TMI Blog1994 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of 1,00,000 pieces and 60,000 pieces of polyester shorts on October 9, 1989 and November 3, 1989 respectively. It is claimed that the goods were exported to the foreign buyer, who remitted the requisite foreign exchange. On January 2, 1990 the petitioner applied to the Joint Chief Controller of Imports and Exports for advance import licence for the import of duty free polyester fabric under Chapter XIX of the Import Policy for the period AM 1989-91. On January 31, 1990 the petitioner was issued Duty Exemption Entitlement Certificate (for short "DEEC" book No. 008053 and duty free advance import licence No. PK/3297494. Under the Advance Licence the petitioner was allowed to import 80,000 meters of 100% polyester fabric of CIF value of Rs. 16,16,000/- as per the following details : 1. Width - 150 Cms. 2. Denier - 150-300 3. The import was subject to the condition that the petitioner would export 1,60,000 pieces of shorts made out of the imported 100% polyester fabric of the aforesaid denier of FOB value of Rs. 24,48,000/-. In accordance with the aforesaid policy all imports under export obligation are duty free. 3. The petitioner claims to have fulfilled the export ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out as the fabric would be damaged. Since on the basis of the examination of 10% of the goods it was found that the fabric was in excess by 92 meters in length and 23.51 kgs. in weight, the Assistant Collector of Customs was of the opinion that the goods were misdeclared both in length and weight. According to the Assistant Collector (Customs) 100% examination of the goods was required to be done but this was not resorted to as the entire lot of goods was composed of a single item, namely, polyester fabric which was of a perishable nature. However, it was decided by him that another 10% of the goods should be measured and examined and weight of 100% goods should be taken. On examination by this method it was found that total excess length worked out to be 843.85 meters. The CIF value of the excess goods was placed by the Assistant Collector at Rs. 17,0000/-. The Assistant Collector therefore, held the view that the goods to the extent of the above quantity and value were sought to be cleared without valid licence and without payment of duty by misdeclaring the same and hence were liable for confiscation under Section 111(d) and (m) of the Customs Act, 1962. 4. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . had neither been issued by him nor had he ever sold any goods to it. In the counter-affidavit it is also pointed out that the statement of Shri Moti Singh, Proprietor of M/s. Fine Garments, G-52 Partap Nagar was recorded under Section 108 of the Customs Act. According to him, he had fabricated about 1,60,000 shorts for M/s. R.C. Fabrics but he was not aware whether the fabric used for stitching the shorts was polyester or some other material. With regard to the adjudicating order passed on January 10/15, 1991 it was stated that the same was irrelevant for the purpose of the present writ petition. Besides, it was denied that the goods were being detained arbitrarily and unauthorisedly or the authorities were acting in colourable exercise of their power. 6. After filing of the counter-affidavit, when the matter came before the Division Bench on February 11, 1991, a request was made on behalf of the respondents for grant of time to further investigate the matter. In accordance with the request this Court allowed the investigation to be completed within one week and also permitted the customs to issue a show cause notice to the petitioner. Liberty was also given to the petitioner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o permitted to file additional submissions before the Collector of Customs, who was to deal with the same including the question of his jurisdiction to proceed with the matter in view of the existence of an earlier order of adjudication dated January 10/15, 1991. 7A. On October 22, 1993 the Collector of Customs, on consideration of the matter including the reply of the petitioner and the additional submissions filed by it, passed an order upholding the contention of the petitioner that the show cause notice issued on February 18, 1991 was without jurisdiction as earlier adjudication proceedings had culminated in the order dated January 10/15, 1991. While upholding the contention of the petitioner the Collector also noticed that the test report dated November 26/December 4, 1990 was available when the adjudication order dated January 10/15, 1991 was passed by the Asstt. Collector of Customs but the Asstt. Collector made no mention of it in his order. He also found that the order of the Assistance Collector covered the entire consignment which was imported by the petitioner under Bill of Entry No. 151684, dated August 16, 1990. In the circumstances the Collector was of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying with the fourth respondent Central Warehousing Corporation. He further submitted that the goods were not released as the same were the subject matter of investigation in order to ascertain whether the import trade formalities were complied with by the petitioner and whether the goods tallied with the import licence. It was also contended that according to the test report dated November 26/December 4, 1990 polyester fibre of the goods was of a different denierage than what was declared in the invoice filed alongwith the Bill of Entry. In view of these submissions, it was therefore, urged by him that the goods were not detained arbitrarily, unauthorisedly and in colourable exercise of their power by the respondents. He also denied the liability of the Union of India to pay the demurrage and other charges of the fourth respondent. Learned Additional Solicitor General canvassed that the petitioner can secure the release of the goods without payment of demurrage and other charges or at the concessional rates only on the issuance of a detention certificate. 11. Learned Counsel, Shri Manvendra Verma, appearing for the fourth respondent contended that the petitioner was liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Collector of Customs the goods which were found to be in excess were confiscated and option was given to the petitioner to redeem the same on payment of redemption fine of Rs. 25,000/- and penalty of Rs. 5,000/-. This adjudication order was passed by the Assistant Collector on January 10/15, 1991. It is also not disputed that the petitioner complied with the order and paid redemption fine and the penalty. It is further not disputed that the adjudication order dated January 10/15, 1991 remained unchallenged and acquired finality. Therefore, once the conditions for the release of goods set out in the adjudication order were complied with by the petitioner, the goods could no longer be kept in detention. At this stage we may, however, mention that during the course of the proceedings in the writ petition, on the request made on behalf of the first and second respondents, the Division Bench on February 11, 1991 granted a week's time to them to complete the investigation; to issue a show cause notice to the petitioner; and to receive its reply and then to complete the adjudication proceedings and pass on order. As a result thereof the petitioner was served with a fresh show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in the order of the Assistant Collector of Customs dated January 10/15, 1991. Irrespective of the reasons for overlooking the report of the Central Revenue Control Laboratory by the Assistant Collector of Customs, his order dated January 10/15, 1991 acquired finality, and it was not permissible to initiate fresh adjudication proceedings in regard to the same consignment which was covered by the earlier order. Once the petitioner was given an option by the adjudicatory authority to redeem the goods on payment of fine, the goods were bound to be cleared by the customs on the petitioner complying with the conditions set out in the order. The Customs authorities were not correct in ignoring the order of the Assistant Collector dated January 10/15, 1991 which had acquired finality as they failed to report to the procedure laid down in sub-sections (2) to (4) of Section 129D(2) of the Customs Act, 1962 for setting aside the same. Once the adjudicatory authority gives an option to the importer to redeem the goods on payment of fine, the said order should be given effect to unless the procedure as laid down under sub-sections (3) to (4) of Section 129D of the Act is resorted to and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he custodian of goods under Section 45 of the Customs Act. As the Inland Container Depot is the custodian for the Customs authorities and the detention certificate has been issued by the Customs, then the Inland Container is bound to release the goods to the importer and with regard to the demurrage charges and ground rent charges, it is the Customs Department which is liable to the Container Corporation of India. 6. Counsel for the Container Corporation of India submitted that the Shipping Corporation of India Ltd. vide its letter dated January 28, 1991, has asked the Container Corporation not to release the goods although they had issued delivery order earlier to the importer. The importer shall get the delivery order revalidated. The demurrage charges prior to the date February 27, 1988, will be borne by the importer on which the Bill of Entries were submitted by the petitioner and after February 27, 1988, till the goods are released, the Customs Department would be liable for the payment of demurrage charges and ground rent charges to Container Corporation." 18. Again in M/s. Sundeep Industries and another v. Collector of Customs, New Delhi and Others, 44 (1991) Delhi Law T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and dominion of the goods became automatically vested in the petitioner. This right cannot be taken away by the respondents unless there is any legal warrant under the provisions of the Statute. During the period of divesting and vesting, in my opinion, there is no transfer of ownership, but there is only a transfer of dominion over the goods. Until duty, fine and penalty liable to be paid remains unpaid, the divesting of the goods from the petitioner and vesting in the respondents may amount to justified detention; but the moment the said charges are fully paid by the petitioner, the detention becomes illegal. Though it is not the case of the petitioner that the continued illegal detention of the consignment in question amounts to conversion. I am of the opinion that it would invariably have the effect of actionable conversion. Insistence of the respondents that both the consignments in respect of which duty, fine and penalty have been paid and the consignment for which such charges have not been paid should be together cleared after payment of the charges due to the respondents, in my opinion, amounts to unjustified refusal of release of the consignment in question. As long a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the delay in clearing the goods from the Port Trust was not due to the negligence of the importer. In that case the Supreme Court was mainly considering the question of legality of the scale of rates relating to demurrage etc. framed under Section 43 of the Bombay Port Trust Act, 1879 and the liability of the importer to pay the same when there was no evidence of the delay on the part of the port trust or of the persons for whom the port trust was responsible in releasing the goods. In this regard it was held as follows : "14. The position therefore is that even though the delay in clearing the goods was not due to the negligence of the importer for which he could be held responsible yet he cannot avoid the payment of demurrage as the rates imposed are under the authority of law the validity of which cannot be questioned. The claim cannot be resisted as there is no evidence that the delay was due to any act of the Port Trust or persons for whom the Port Trust is responsible." 23. It needs to be noticed that unlike the present case, question about the liability of the customs authorities to pay the charges was neither pleaded nor argued before the apex court in the aforesaid c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted the mistake by stating that the certificate was incorrectly issued as the goods were detained in order to ascertain whether the import trade control formalities were complied with and not for examination under Section 17(3) and Section 17(4) of the Customs Act. The port trust ultimately had to file a suit against the first respondent before the High Court of Madras for seeking recovery of demurrage. The High Court held, inter alia, that the scale of rates of demurrage fixed by the Trustees of Port of Madras was unreasonable and beyond the power of the Board. As regards the claim of the Trustees of Port of Madras against the first respondent, the High Court was prepared to hold the latter liable to pay the demurrage except for the fact that the scale of rates was unreasonable and beyond the power of the Board of Trustees. Thereupon Trustees of the Port of Madras appealed to the Supreme Court and prayed that its claim against the first respondent should be upheld. The Supreme Court set aside the judgment of the High Court and held that the scale of rates was reasonable and intra vires the power of the board. In so far as the liability of the first respondent was concerned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities are bound to restore the goods to the petitioner from the warehouse without petitioner having to pay the demurrage charge etc. to the warehouse. Property has to be released without any additional liability from the date when the justification of the seizure came to an end. This result is based on one of the facets of the general principle of Restitution. At this stage it will be necessary to discuss the principle in little more detail for considering the question of its applicability to the case in hand. 29. The doctrine of Restitution is a part of the Common Law. According to it money paid under mistake of fact or under duress is recoverable. But until recently money paid under mistake of law was irrecoverable in England. Thanks to the judgment of House of Lords in Woolwich Equitable Building Society v. Inland Revenue Commissioners, 1993 A.C. 70 which has reduced the rigour of the mistake of law rule by holding that money paid by a citizen of a public authority in the form of taxes or other levies pursuant to ultra vires demand by the authority, is prima facie recoverable by the citizen as a matter of right. The rule that money paid under mistake of law was irrecoverable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have eschewed technicalities in applying the doctrine of restitution and the same is being extended to embrace cases where money or goods or something of value was wrongly delivered to or taken over by another. 35. Even payments made under mistake pursuant to an unlawful demand can be recovered from the recipient thereof irrespective of the fact whether the mistake in making the payment is one of fact or of law. (See : Sri Sri Shiba Prasad Singh v. Maharaja Srish Chandra Nandi and Another, L.R. Vol. LXXVI IA 244 and Sales Tax Officer, Banaras and Others v. Kanhaiya Lal Mukandlal Saraf, 1959 S.C.R. 1350). 36. It is also well established that in a case where the payment is demanded and made as a consequence of an unconstitutional, invalid and ultra vires demand, the fact of coercion need not be proved as the same will be presumed (See : M/s. Tilokchand Motichand and Others v. H.B. Munshi, Commissioner of Sales Tax, Bombay and Another, AIR 1970 S.C. 898 at page 907 (Para 34). 37. Therefore the position is that if money is paid to the public authority which the person was not liable to pay, he can recover the same except where it would be inequitable to accept his claim. What ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles in Woolwich Equitable Building Society v. Inland Revenue Commissioners, (1993 A.C. 70). 20. In regard to the law of restoration of loss or damage caused pursuant to judicial orders, the Privy Council in Alexander Rozer Charles Carine v. The Acomptior D' Escompte Paris, 1869-71 (3) AC 465 at 475 stated : ".................one of the first and highest duties of all courts is to take care that the act of the court does no injury to any of the Suitors, and when the expression "the act of the court is used, it does not mean merely the act of the Primary Court or of any intermediate Court of Appeal, but the act of the court as a whole, from the lowest court which entertains jurisdiction over the matter up to the highest court which finally disposes of the case." " 21. In Jai Berham Others v. Kedar Nath Marwari Ors. (AIR 1922 P.C. 269 at 271), the Judicial Committee referring to the above passage approval added: "It is the duty of the Court under Section 144 of the Civil Procedure Code to "Place the parties in the position which they would have occupied, but for such decree or such part thereof as has been varied or reversed. Nor indeed does this duty or jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use of setting aside or reversing a wrong order of the court if a party who has suffered as a consequence thereof remains seething with pain of injustice even when the order is knocked down? Healing touch in such a case is a must. The stain of injustice must be removed, at least bleached if it is not possible to totally eradicate it. In the present case, at least the money value of the goods which have been sold by the plaintiffs should be secure and available, in the event of the plaintiffs failure to establish their lien in a suit which Mr. Sahai, learned counsel for the plaintiffs says has been instituted by them in a court at Chandigarh or in any other appropriate proceedings which the parties may institute within the time imperative prescribed by law. 30. A litigant is not to suffer because of a wrongful act of the court. There are large number of authorities to support this doctrine. A few cases need be cited. In Jang Singh v. Brij Lal and Others, AIR 1966 SC 1631 at page 1633 the Supreme Court held as follows : "There is no higher principle for the guidance of the court than the one that no act of courts should harm a litigant and it is the bounden duty of courts to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, we have no doubt whatsoever that the petitioner would have succeeded in its claim for recoupment of the amount against the first three respondents. Now the question which arises is whether the petitioner is entitled to restitution of the goods without payment of warehouse charges by it after January 15, 1991 and whether the first three respondents are bound to satisfy the demand of the fourth respondents in regard to demurrage and other charges after January 15, 1991 for the storage of goods in question in the Container Freight Station for the purpose of restoring of the goods to the petitioner. In order to appreciate the situation, the following example would be apposite. 43. Suppose "X" owes a debt to "Y". "X" forces "Z" to pay it for him to "Y" under duress. "Z" would be entitled to recoupment from "X" and it will make no difference that "Z" paid "Y" rather than X directly. Similarly when the importer pays the charges of a warehouse where the goods had been illegally and unauthorisedly detained by the customs, he will be entitled to recoupment of the amount paid by him from the latter, on the basis that customs must suffer the consequences of its unlawful act. In such a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents have explained the position. 47. There is another disquieting feature of the case. As noted by us in the earlier part of the judgment, the Assistant Director, DRI, Shri Shalinder Sharma in the counter-affidavit affirmed by him in November 23, 1990 stated in reply to para 4E of the petition that the goods were never verified from the angle whether the same were made from polyester fabric and the petitioner did not submit any test report in regard thereto. The affidavit in this regard reads as under : "21. With reference to para 4-E of the petition, it is submitted that the goods are never verified from this angle whether the same are made of polyester fabrics and the petitioner have not submitted any test report in respect of their contention..........." 48. This assertion has not been made with due care and caution as is expected of an honest and forthright officer. From a perusal of the show cause notice dated February 18, 1991 which was issued to the petitioner under the signatures of the same officer, it is clear that the petitioner had submitted two test reports dated February 5, 1990 and March 16, 1990 and as per the test reports, the samples were made of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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