Waiver of Demurrage and Detention under Customs Regulations

Handling of Cargo in Customs Areas Regulations, 2009

Key Takeaway Points:

Title and Commencement: The regulations are called the Handling of Cargo in Customs Areas Regulations, 2009, and they came into force on the date of their publication in the Official Gazette.
Definitions: Key terms such as “Act” and “Customs Cargo Services provider” are defined, with the latter including persons responsible for handling imported and export goods.
Application: The regulations apply to handling imported and export goods in various customs areas including ports, airports, inland container depots, land customs stations, and other approved customs areas.
Retrospective Application: Actions taken before the regulations came into force are deemed to have been done under these regulations, and existing providers must comply within three months to one year.
Conditions for Providers: Customs Cargo Service providers must meet specific infrastructure, equipment, and manpower requirements, provide office accommodations, storage facilities, and ensure security and access control.
Responsibilities: Providers must keep records, ensure safety and security, not permit unauthorized removal of goods, and dispose of unclaimed goods within specified time limits.
Approval Process: Providers must apply for approval, which is granted for two years initially and can be extended for five years upon review. Providers under the Authorised Economic Operator Programme may get extensions for ten years.
Suspension or Revocation: The Commissioner of Customs can suspend or revoke approval for non-compliance, following a specified procedure.
Renewal: Approval can be renewed for five years if the provider’s performance is satisfactory.
Explanatory Memorandum: The regulations aim to ensure efficient handling of import and export goods and adequate infrastructure at customs facilities, fulfilling recommendations by the Public Accounts Committee.
Amendments Done so far:

Originally Introduced through Notification No. 26/2009-Cus. (N.T.), dated 17-3-2009, as amended by Corrigendum F. No. 450/55/2008-Cus-IV, dated 2-04-2009,
Amended through Notification No. 96/2010- Cus. (N.T.), dated 12-11-2010,
Amended through Notification No. 43/2012-Cus. (N.T.), dated 16-05-2012,
Amended through Notification No. 104/2012-Cus. (N.T.), dated 16-11-2012
Amended through Notification No. 115,2016-Cus.(N.T.) dated 26-08-2016,
Amended through Notification No. 24/2017-Cus.(N.T.) dated 31.03.2017,
Amended through Notification No. 29/2019-Cus.(N.T.) dated 01.04.2019]

12. Provision under the Customs Act, 1962: In exercise of powers conferred by sub-section (2) of section 141 read with section 157 of the Customs Act, 1962 (52 of 1962), the Central Board of Indirect Taxes and Customs hereby makes the following regulations, namely-

Section 141(2): The imported or export goods may be received, stored, delivered, dispatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed.

Section 157: General power to make regulations- (1) Without prejudice to any power to make regulations contained elsewhere in this Act, the Board may make regulations consistent with this Act and the rules, generally to carry out the purposes of this Act.

Clause for Waiving Demurrage and Detention:

Exporters or importers can approach the customs department to waive demurrage and detention under Clause 6(1)(l), which states that the Customs Cargo Service provider shall not charge any rent or demurrage on goods seized, detained, or confiscated by customs officers.

In relation to the waiver clause, specially where the shipment is detained by Customs authorities, please read along with Notfn. No. 26/2022- Customs (NT) dtd 31.03.2022 for obtaining the “Detention Certificate” u/s 45 (2) (b) of the Indian Customs Act, 1962.

Section 45 (2) (b): The Custodian u/s 45 “shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in accordance with the permission in writing of the proper officer [or in such manner as may be prescribed]. Here, permission in writing is to be construed as the “Detention Certificate”.

Famous Citation of Supreme Court of India:

In the case of M/s Shipping Corporation of India v. CL Jain Woolen Mills, the Supreme Court transferred the liability of paying the demurrage charges to the customs authority instead of the importer of goods. Nevertheless, in the said case, the decision stood in favour of the custodians. Therefore, it can be suitably said that judicial precedents continue to recognize the right to demurrage of custodians.

The court considered several legal provisions and case facts in this document:

Customs Act, 1962:

Section 8: Approval of proper places for unloading and loading goods.
Section 33: Prohibition of unloading goods at unapproved places.
Section 34: Supervision of unloading by proper officers.
Section 45: Custody and removal of imported goods.
Section 47: Clearance of goods for home consumption.
Section 49: Storage of imported goods in warehouses.
Section 57: Appointment of public warehouses.
Section 58: Licensing of private warehouses.
Section 62: Control of warehoused goods.
Section 63: Payment of rent and warehouse charges.
Section 67: Removal of warehoused goods.
Section 68: Procedure for clearing warehoused goods for home consumption.

2. Indian Bills of Lading Act, 1956:

Clause 18: Payment of demurrage charges for non-clearance of goods within the free time.
Clause 2: Definition of Carrier’s Tariff.
Clause 14: Lien on goods for unpaid charges.

3. Indian Contract Act:

Section 170: Bailee’s lien for services rendered.
Section 171: General lien of bankers, factors, wharfingers, attorneys, and policy brokers.

Case Facts:

The Shipping Corporation of India (appellant) had a lien over the goods until dues, including demurrage charges, were paid.
The customs authorities detained the goods, considering the import unauthorized, and later allowed redemption on payment.
The Delhi High Court quashed the customs authorities’ order and directed the release of goods without demurrage charges.
The Shipping Corporation was not a party to the writ petition in the High Court.
The High Court directed the customs department to sort out the matter of demurrage charges with the carriers.

Order Issued:

The court upheld the Delhi High Court’s decision that the importer is not liable to pay demurrage charges due to the illegal detention by customs authorities.
The customs authorities are liable to bear the demurrage charges.
The court directed the Shipping Corporation and Container Corporation to consider waiving the demurrage charges if an application is filed by the customs authorities.

The court emphasized that the customs authorities do not have the power under the Customs Act to prevent the carrier from charging demurrage fees, and the contractual terms between the importer and the carrier remain valid.

This Article is Authored by Shri Ravi Shekhar Jha, BALLB I LLM (Constitutional Law). He can be reached at his email ID intelconsul@gmail.com or at his Mobile No. +91-9999005379

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Source: CBIC, Ministry of Finance & Supreme Court of India

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