REFUND OF WAREHOUSING CHARGES

[Mr. M. GOVINDARAJAN]

Section 57 of the Customs Act, 1961 (‘Act’ for short) provides that  at any warehousing station, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may appoint public warehouses wherein dutiable goods may be deposited.  Section 59 provides that the importer of any goods specified in sub-section (1) of section 61, which have been entered for warehousing and assessed to duty under section 17 or section 18 shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods.   When the provisions of section 59 have been complied with in respect of any goods, the proper officer may make an order permitting the deposit of the goods in a warehouse.  The owner of any warehoused goods shall pay to the warehouse-keeper rent and warehouse charges at the rates fixed under any law for the time being in force or where no rates are so fixed, at such rates as may be fixed by the Commissioner of Customs.   If any rent or warehouse charges are not paid within ten days from the date when they became due, the warehouse-keeper may, after notice to the owner of the warehoused goods and with the permission of the proper officer cause to be sold (any transfer of the warehoused goods notwithstanding) such sufficient portion of the goods as the warehouse-keeper may select.

The issue to be discussed in this article is whether the warehousing charges paid by the assessee can be got refunded under the provisions of Customs Act with reference to the decided case law.

In ‘Principal Commissioner of Customs (Prev) V. Suren International Limited’ – 2017 (8) TMI 207 - DELHI HIGH COURT the assessee imported 40 containers of Aluminium/Copper scrap.  When the goods were examined by the Department they found there was a grossly erroneous declaration of weight and description of goods.  The Department the goods on 07.08.2001 at the value of ₹ 14,59,101.  The Department also seized the goods valued ₹ 145.72 lakhs and ₹ 395.22 lakhs.    By adjudication order on 30.06.2003 the Commissioner of Customs confiscated the goods with an option to redeem them on payment of redemption fines of ₹ 4 crores and ₹ 2.5 crores.   Penalty was also imposed.

The assessee filed appeal before the Tribunal against the order of Commissioner.   During the pendency of the appeal, the assessee approached the Department for release of confiscated goods after payment of fine and penalty.  The seized goods had been kept in the warehouse of the Central Warehousing Corporation from May 2003 onwards.  The Revenue required the assessee to deposit the warehousing charges of CWC for a sum of ₹ 33,99,896.  The said charges were paid by the assessee under protest.

The assessee, thereafter sought refund of the warehouse charges paid by him which was rejected by the Assistant Commissioner of Customs on 05.12.2008.  The assessee filed appeal before the Commissioner (Appeals) against the order of Assistant Commissioner.  The Commissioner (Appeals) dismissed the appeals.

The assessee, thereafter filed appeal before the Tribunal.  The Tribunal set aside the order of the Assistant Commissioner and Commissioner (Appeals).  The Tribunal held that the Adjudicating Authority has not passed any order for payment of rent by the appellant for the period of seizure of goods.   In these circumstances the appellant is not liable to pay rent.  As the appellant paid the amount under protest, the amount is refundable to the appellant as the appellant has no liability to pay rent.

Aggrieved against the order of the Tribunal, the Revenue filed appeal before the High Court.  The High Court observed that there is no mention of the provision of law in terms of which the CESTAT has granted relief to the assessee.  The CESTAT is a statutory tribunal deriving powers and jurisdiction from the specific provisions of the statutes it deals with, one of which, in the context of the present appeal, is the Customs Act.  In the exercise of such powers, the quasi judicial authorities may have to refer to and/or apply the relevant statutory provisions.   It is also possible that in terms of the specific provisions of the Acts, they may have certain discretionary powers.  Even such powers have to be exercised reasonably and within the ambit of the Act.

The High Court held that where refund of a sum paid as warehousing charges is sought by an importer, the authority to whom the application is made will first have to examine under what provision of law such a request is made and whether such a request can in fact be entertained.  In the present case, while dismissing the assessee’s appeal, the Commissioner (Appeals) that the respondent failed to point out the provision of law under which it was seeking refund of warehousing charges.

The High Court raised the same question before the assessee.  He first referred to   Section 27 of the Customs Act.   Section 27 does not envisage refund of tax of warehousing charges.  Then he referred Chapter IX of the Act which deals with ‘warehousing’.  Again he was unable to point out any particular provision in terms of which an importer could seek refund of the warehousing charges after payment of the redemption fine and penalty.

The High Court further analyzed the provisions of Customs Act.

• Section 49 provides for warehousing of imported goods pending clearance.  The Customs authorities can permit the importer, on his making an application, to deposit the goods entered for home consumption in a private or public warehouse for a specified period pending clearance;
• Sections 59 to 73A are general provisions under which the importer may warehouse imported goods;
• Section 61(2) talks the exemption being granted from payment of interest on the customs duty in certain circumstances, where the detention is beyond a period of 90 days;
• Section 64 spells out the owner’s right to deal with the warehoused goods;
• Section 68 provides clearance of warehoused goods for home consumption;
• Section 69 provides for clearance of warehoused goods for export do not envisage refund of warehouse charges;
• Section 73 provides that the cancellation of the warehousing bond is condition upon payment of all amounts due on account of such goods.  The expression ‘all amounts’ is obviously not restricted to customs duty, penalty, fine etc.,  It would include the warehousing and/or demurrage charges;
• Section 141 states that goods in the customs area would be subject to the control of officers of customs in such manner as may be prescribed.

The High Court observed that none of the provisions mention anything about the owner seeking refund of warehousing charges.   Besides these provisions, there appears to be no specific provision in the Act or the rules made there under which contemplates refund of warehousing charges.  The Court has also not been shown any regulation or circular which permits an application to make to an order of the Customs exercising powers of adjudication powers, to entertain and grant the prayer for refund of warehousing charges.

The High Court held that in the present case, the CESTAT failed  to refer to the Customs Act and ascertain if there was any provision therein that permitted the adjudicating authority under the Companies Act to entertain, much less grant, the assessee’s application for refund of warehousing charges.  The assessee’s liability to pay the warehousing charges is independent of the liability to pay the customs duty, interest, fine, penalty etc.,  This is made explicit in section 73 of the Act.

The assessee contended that in the present case the warehousing of the imported goods was itself illegal since it was without any application made by the assessee.  The High Court held that if the assessee has any other remedy available to it, in accordance with law, this order will not prevent it from seeking such remedy.  The High Court allowed the appeal and set aside the order of the Tribunal.