Case Note & Summary
The case involves a dispute between the Union of India (appellant) and M/s. Associated Container Terminal Ltd. (respondent) regarding the priority of claims over sale proceeds of warehoused goods. M/s. Kushang Apparel Ltd. imported CTV kits and warehoused them at ICD, Faridabad under Section 59 of the Customs Act, 1962. The bond period expired on 28th February 2002, but the importer failed to clear the goods or pay warehouse charges. The warehouse-keeper (respondent) sought to sell the goods under Section 63(2) of the Act. After multiple auctions and tender sales, the goods were sold for Rs.41,44,555/-. The Assistant Commissioner directed that sale proceeds be appropriated as per Section 105 of the Act, and later demanded Rs.27,47,146/- as customs duty from the respondent, who had furnished a bank guarantee. The respondent challenged this demand in the Delhi High Court, which allowed the writ petition, holding that the respondent was entitled to recover warehouse charges first from the sale proceeds. The Supreme Court reversed this decision, holding that under Section 150(2) of the Customs Act, customs duty (clause c) has priority over warehouse charges (clause d). The court also applied the principle from Kesoram Rayon that duty is payable at the rate on the date of deemed removal under Section 72. The appeal was allowed, setting aside the High Court's order and dismissing the writ petition.
Headnote
A) Customs Law - Priority of Claims - Section 150 Customs Act, 1962 - Sale Proceeds - The issue was whether customs duty or warehouse charges have priority in distribution of sale proceeds of warehoused goods sold under Section 63(2). The Supreme Court held that under Section 150(2), customs duty (clause c) has priority over warehouse charges (clause d), and the High Court erred in allowing warehouse charges to be recovered first. (Paras 6-12) B) Customs Law - Deemed Removal - Section 72 Customs Act, 1962 - Rate of Duty - Goods not removed from warehouse within permitted period are deemed improperly removed under Section 72, and duty is payable at the rate applicable on the date of deemed removal (expiry of warehousing period). The court relied on Kesoram Rayon v. Collector of Customs to affirm this principle. (Paras 7-8) C) Customs Law - Sale of Goods - Section 63(2) Customs Act, 1962 - Warehouse Charges - The warehouse-keeper may sell goods for non-payment of rent, but the sale proceeds must be distributed as per Section 150, not solely for warehouse charges. The court clarified that Section 63(2) does not override the priority scheme under Section 150. (Paras 3-5)
Issue of Consideration
Whether the sale proceeds of warehoused goods sold under Section 63(2) of the Customs Act, 1962 should be applied first to customs duty or to warehouse charges, and the correct interpretation of Section 150 of the Act.
Final Decision
Appeal allowed. The order of the Delhi High Court dated 28th November 2007 is set aside. The writ petition filed by the respondent is dismissed. No order as to costs.
Law Points
- Priority of customs duty over warehouse charges in sale proceeds
- Application of Section 150 of Customs Act
- 1962
- Deemed removal of goods under Section 72
- Rate of duty on date of deemed removal
