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Union of India & Ors. v. M/s. Associated Container Terminal Ltd.

Civil Appeal · 2020 INSC 182Decided 14 Feb 2020
Civil Appeal No. 4490 of 2008
Justice A.M. Khanwilkar · Justice Hemant Gupta · Justice Dinesh Maheshwari

Background

An importer failed to clear CTV kit goods kept in a customs warehouse at ICD Faridabad within the permitted one-year bond period and also did not pay warehouse rent. The warehouse-keeper, Associated Container Terminal Ltd., auctioned the goods under the Customs Act to recover its dues, and the sale proceeds were partly appropriated for customs duty. A dispute arose over whether customs duty should be calculated based on the value of goods on the date they should have been cleared (as per an earlier Supreme Court ruling in Kesoram Rayon) or based on the actual sale price achieved at auction, and over which claim, customs duty or warehouse charges, had priority in the sale proceeds. The Delhi High Court ruled in favour of the warehouse-keeper, prompting the Union of India to appeal.

Decision Breakdown

The Supreme Court held that the earlier Kesoram Rayon ruling did not apply here because that case concerned duty owed directly by an importer who sought clearance, whereas this was a case of goods never cleared and instead sold off under Section 63 for recovery of warehouse dues. Relying on a binding Central Board of Excise and Customs circular, the Court held that customs duty on such unclaimed/uncleared goods must be calculated by treating the actual sale proceeds as the "cum-duty price" (working the duty backward from the sale price), not based on duty payable at the time of the original bill of entry. The appeal was disposed of with directions to recalculate the customs duty on this basis and to distribute the sale proceeds according to the statutory priority order in Section 150(2) of the Customs Act.

Lesson Learnt

When imported goods are left unclaimed and auctioned to pay off warehouse charges, customs duty is calculated on the real amount the goods fetched at auction, not on some earlier notional value, and government circulars binding on tax authorities can determine how such calculations must be made.

Official source (sci.gov.in)View Judgment (PDF)

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