A very important issue about what will be the date when the duty is payable for warehoused goods which are cleared illegally. This concerns a very large number of importers who warehouse the goods and clear them as and when they need them. This is an old issue but controversies never die. The issue has come up once again because in a latest judgement delivered on 30th April 2009 the Tribunal Delhi has ruled that on illegally cleared warehoused goods the rate of duty will be applicable as per Section 15(1)(b) ( for warehoused goods the date when the Bill of Entry is presented to Customs) and not as per Section 15(1)(c) of the Customs Act (the date of payment of duty). I respectfully disagree with this judgement. The correct position is that the relevant date is the date of payment of duty under Section 15(1)(c).
Let me first explain the legal provision. Section 15 of the Customs Act gives the date for determination of rate of duty on imported goods. Section 15(1)(a) is for goods normally cleared for home consumption. Section 15 (1) (b) is for warehoused goods cleared in normal course for home consumption. Section 15(1) (c) says that in the case of any other goods the date of payment of duty is the relevant date. The Sub-Section (1) (c) covers all sorts of situations which are not in the normal course. Cases where goods are short landed but the presumption is that they are supposed to have been landed, cases where goods are stolen from the port and one does not know how and when or by whom, cases where goods are just lying in the port and one does not know of which consignment it is a part and so many miscellaneous situations are all those where no relatable date is known. And these are all covered by the Section 15(1)(c). For all these cases, the rate of duty is as on the date when the duty is finally paid on the bas of a document which is approved by Customs.
Now in the case of Bisco Limited, some warehoused goods were found outside the warehouse and after the warehousing period was over. Obviously they were illegally taken out of the warehouse and no regular Bill of Entry (clearance document) was filed. The Tribunal has relied on a judgement of the Supreme Court in the case of Kesoram Rayon where the Supreme Court which has held that for goods not removed from a warehouse after the period is over, the rate of duty applicable will be the “date of their deemed removal from the warehouse, that is to say the date on which the permitted period or its permitted extension came to an end”. From this judgement the Tribunal has concluded that therefore Section 15(1)(b) is applicable.
Unfortunately this conclusion cannot be correct because firstly these goods here are not “deemed” cleared but actually cleared after the period was over and secondly because Section 15(1)(b) is specifically only for those cases where goods are cleared on a Bill of Entry. Bill of Entry is presented only for those cases where the clearance is legally done. In the case of illegally cleared warehoused goods, there is no Bill of Entry and therefore Section 15(1)(b) is ruled out by the very specific wording of this Section. The only alternative that remains is Section 15(1)(c).
The CBEC should consider immediately filing an appeal to the Supreme Court because it is a fundamental and legal issue. Along with it, prayer should be made to clarify whether the Supreme Court in the Kesoram judgment meant 15 (1) (b) or 15 (1) (c). smukher2000@yahoo.com