding period fixed by section  61 and as these circulars were of binding force, as held by  this Court in Commissioner of Customs,Calcutta & Ors.  V. Indian Oil Corpn. Ltd. & Anr. (2004) 3 SCC 488, the  primary argument raised by the learned appellant’s counsel  with regard to the maximum period of warehousing, had no  substance.  It has also pointed out that the surrender  document dated 31st December 2004 had been withdrawn  by the respondent vide letter dated 21st September 2005 on  the plea that it wanted to clear the goods and that an  application for this purpose had also been made under  section 69 of the Act.  In answer to Mr. Agrawal’s plea it has  been submitted that it was not open to the Union of India to  contend that a circular issued by one of its officers was  contrary to the Statute in the light of the judgment in the  case of Commissioner of Customs, Calcutta (supra).   6.           We have heard the learned counsel for the parties and  have gone through the record very carefully.  The matter  would turn on an examination of the various provisions of  the Act.  Section 46 of the Act deals with entry of goods on  importation and warehousing of the goods in certain  circumstances. Section 47 deals with clearance of goods for  home consumption.  Section 48 postulates that in case any  goods imported into India are not cleared for home  consumption or warehoused within thirty days from the  date of unloading, they may be sold by the proper officer.   Sections 61 and 72 in so far as relevant for our purpose are  reproduced below: "Sec.61.   Period for which goods may  remain warehoused. \026 (1) Any  warehoused goods may be left in the

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warehouse in which they are deposited or  in any warehouse to which they may be  removed,-

(a)     in the case of capital goods intended  for use in any hundred per cent  export oriented undertaking, till the  expiry of five years;

(aa)    in the case of goods other than  capital goods intended for use in  any hundred per cent, export- oriented undertaking, till the expiry  of three years; and

(b)     in the case of any other goods, till the  expiry of one year,                      

after the date  on which the proper officer  has made an order under section 60  permitting the deposit of the goods in a  warehouse:

Provided that \026 (i)     \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005. (A)     \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005. (B)     \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005.

(ii)    in the case of any goods  referred to in clause (b), if they  are likely to deteriorate, the  aforesaid period of one year  may be reduced by the  [Commissioner of Customs] to  such shorter period as he may  deem fit:

Sec.72.Goods improperly removed from  warehouse, etc. \026 (1) In any of the following  cases, that is to say, - (a)     xxx     xxx             xxx             xxx

(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)     xxx     xxx             xxx             xxx

(d)     xxx     xxx             xxx             xxx

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 to pay any amount

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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."

7.    Concededly the present case would fall within the scope of  Section 61(1)(b). The facts show that the goods imported by  the respondent had been warehoused on 30th of May 1996  initially for a period of one year i.e. the maximum permissible  period but which had nevertheless been extended time and  again on the request of the respondent upto 31st January 2001  whereafter no application for extension had been made. It is  also clear to us from the letter dated 31st December 2004 that  the respondent had intimated that he was surrendering the  goods as the purpose for which they had been imported could  not be implemented.   We are of the opinion that merely  because the respondent thereafter withdrew the offer of  surrender would not make any difference  to its cause.  Mr.  Sunil Kumar, the learned senior counsel has, however,  submitted that though the Statute did  indeed fix the  maximum period of warehousing to be of one year, yet the  various circulars issued by the Board under section 151 (A) of  the Act  had made a clear departure from the aforesaid  provisions.  He has in particular placed reliance on circulars  dated 14th January 2003 and 29th July 2002 which dealt  with  the special grant of the warehousing period by the Chief  Commissioner under Section 61.  The circular dated 14th  January 2003 is pre-faced by referring to the circular dated  29th July 2002 and the remarks that clarifications had been  sought whether goods imported and bonded in a warehouse  could be permitted to be cleared for export under section 69 of  the Act even though demand notices under section 72 had  been issued upon expiry of the initial or the extended period of  warehousing. The circular then goes on to read: "The matter has been examined in the  Board.  It has been decided that in case an  Importer makes  a request to permit re-export  of the goods under Section 69 of the Customs  Act, 1962, such a request may be allowed even  if the permitted period for bonding has expired  and demand notice has been issued, or it has  been decided to put the goods under auction.   Before permitting re-export in each such case,  however, it will be necessary to extend the  period of warehousing under Section 61 of the  Customs Act to enable the Importer to export  the goods within the permitted period of  warehousing."

8.       The circular dated 29th July 2002 is, however, a general  circular advising the Chief Commissioner to be liberal in  granting extension under section 61 of the Act.  Relying on the  aforequoted paragraph of the Circular of 14th January 2003,  Mr. Sunil Kumar has argued that the maximum period  visualized under section 61 of the Act could, therefore, have  been exceeded.  Mr. Gaurav Agrawal has raised a larger issue -  whether the circulars aforesaid could authorize a deviation  from the Statute itself but in the light of the peculiar facts of  the case we are not called upon to answer this question. We  note from the perusal of the circular dated 14th January 2003  that the request for re-export  of the goods could be allowed

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even if the maximum period of warehousing had expired and  demand notices had been issued and even if it had been  decided to put the goods to auction.  This circular obviously  would not apply to a situation where the goods had already  been put to  auction.  It is clear from the record that the first  auction of the goods had been fixed on the 28th September  2005.   However, vide letter dated 22nd September 2005 the  respondent had requested the department to stop the auction  and to allow it to clear the goods on payment of all charges  and promised to file the various documents in one day but did  not do so and on the contrary once again vide letter dated 28th  September 2005 moved another application for re-export of the  goods.  The auction of 28th September 2005 was also  challenged by the respondent in CWP No.6907/2005.  This  petition was dismissed on 19th October 2005 with a direction  that the application for re-export filed by the respondent be  disposed of by the Chief Commissioner by a reasoned order.    As already mentioned above, the Chief Commissioner vide his  order dated 3rd January 2006 rejected the prayer of the  petitioner for re-import of the goods as being legally untenable  and observing thus : "From the peculiar facts and  circumstances of the case as detailed above, it  is clear that the Importer have no intention,  whatsoever to clear the goods.  Their sole aim  throughout there almost a ’decade’ long period  has been to ’stall’ the disposal of these un- cleared time-expired bonded goods.  It is also  surprising to note that they have been taking  self-contradictory grounds to hamper the  disposal of the goods.  Once, they surrender  their title to the goods, then they come up with  a proposal to clear the same on payment of  duty  + interest leviable thereon and again they  plead that they want to re-export the goods to  a SEZ Unit in Pitampur.  All these  prevaricating and ever shifting stands taken by  them have resulted in non-disposal of the  time-expired bonded goods and non-realization  of valuable government revenue.  These  documented facts also clearly indicate that the  petitioner Importers have not come with clean  hands an their sole objective has been merely  to stop the disposal of valuable goods and a  huge amount of Revenue involved in it."

9.       The Chief Commissioner finally concluded that there  was no merit in the request of the petitioner dated               28th September 2005 to allow him any further extension of the  warehousing period for re-export of the goods.  This order was  challenged by the respondent in CWP No. 60 of 2006 which  too was dismissed and the Special Leave Petition filed  thereafter was also dismissed.  It is therefore clear from the  record that the   circular dated 14th January 2003 would not  be applicable in the present case as the application for  extension of time had been made on 22nd /28th September  2005 when the auction was to be held on 28th September,  2005 but had been stalled on account of the efforts of the  respondent  and that the respondent cannot be permitted to  take advantage of its own wrong and to say that though the  auction could not be finalized due its stalling efforts yet it was  entitled to fall back on the circular and to argue that the first   auction had not been held on 28th September 2005 but on    14th July 2006.  We are also of the opinion that the respondent

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having surrendered its title in the goods vide letter dated 31st   December 2004 it was not open to it to contend that this  surrender had been withdrawn subsequently.  In the light of  the present circumstances the observations made in  Commissioner of Customs, Calcutta (supra) can have no  applicability. 10.             We also note that as the respondents’ plea for re- export had been rejected upto the Supreme Court on 3rd  February 2006 in culmination of the proceedings in CWP  No.60 of 2006 in which all issues had been raised, no  interference is called for on this score as well. 11.     We have also considered the case of the respondent with  regard to the consensual nature of the order of the High Court  dated 9th August, 2006.  Notwithstanding the clarification  given by the High Court on 14th February, 2007, we can see no  consent on the part of the Union of India or its counsel. 12.     We accordingly allow both appeals without any order as  to costs.