Case Law Details
Sinochem India Company Private Limited Vs Union of India (Bombay High Court)
Explore Bombay High Court’s landmark ruling favoring Sinochem India against the Union of India. Analysis of chemical import dispute, court observations, and implications.
Introduction: In a landmark judgment, the Bombay High Court has recently delivered a significant victory for Sinochem India Company Private Limited against the Union of India. The court, in its decisive ruling, directed customs authorities to issue a detention charges waiver certificate concerning the importation of chemicals intended for use as fertilizers. This article provides an in-depth exploration of the case, a detailed analysis of the court’s findings, and the broader implications of this impactful legal decision.
Detailed Analysis:
- Background and Importation Process: The petitioner, Sinochem India, a leading importer, initiated the legal proceedings following the seizure of chemicals imported from China for use as fertilizers. The seizure memo issued prompted further scrutiny, leading to testing of the goods. Despite favorable test reports, a dispute arose concerning the valuation of the goods, attributed to the marginal difference between the invoice price and the manufacturer’s price, owing to export incentives in China.
- Provisional Release and Request for Waiver: Faced with the perishable nature of the goods and their essentiality for the upcoming paddy season in India, Sinochem India sought provisional release. Alongside, the petitioner persistently requested the issuance of a waiver certificate for detention charges imposed by the shipping line. However, these requests were met with unresponsiveness from the customs authorities.
- Legal Proceedings and Court’s Observations: The matter was brought before the Bombay High Court through a petition filed under Article 226 of the Constitution of India. The court, after hearing arguments presented by Ld. Counsel Bharat Raichandani, proceeded to evaluate the circumstances.The court’s detailed analysis included a scrutiny of the petitioner’s compliance with regulations, the customs authorities’ responses, and relevant circulars. It expressed dissatisfaction with the lack of response from the customs authorities, highlighting deviations from established circulars and rejecting reliance on specific regulations.Notably, the court upheld the petitioner’s correct declarations, distinguishing judgments cited by the Revenue. It also chose to keep the question of dispute between the petitioner and the shipping line open, recognizing the complexity of the matter.
Legal Precedents and Circulars:
- Detention Certificate Framework: To contextualize the court’s ruling, it’s essential to understand the framework for the issuance of detention certificates. Public Notice No. 111 of 1985 by the Bombay Custom House outlines specific circumstances warranting the issuance of such certificates. These include detention for import control formalities, pending test results, and other bona fide reasons. Importantly, the notice specifies that detention certificates should not be denied in cases where the delay is caused by Customs House Laboratory testing or routine appraisement processes.
- Regulation 10(1)(l) of Sea Cargo Manifest and Transhipment Regulations, 2018: Respondent nos.1 & 2 relied on Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018. This regulation places a responsibility on authorized carriers not to demand container detention charges for goods detained by customs for the purpose of verifying entries. However, the court rejected this contention, emphasizing the petitioner’s accurate and complete information regarding the price difference.
- Section 46(4A) of the Customs Act, 1962: Respondent nos.1 & 2 further relied on Section 46(4A) of the Customs Act, 1962, asserting that the petitioner failed to ensure the accuracy and completeness of information. The court, after analyzing the petitioner’s explanations and supporting documents, disagreed with this argument, stating that the petitioner had provided accurate and complete information.
Government Circulars and Instructions:
- Circulars Addressing Cargo Detention: The court took note of Circular No. 84/95 dated 25th July 1995, which emphasized the need to avoid long detentions of imported cargo at ports, highlighting the adverse impact on port congestion and container availability. The circular directed Customs authorities to move detained cargo to customs warehouses, releasing containers for other importers’ use. Circular No. 83/98-Customs and recent instructions such as No. 20/2021-Customs reiterated this approach.
- Court’s Critique of Customs Authorities: The court, in its analysis, expressed dissatisfaction with the customs authorities’ handling of the situation. It pointed out that the delay in releasing the goods was a result of the authorities’ detention for investigation, lasting almost two months. The court asserted that the authorities should have followed established procedures, including shifting the goods to a customs warehouse under Section 49 of the Customs Act.
Conclusion:
In conclusion, the Bombay High Court’s ruling in favor of Sinochem India signifies a crucial milestone in customs-related disputes. The court’s detailed analysis highlighted the importance of adherence to circulars, the need for timely responses from public officers, and the significance of facilitating the ease of doing business.
The judgment sets a precedent for importers facing similar challenges, emphasizing fair treatment, and the court’s directive for the issuance of a detention charges waiver certificate provides relief for Sinochem India. Importantly, the decision underscores the courts’ role in ensuring adherence to legal frameworks and promoting efficient customs procedures.
This case serves as a reminder to customs authorities to align with established circulars, promptly respond to requests, and adopt proactive measures to avoid unnecessary delays in cargo clearance. As legal precedents continue to shape customs regulations, importers and industry stakeholders can leverage such judgments to navigate and streamline their import processes. The Sinochem India case stands as a testament to the judiciary’s commitment to upholding fairness and transparency in customs-related matters.
The matter was argued by Ld. Counsel Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Rule. Rule made returnable forthwith. Mr.Mishra, learned counsel waives service on behalf of Respondent Nos.1 & 2. Ms.Mehta, learned counsel waives service on behalf of Respondent No.3. By consent of the parties heard finally.
2. By this petition filed under Article 226 of the Constitution of India, the Petitioner has prayed for various reliefs. However, at the time of the hearing, the petitioner has confined the reliefs as prayed for in prayer clauses (b) and (c) which read as under :-
“(b) That, in the facts and circumstances of the present case, this Hon’ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India, as this Hon’ble Court may deem fit, calling for the records of the case pertaining to the Petitioner case and after going into the legality and validity direct the Respondent No.2 to issue appropriate order and/or direction and/or detention waiver certificate to the Respondent No.3;
(c) That, in the facts and circumstances of the present case, this Hon’ble Court be pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other writ, order or direction under Article 226 of the Constitution of India, as this Hon’ble Court may deem fit, calling for the records of the case pertaining to the Petitioner case and after going into the legality and validity direct the Respondent No.2 to reimburse/refund the detention charges amounting to Rs.46,96,695/- paid by the petitioner to Respondent No.3 forthwith, along with interest thereon @ 18% p.a.;
3. Narrative of Events –
(i) The petitioner is engaged in the business of importing agrochemicals and selling insecticides in India.
(ii) On 19th/20th December 2020, the petitioner filed Bill of Entry No.9964993 dated 15th December 2020 (a new Bill of Entry was numbered as 2773198 dated 15th February 2021) for import of 17 containers containing goods namely “BUTACHLOR.” The said goods were imported from China.
(iii) On 13th January 2021, the Commissioner of Customs, Nhava Sheva addressed a letter to respondent no.2 granting permission to shift the said goods to a bonded warehouse under Section 49 of the Customs Act, 1962. This permission was granted pursuant to the petitioner’s letter of even date.
(iv) On 18th January 2021, the petitioner addressed a letter to respondent no.3 recording that the petitioner has obtained permission for temporary bonding of cargo from custom, pending test results from the laboratory.
(v) On 29th January 2021, the petitioner requested respondent no.2 to grant to the petitioner exemption from demurrage charges as per Public Notice No.(PN) 26/2010 dated 2nd March 2010 against Bill of Entry No.9964993 dated 15th December 2020.
(vi) On 5th February 2021, the petitioner once again requested respondent no.2 to issue demurrage waiver certificate to Continental CFS and detention waiver certificate to respondent no.3. The petitioner also requested that the goods may be released against the provisional duty bond since the same is detained for more than 45 days.
(vii) On 15th February 2021, the Senior Intelligence Officer, Nhava Sheva, passed a seizure memo in regard to the said goods on the ground that the unit price of goods in the supplier’s invoice is 17.661 RMB/kg, whereas unit price of goods in the manufacturer’s invoice is 18 RMB/kg. It was recorded that the petitioner had mis-declared the value of the said goods rendering the same liable to be confiscated under Section 111(m) of the Customs Act. The seizure memo also recorded discrepancies of 3 days between the dates mentioned on the supplier’s invoice and the manufacturer’s invoice.
(viii) On 16th February 2021, the petitioner addressed a letter to respondent no.2 recording that the testing procedure conducted by respondent no.2 of the goods has now been completed. The petitioner also specifically explained that the price difference of 1 Chinese Yuan per KG was due to export incentive received by the supplier. In support thereof, the petitioner enclosed comparative chart of suppliers costing chart with export incentives and local price from supplier without incentives. The petitioner further requested respondent no.2 to clear the goods against PD bond provisionally to avoid extreme detention and demurrage, and considering the fact that the insecticide was required for production of pesticides for paddy season.
(ix) The petitioner filed a revised Bill of Entry No.2773198 dated 15th February 2021 for provisional release of the goods.
(x) On 19th February 2021 (sic 19th February 2020), the Assistant Commissioner of Customs addressed a letter to the Joint Additional Commissioner of Customs, Nhava Sheva, giving no objection certificate for release of the goods on execution of a bond as per paragraph 2.1 of CBIC Circular No.35/2017. The said letter records that the estimated differential duty of the seized goods is Rs.3,59,789/-. The said letter also records that the petitioner requested for provisional release of these goods vide letter dated 5th February 2021.
(xi) The petitioner has annexed to the petition various e-mail correspondence with respondent no.3 with respect to detention charges.
(xii) On 8th July 2021, the petitioner requested respondent no.2 for waiver of detention charges against the bill of entry. The said letter records that the delay of almost 2 months to complete the investigation process was attributable to the investigating authorities which has resulted into huge detention and demurrage charges. Such letter also recorded that a similar request was made for waiver by petitioner’s earlier letters dated 29th January 2021 and 5th February 2021. The petitioner, therefore, requested respondent no.2 to grant waiver of detention charges of Rs.46,96,695/-.
4. It is in the above backdrop that the petitioner has approached this Court seeking appropriate directions against respondent no.2 for issuance of a detention waiver certificate.
5. Heard learned counsel for the petitioner and learned counsel for the respondents. With their assistance, we have perused the documents annexed to the petition and the reply affidavits filed by the respondent nos.1 & 2 and respondent no.3.
Submissions on behalf of the Petitioner
6. It is submitted that the delay in releasing the goods is on account of detention of the goods by respondent nos.1 & 2 for the purpose of investigation which lasted for almost 2 months and, therefore, the delay in releasing the goods cannot be attributed to the petitioner. The petitioner further submitted that vide letters dated 29th January 2021, 5th February 2021 and 8th July 2021, the petitioner had requested respondent no.2 to issue detention waiver certificate but no response was received from respondent no.2. The petitioner also relied upon Public Notice (PN) No.26 of 2010 dated 2nd March 2010 in support of its submission that no rent or demurrage on the goods seized or detained shall be charged if the goods are detained or confiscated by the proper officers of the Customs. The petitioner further submitted that they have explained the difference in price, which too was very minimal i.e. Rs.3,59,789/-. The explanation given for the difference in value has not been rebutted by the respondent nos.1 & 2. The petitioner therefore contended that, in the light of these facts, respondent no.2 was not justified in not issuing the detention waiver certificate.
Submissions of Respondent Nos.1 & 2
7. The counsel for respondent nos.1 & 2 has taken us through the reply affidavit dated 2nd October 2021 and it is his submission that as per Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018, the entries in the bill of entries are not found to be correct, and therefore, they are justified in imposing the detention charges and in not issuing the detention waiver certificate.
Submissions of Respondent No.3
8. The counsel for respondent no.3 submitted that there is no privity of contract between the petitioner and respondent no.3, therefore, no relief can be granted against respondent no.3. Respondent no.3 further stated that they were not responsible for detention and therefore, cannot be made to suffer for no fault on their part. The learned counsel further relied on Section 49 of the Customs Act and contended that the petitioner should have applied for de-stuffing of the goods in public warehouse to mitigate the loss. Respondent no.3, therefore, submitted that no order be passed against them.
Analysis and Conclusion
9. The only issue which falls for our consideration is whether in the facts of the present case, Respondent No.2 was justified in not issuing detention waiver certificate ?
10. The procedure for issue of “Detention Certificate” is notified in Public Notice No. 111 of 1985 dated 29.07.1985 of the Bombay Custom House issued much prior to the Handling of Cargo in Customs Area Regulations, 2009. Paragraph 2 of the Public Notice No.111 of 1985 sets out the circumstances under which a regular detention certificate could be issued by the Customs House for facilitating the importers to get remission of demurrage charges. They are as under :-
“(a) Where the goods are detained by Customs House for bona fide operation of import control formalities without any default on the part of the importers.
(b) Where the goods have been released on caution ( a regular detention certificate and not a recommendatory letter).
(c) Where the goods are detained [by] the Custom House pending test report and the facility of clearance against provisional assessment has not been allowed. Such detention certificates will be issued on merits for the period for which the goods were detained for the purpose.
(d) Where the goods are detained for PHO formalities, the certificate will cover the period stretching between the date of drawal of the sample by the PHO and the date of his test results, and
(e) In cases where samples have been drawn from the imported consignments by the Assistant Drugs Controller for ensuring compliance with the provisions of Drugs and Cosmetics Act, 1940 and where the Assistant Drugs Controller is of the opinion that release cannot be allowed against a letter of guarantee pending tests.”
11. The said public notice also states that detention certificates will not be issued in the following types of cases:-
“(a) Time taken by the Custom House Laboratory for analytical/chemical testing of samples drawn from the consignments, since the facility of clearing the goods on bond in terms of Section 18 already exists.
(b) Samples drawn from the imported consignments by the Assistant Drugs Controller for ensuring compliance with the provisions of Drugs and Cosmetics Act, 1940 and for being forwarded to the Central Drugs Laboratory, Calcutta, as the importers can avail of the facility of clearing the goods against letters of guarantee and need not wait till the receipt of the test report.
(c) The period taken for mutilation of woollen rags in the docks.
(d) Cases where goods are detained in the ordinary course of appraisement such as for determination of the tariff classification of goods or their assessable value in terms of Section 14 of the Customs Act.”
12. At the outset, we wish to state that we are not adjudicating any dispute between the petitioner and respondent no.3 nor has the petitioner prayed for any relief against respondent no.3 in the present petition.
13. The learned counsel for respondent nos.1 & 2 has relied upon Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018, to deny the issuance of detention waiver certificate. The said Regulation reads as under :-
“Regulation 10 . Responsibilities of the authorised carrier under these regulations – (1) An authorised carrier shall –
(a) to (k) ……
(l) not demand any container detention charges for the containers laden with the goods detained by customs for purpose of verifying the entries made under Section 46 or Section 50 of the Act, if the entries are found to be correct.”
14. The contention of respondent nos.1 & 2 is that on account of mis-declaration of value of goods, the entries found in the bill of entry are not correct, and therefore, the waiver certificate could not be issued. In our view, this contention is to be rejected. The petitioner vide letter dated 15th February 2021, explained the difference between the price mentioned in supplier’s invoice and manufacturer’s invoice on the ground that it is due to export incentive received from the supplier. The petitioner also enclosed comparative chart of the suppliers costing chart with export incentive and local price from supplier without incentives in support of its contention and also uploaded clarification letter in that regard. Respondent nos.1 & 2 have not rebutted the same, therefore, respondent nos.1 & 2 cannot contend that the entries in bill of entries are found to be incorrect.
15. Respondent nos.1 & 2 have also relied on Section 46 (4A) of the Customs Act, 1962 in support of their contention to deny the issuance of detention waiver certificate. The said sub-section reads thus :-
“46. Entry of goods on importation –
(1) to (4) ….
(4A) The importer who presents a bill of entry shall ensure the following namely :-
(a) the accuracy and completeness of the information given therein;
(b) the authenticity and validity of any document supporting it; and
(c) compliance with the restriction or prohibition, if any, relating to the goods under this Act or under any other law for the time being in force.
In our view, Section 46 (4A) provides that the importer shall ensure the accuracy and completeness of the information given therein and the authenticity and validity of any document supporting it and compliance with the restriction or prohibition, if any, relating to the goods. It appears that on account of price difference between the supplier invoice and manufacturer invoice, the respondents are contending that the petitioner has not ensured the accuracy and completeness of the information given therein. In our view, for the reasons recorded above, one cannot say that the petitioner has not given accurate and complete information with respect to the price difference. The petitioner has filed the documents in support of its explanation which has not been rebutted by the respondents, and therefore reliance placed by the respondent nos.1 & 2 on Section 46(4A) of the Customs Act is not appropriate to deny the issuance of detention waiver certificate.
16. The petitioner vide letters dated 29th January 2021, 5th February 2021 and 8th July 2021 had repeatedly requested respondent no.2 for issuing detention waiver certificate. However, respondent no.2 for the reasons best known has not responded to these letters. Respondent no.2 at the most in exercise of his public duty ought to have replied to these letters giving reason as to why the request made for waiver certificate could not be acceded to. The reason for the first time is appearing in the reply affidavit to the present petition. Such a course of action cannot be accepted moreso considering the norms of ease of doing business.
In connection with detention issues, it is important to note the Circular No.84 dated 25th July 1995 which reads thus : –
“Circular No.84/95
dated 25/7/95
F.No. 450/61/93-Cus.. IV Government of India Ministry of Finance, Department of Revenue Central Board of Excise & Customs, New Delhi
Subject: Customs detention of imported cargo at ports – Instruction regarding
I am directed to say that the matter of long detention of cargo including containerised cargo at various ports by the Customs authorities leading to port congestion as well as hold up of containers has been represented at various forums. This issue has also come up for discussion in the last Scope Shipping meeting recently held in Bangalore.
2. The matter has been examined by the Board and it is observed that at times the customs is detaining the imported cargo along with containers in which it has been unloaded for the purpose of investigation. The Directorate of Revenue Intelligence is also insisting upon detention of imported cargo till such time as the enquiry / investigation undertaken by it is completed. It is the view of the Board that for facilitating investigation the detention of the imported cargo may be necessary at times. However, this should not be at the cost of hardship to other importers or the container agents as the imported containers may be required for use by persons other than the importer of the detained cargo. At the same time, long detention of cargo including containerised cargo no doubt blocks valuable space in the already congested ports. This is not also desirable.
3. Having regard to the legal necessity of detention of imported cargo and at the same time taking into account the difficulties created by such detention, as detailed above, it has been decided by the Board that long detentions of imported cargo including containerised cargo at the ports is to be avoided by the Customs authorities including Intelligence and enforcement authorities. Accordingly, the Board desires that whenever it becomes necessary to detain the imported cargo for long time periods pending completion of enquiry/ investigation, such cargo should be removed to a customs warehouse in terms of the provision of section 49 of the Customs Act, 1962. For this purpose, the cargo can also be removed from the container and the container can be released for use by the container agents/other importers.
4. It is desired by the Board that the above procedure for detention of imported cargo may be followed with immediate effect by the concerned officers of customs. For this, a suitable departmental instruction/standing order may be issued. It is further desired by the Board that the Commissioners of Customs/DGRI may monitor all containers detained for investigation so as to ensure that unnessary detention of import cargo for long time periods and beyond the required time are not resorted. A report of the review undertaken in the regard may be sent by 30.9.95 indicating only cases where such containers are required to be detained beyond 6 months with justification therefor.
Sd/-
(V.K. Singh)
Senior Technical Officer
18. To the similar effect is Circular No.83 dated 5th November 1998 and paragraph 5 of the said Circular reads thus : –
Circular No.83/98-Customs
dated 5/11/1998
“5. In case the goods are required to be detained for detailed examination, investigations, etc. the goods should be destuffed from the container and stored in any ware houses. The containers should be released so that the shipping agents can fulfil their commitment of re-exporting the container within six months of their import.”
19. Instruction No.20/2021 dated 10th September 2021 issued by the Central Board of Indirect Taxes and Customs also reiterates what is stated above. Relevant paragraph 2.2 of the said instruction reads as under :-
Instruction No.20/2021-Customs
“2.2. Field formations follow the spirit of para 5 of Board Circular 83/98-Customs dated 5.11.1998 and para 3 of Board Circular No.84/95-Cus dated 25.07.1995 thereby taking proactive steps such that containers housing import cargo that is under enquiry are expeditiously released. For this, provision already exists that whenever it becomes necessary to detain the imported cargo, pending completion of enquiry/investigation, such cargo should be removed to a customs warehouse in terms of the provisions of Section 49 of the Customs Act, 1962. For this purpose, the cargo can also be removed from the container and the container can be released for further use. The field formation should encourage this activity by offering it to the importers.”
20. In our view, on a reading of the above referred circulars and instructions, respondent nos.1 & 2 ought to have immediately informed the petitioner that the goods may be stored in public warehouse pending clearance as per Section 49 of the Customs Act, which has not been done in the present case.
21. In the instant case, the demurrage could have been avoided if after removing the goods for testing, same were directed to be shifted to warehouse under Section 49 of the Act. The petitioner on 13th January 2021 sought such permission and which was immediately granted but the same could have been done when the goods were detained for investigation. Therefore, in our view, respondent nos.1 & 2 were not justified in not responding to various letters of the petitioner seeking waiver certificate and now to justify the same in reply affidavit. In our view, the petitioner is therefore entitled to detention waiver certificate upto the period 13th January 2021.
22. The respondent no.1 has relied upon the decision of the Supreme Court in case of Jindal Drugs Ltd. Vs. Union of India, 2018 (361) E.L.T. 769. The Supreme Court in this case held that the revenue cannot be made liable to pay demurrage charges unless the action of the detention is palpably wrong or wholly unacceptable. The stand taken by the revenue which is subsequently corrected by the revenue itself on the basis of subsequent notification or judicial pronouncement would not make the revenue liable for payment of demurrage charges. It is this ratio which has been laid down by the Supreme Court in case of Jindal Drugs Ltd. (supra). The facts of the petition before us is not the same and the only prayer sought for is for issuing detention waiver certificate and not a prayer to make the revenue liable for payment of any demurrage charges. Therefore, this decision would not assist the case of the revenue.
23. The second decision on which reliance is placed by the revenue is in case of Mumbai Port Trust Vs. Shri Lakshmi Steels, 2017 (352) E.L.T. 401. In this case, the Supreme Court analyzed Sections 48, 53, 58 and 59 of the Major Port Trust Act and observed that the Port Trust is entitled to charge demurrage charges in the light of the provisions of Major Port Trust Act which is referred hereinabove. The Supreme Court observed that the provisions of the Major Port Trust Act under which the claim was made by the Port Trust is different than the provisions of the Customs Act and hence the claim made by Mumbai Port Trust was justified. The Supreme Court, after analyzing the Customs Act and the Major Port Trust Act, upheld the contention of the Port Trust Authorities to levy demurrage charges on the importers. In the proceedings before us, the provisions of the Major Port Trust Act are not invoked and since this decision does not deal with the Custom Regulation which is posed for our consideration and which we have analyzed hereinabove, the said decision also would not be applicable to the facts of the present case.
24. The Petition is accordingly disposed of by the following order :-
(i) Respondent nos.1 & 2 to issue detention waiver certificate with respect to Bill of Entry No.2773198 dated 15th February 2021 (old 9964993 dated 15th December 2020) within a period of four weeks from today;
(ii) We are not adjudicating any dispute between the petitioner and respondent no.3 and none of our observations made herein should be read as our views with respect to the dispute between the petitioner and respondent no.3.
(iii) No costs.
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