Tata Iron and Steel Co. vs Union of India (UOI)

G.K. Mitter, J.—This is an appeal from a decree dismissing the Plaintiff''s suit for recovery of Rs. 29,300 on the basis of a declaration that the Plaintiff was entitled to a credit of the said sum wrongfully debited in the Plaintiff''s account with the Defendant Union of India and for other reliefs.

The suit arose as follows: In connection with its business of manufacturers and dealers in steel the Plaintiff has to import various goods from abroad. For the purpose of quick clearance of the goods from the Customs department in the port of Calcutta it has been maintaining a current account with the Collector of Customs functioning under the Sea Customs Act of 1878 whereunder the Plaintiff has been keeping with the said Collector a deposit of a large sum, of money and the Collector has been debiting the amounts which might be due by the Plaintiff as and by way of import duties and other charges assessed on goods imported by the Plaintiff through the port of Calcutta. As and when goods imported by the Plaintiff arrived in the port of Calcutta the Plaintiff''s clearing agents filed bills of entry showing the necessary particulars of the goods imported. Thereafter the said agents were allowed to clear the goods from the Calcutta port while the duties were actually assessed sometime afterwards by Customs officers and when they were so assessed the amounts were debited in the Plaintiff''s account maintained with the Collector of Customs. In October/November 1945, the Plaintiff imported a consignment of machinery per S.S. West Point. The Plaintiff''s clearing agents M/s. Calcutta Steam Navigation Co. Ltd. duly tiled a bill of entry showing particulars of the said consignment. Thereafter the Plaintiff''s agents were allowed to clear the goods prior to the assessment of duties by Customs officers. The Plaintiff alleges in the plaint that the servants of the Union of India at the Custom House, Calcutta, appear to have wrongfully debited on or about June 1951, the sum of Rs. 34,017-9 in the Plaintiff''s said current account in respect of the duty on the said consignment whereas on proper calculation the sum of Rs. 4,717-9 as only was due and payable thereon. The Defendants admitted in correspondence prior to the suit that the debit had been made through mistake, but they refused to refund the sum of Rs. 29,300 relying on Section 40 of the Sea Customs Act.

In the written statement filed the Defendants stated that the Plaintiff maintained a deposit account with the Collector of Customs under the provisions of Section 41 of the Sea Customs Act, a facility granted to the Plaintiff for payment of Customs duty through the said account instead of payment in cash. Bills of entry used to be assessed upon presentation for appraisement and duty was subsequently realised by debiting the deposit account of the Plaintiff. The Defendants admitted that the sum of Rs. 34,017-9 as was debited through inadvertence and this was due to an error in totalling several figures which actually added to Rs. 4,7179 as. in place of Rs. 34,017-9 as. After entry of several items on June 21, 1951, the Pass Book relating to the Plaintiff''s account was returned to the Plaintiff''s clearing agents on July 3, 1951. The Plaintiff had sufficient time to check up the entries and make claims for refund under the provisions of Section 40 of the Sea Customs Act. At the date when refund was asked for on March 17, 1952, the said claim had already been time barred.

At the hearing of the suit the following issues were settled:

(i) Did the Plaintiff maintain a deposit account with the Collector of Customs as stated in para. 2 of the plaint?

or

Did the Plaintiff maintain the said deposit account with the Union of India as alleged in para. 3 of the plaint?

(ii) Did the Union of India hold the deposit in trust for the Plaintiff as alleged in para. 4 of the plaint?

(iii) Is the Plaintiff''s claim barred by the provisions of Section 40 of the Sea Customs Act?

(iv) Is the Plaintiff''s claim barred by the law of limitation?

(v) Is the Plaintiff entitled to the reliefs claimed or any of them?

Chapter V of the Sea Customs Act of 1878 provides for levy and exemption from Customs duties. Section 29 lays down that the owner of the goods imported must declare the real value in the bill of entry or shipping bill. Sections 29A and 29B provide for the assessment of duty. Section 40, with the marginal note "no refund of charges erroneously levied or paid, unless claimed within three months" lays down that "no Customs duties or charges which have been paid and of which repayment, wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or misconstruction, shall be returned, unless such claim is made within three months from the date of such payment." The explanation is omitted as it is not relevant. Section 41 has the marginal note "power to give credit for and keep account current of, duties and charges." The text of the section is:

the Customs Collector may, if he thinks fit, instead of requiring payment of customs duties and charges due from any mercantile firm or public body, at the time such duties and charges are payable under this Act, keep with such firm or body an account current of such duties and charges. Such account shall be settled at intervals not exceeding one month and such firm or body shall make a deposit or furnish security sufficient in the opinion of the Customs Collector to cover the amount which may at any time be due from them in respect of such duties and charges.

The broad question involved in this case is whether the limitation of three months imposed u/s 40 is applicable to a case where an importer has an account current with the Customs Collector. The oral and documentary evidence adduced in this case may now be examined. The first witness of the Plaintiff was Prokash Chandra Ghose employed in one of Tatas organisations at the date of the hearing of the suit. From 1945 to 1951 he had worked for Messrs. Hoare Miller and Co. who were the Managing Agents of Calcutta Steam Navigation Co. Ltd., the Clearing Agents of the Plaintiff. He described what was known as the ''Note Pass'' system in use in the Customs office at Calcutta. Briefly this was as follows: The Plaintiff who imported goods did not always get all the relevant documents in connection with the import in time. Sometimes they used to get marks, numbers and description of the goods from the Ship''s manifest available to them. This was checked in the Customs office and the Plaintiff''s clearing agents were allowed to clear the goods. When the relevant documents were received from the Plaintiff the Customs Authorities were approached once more. Parties like the Plaintiff used to get possession of the goods before appraisement of Customs duty. Sometimes adjustments took place one or two years after the goods had actually been cleared. In this case the goods were imported in 1945. Column 1 to col. 5 of the bills of entry were filled in 1945, but the adjustment was actually made in the Pass Book on or about June 21, 1951. In respect of the different items imported the duty assessable was Rs. 4,717-9 as., but actually the different figures were wrongly totalled at Rs. 34,017-9 as. There is no dispute in this case that the actual amount which was chargeable for the imported goods was Rs. 4,717-9 as., but the Customs receipt in respect of the consignment which bears the date June 21, 1951, was for Rs. 34,017-9 as. (Ex. D). According to the witness it was collected by the Plaintiff about eight months from the date noted thereon. The witness said that the pass book used to come and go from the Custom House at intervals of several months as would be evidenced by the transit register of the Pass Book from March 17, 1951 to March 23, 1952, exhibited in this case. There was an entry in the transit register dated May 15, 1951, followed by another dated June 12, 1951, to which reference was made by the witness. The witness admitted that the figure of Rs. 34,017-9 as., appearing at the bottom of the bill of entry was in his handwriting. He further admitted that this amount was adjusted in the Pass Book on June 21, 1951, when the Customs Authorities issued the receipt.

The second witness of the Plaintiff was one Sankar Narayan Chandrasekhar employed in the Accounts Department of the Plaintiff from before 1945. Referring to the Pass Book he said that Rs. 1,00,000 had been deposited by Tatas on June 15, 1951 and the total amount of credit in favour of Tatas was Rs. 1,10,391-2 as. On that date. He spoke of the debit entry of Rs. 34,071-9 as. appearing against the date June 21, 1951 and said that the correct amount should have been Rs. 4,017-9 as. the actual amount debited in excess thus being Rs. 29,300. In cross-examination he said that there was no actual payment on that date but that there was only adjustment of the deposit. According to him the Pass Book was taken by Hoare Millers but not sent to Jamshedpur. Tata organisations at Jamshedpur used only to receive copies of the Pass Book from time to time. On July 4, 1951, a further amount of Rs. 1,00,000 was deposited by Tatas in the account. The witness said that on that date they could check the arithmetical figure appearing in the Pass Book to ascertain whether the figures shown therein were correct or not. According to him the mistake was made in the Accounts department of the Custom House and not by Hoare Millers.

The Defendants examined only one Niranjan Datta who was working from 1945 in the Customs Department. When he was shown the Pass Book he said that the entries in the Pass Book were not made by him but by the Ledger Keeper. Referring to the entries in the Pass Book he said that his signature appeared in the Pass Book from time to time. He was also shown the Transit Register of the Pass Book, according to which the Pass Book had been sent to the Clearing Agents on July 3, 1951 and again on September 27, 1951.

The first letter written in respect of the transaction mentioned in the plaint was that of Hoare Miller and Co. Ltd. to the Chief Accounts Officer, Custom House, on March 17, 1952. In this the writers referred to the bill of entry No. D1. 2330 of June 21, 1951 and stated that apparently due to an oversight the addressee''s Accounts Department had totalled up the duty on the various items as Rs. 34,017-9 as. in place of Rs. 4,717-9 as. The original receipt for the amount issued was enclosed with the letter and a request was made that credit be given for the excess realised from Tatas. On September 2, 1952, the Chief Accounts Officer wrote back to say that the claim for refund of excess recovery of Rs. 29,300 from Tata Iron and Steel Co. Ltd. through their deposit account could not be considered as refund was time barred u/s 40 of the Sea Customs Act. Messrs. Hoare Miller and Co. Ltd. wrote again on March 7, 1953, stating that the entries in the Customs Pass Book were much beyond time and as soon as the writers noticed the wrong debit in the Pass Book they intimated the Customs Department that proper adjustment should be made. To this the reply by the Auditor of the Custom House was that the Pass Book had been submitted on May 15, 1951, May 22, 1951 and July 3, 1951, when entries complained of had been entered by the Accounts Department and that there was sufficient time at the disposal of the addressee to file a claim for refund of excess duty in respect of bill of entry dated June 21, 1951. Subsequent correspondence was in the same vein and on November 3, 1953, the Chief Accounts Officer informed Hoare Hiller and Co. Ltd. that Government of India saw no sufficient reason to relax the provision of Section 40 of the Sea Customs Act and therefore rejected the claim. On November 4, 1954, the Deputy Secretary to the Government of India wrote to the Plaintiff that the duty had evidently been entered wrongly by the Clearing Agents and the Custom House Authorities failed to detect the error, but as the Clearing Agents had every opportunity of reopening the matters as soon as the debit appeared in the Pass Book, the Government of India did not think fit to relax the provisions of Section 40 of the Sea Customs Act. Messrs. Hoare Miller and Co Ltd. wrote again on the subject on November 30, 1954, admitting that the error in totalling the amount of duty had been made by them but this should have been detected by the Accounts Department of the Customs Authorities and in the circumstances a repayment of the amount overdrawn by the Customs Authorities to Tatas should be allowed.

The learned trial Judge came to the conclusion that Section 40 of the Sea Customs Act stood in the way of the Plaintiff''s recovering the amount of Rs. 29,300 from the Defendants. According to him the debit in the Pass Book amounted to a payment made within the meaning of Section 40 of the Act and no refund was possible after three months of such debit.

On behalf of the Appellant it was argued before us that (i) Section 40 only applied when payment in cash was made and it was only in such a case that the period of limitation of three months applied, (ii) as Section 41 provided for keeping an account current to show the exact amount of Customs duties and charges payable under the Act and the realisation thereof out of the deposit or security to be furnished by the importer the intention of the legislature was that such account should be settled at intervals not exceeding one month and (iii) the legislature did not intend that if there was an error in the accounts either party should suffer as a result thereof and be subject to the special period of limitation mentioned in Section 40. It was urged that to extend the operation of Section 40 to cases of adjustment in the deposit account would be giving a strained meaning to the section i.e. Section 41. It was further argued that the provision of Section 40 being one of limitation no metaphor should be adopted to give an extended meaning when Section 41 governed the rights of the parties. A plea was further put forward that the Sea Customs Act being a fiscal statute if two alternative interpretations were possible that which was in favour of the subject should be adopted.

On behalf of the Respondents it was argued that the adjustment of account and a debit out of the deposit in the importer''s favour meant payment within the meaning of Section 40 and the period of limitation for refund would be that laid down in Section 40. It was further argued that quite apart from Section 40 the suit was barred by the general law of limitation as the Plaintiff with constructive knowledge of the 3 wrong debit in July 1951 or actual knowledge in March, 1952, had failed to file the suit till April 10, 1956, which was beyond three years from either of the dates mentioned and the suit was governed by Article 96 of the Limitation Act as it stood at the relevant time.

In our view no extended meaning should be given to the wording of Section 40 of the Sea Customs Act. As this section seriously curtails the rights of an importer who pays Customs duty through inadvertence or misconstruction his claim for refund should not be held to be barred unless it is strictly and literally covered by the section. Section 41 shows that in the case of certain mercantile firms or public bodies payment of Customs duties might not be insisted upon as u/s 40 and what was necessary was that an account current should be kept of such dues. The provision for settlement of the account at intervals not exceeding one month is only directory and not mandatory as it cannot be argued that if the amount was not settled at intervals of one month either party was to suffer any disadvantage as the result thereof. Further if the mercantile firm or public body did not make the deposit or furnish security sufficient in the opinion of the Customs Collector to cover the amount which might at any time be due from them their liability to pay the amount was in no way diminished.

It is well-settled that provisions as to limitation being restrictive of the rights of litigants must be strictly construed. Reference may be made to one or two of the decisions cited at the Bar. In Narendra Lal Khan v. Taru Bala Dasi ILR Cal. 817 (830) it was observed by Rankin, J.

the Limitation Act being an act of restrictive character must be strictly construed.

In Rudra Narain Maiti v. Natabar Jana ILR Cal. 52 the point at issue was whether the Plaintiff''s suit was barred by Article 3 in the third schedule of the Bengal Tenancy Act and delivering judgment of the Court. Jenkins C.J. said:

This is an article which, after a lapse of a certain time, deprives the Plaintiff of his right to come to Court for the purpose of vindicating a claim which is his and therefore it must be clearly made out that any particular case falls within its terms. We recently had occasion to enter a protest against extending the terms of this article by use of figures of speech and metaphors.

In aid of the proper construction of fiscal statutes our attention was drawn by counsel for the Appellant to a judgment of the Supreme Court in Commissioner of Sales Tax, Uttar Pradesh Vs. The Modi Sugar Mills Ltd., where it was observed

in interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency.

In The Central India Spinning and Weaving and Manufacturing Company, Limited, The Empress Mills, Nagpur Vs. The Municipal Committee, Wardha, , it was observed (para. 5) in construing the words "imported into or exported from and the limits of the Municipality" if there are two possible interpretations then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him.

The learned trial Judge referred to a number of decisions to which our attention was also drawn to the effect that adjustment in the account amounted to payment and therefore, Section 40 would equally apply in a case where there was adjustment in terms of Section 41. There can be no dispute that adjustment is equivalent to payment as was pointed out by Best, C.J. in Eyles v. Ellis 4 Bing. 112, but even though it is equivalent to payment it is not payment is terms of Section 40 of the Sea Customs Act.

In British and North European Bank Ltd. v. Zalztein 1927 (2) K.B. 92 Sankey, J. had to consider the effect of entries in the Pass Book maintained by a banker with regard to the account of a customer. There his Lordship observed (p. 97):

I do not think it can be dogmatically asserted that an entry made in the Pass Book is in all cases conclusive and binding on the bank, or conclusive or binding on the customer, but each case must be judged on its own particular facts, also the customer in whose favour the entry stands starts with the advantage that prima facie it is an admission by the Bank in his favour which cannot in some cases be rebutted.

In this case the goods were actually imported into India in 1945 and a bill of entry was filed in 1951. It appears that both the parties were to blame for the figures mentioned in the bills of entry. The Pass Book merely recorded the incorrect figures in the bill of entry for which both the parties were responsible. In such circumstances I find myself unable to hold that an entry in a Pass Book made erroneously, the error being contributed to by both the parties was a payment within the meaning of Section 40 of the Sea Customs Act. In my opinion Section 40 does not stand in the way of the Plaintiff''s recovery of the money.

The next question is whether the suit is barred by the general law of limitation. To answer that question one must scrutinise the nature of the cause of action as laid in the plaint and then find out the proper article of the Limitation Act which would apply thereto. As already mentioned, the Plaintiff''s case as laid in the plaint is that the Defendant, Union of India''s servants had wrongfully debited Rs. 34,071-9 as. in place of Rs. 4,717-9 as. and the reliefs prayed for were (i) declaration that the Defendants were not entitled to debit the sum of Rs. 34,071-9 as. (ii) a declaration that the Plaintiff was entitled to credit the sum of Rs. 29,300 wrongfully debited, (iii) declaration that the Defendant, Union of India, held the sum of Rs. 29,300 in trust for the Plaintiff and (iv) a decree for Rs. 29,300. The case of declaration of trust was expressly abandoned at the hearing as will be found from the judgment of the learned trial Judge. That case was further not pressed before us. We are, therefore, left with the prayers for the declarations and that for a decree for Rs. 29,300. In Calcutta Jute Manufacturing Co. Ltd. v. United Commercial Bank Ltd. 99 C.L.J. 19, the prayer for a declaration that the Defendant bank had wrongfully debited the Plaintiff''s account with a sum of Rs. 30,000 as a result of forged cheques coupled with a further declaration that the sum of Rs. 30,000 was due and owing by the bank to the Plaintiff was negatived by me. That case was argued very fully and after considering a large number of authorities cited I came to the conclusion that a declaration which merely touches the pecuniary relationship of the parties cannot be granted by the Courts in India. In that case there was an application for amendment of the plaint by asking for the declaration mentioned and this was rejected. I see no reason to take a different view here. In my opinion, the declarations asked for in this case cannot be granted. The question remains whether a decree for Rs. 29,300 can be passed on the facts of this case. It has not been shown that the account between the parties was not subsisting at the time when the suit was filed. The Plaintiff, probably for the convenience afforded by adopting the system laid down in Section 41 of the Sea Customs Act, did not close the account. There can be little doubt that if the account is still continuing the Plaintiff cannot call upon the Defendant to return a portion of the money deposited by it and credited in the account. A customer of a bank cannot call upon the latter without either closing the account or drawing a cheque for an amount which would include the wrongful debit, sue the bank for recovery of any portion of the money due to him. Only one of two courses would be open to the customer of the bank whose account has been wrongly debited. He can close the account and call upon the banker to make over the amount which would be properly at his credit or he can draw a cheque upon the banker which would include the amount wrongfully debited and on the failure of the banker to honour the cheque sue it for damages. In this case the relationship is not that of a banker and a customer, but there is an account between the parties which was continuing at the date of the suit. Without closing the account the Plaintiff could not ask the Union of India to return the amount which was wrongly debited to the Plaintiff. If such a demand were made after the closing of the account the Union of India would be bound to make over the amount debited to the Plaintiff and on its failure to do so a decree could be passed against the Union of India inclusive of the amount wrongfully debited. It, therefore, appears to me that the present suit is premature and cannot be decreed.

In our opinion, however, so long as the account is not closed and a demand for return of the amount due on the account not made, the Plaintiff has no cause of action against the Defendant and no right to sue. The appeal must, therefore, fail, but on the facts of this case we direct that the parties should pay and bear their own costs throughout.

Masud, J.

I agree.