T.R. Ravi, J.

1. The Commissioner of Customs has filed this appeal under Section 130 of the Customs Act, 1962, challenging the final order No.21619 of 2018 in Appeal C/2780/2012 of CESTAT, South Zone Bench, Bangalore.

2. The facts relevant for deciding the appeal are as follows:- As per bill of exchange No.150537 dated 01.11.2004, 16020 metric tonnes of cane molasses were imported and these were warehoused in the storage tanks of the respondent. Disputes arose between the consignor and the consignee of the goods, and, by order dated 16.11.2007, the District Court directed sale of the stored goods. The Department was directed to sell 10291.31 metric tonnes by auction and to deposit the balance amount after settling the dues under the Customs Act, 1962 and other statutory claims. From an amount of Rs.5,00,00,001/- realised in the auction sale, after adjusting an amount of Rs.1,62,66,143/- towards customs duty and Rs.1,05,01,111/- towards interest, the balance amount of Rs.2,32,32,747/- was deposited in the District Court.

3. The manner in which the customs duty was quantified was contested by the respondent. According to him, the quantification should have been done on cum-duty basis as per CBEC Circular No.71/2001 dated 28.11.2001. The respondent also contended that the claim for interest cannot prevail over the claim for warehouse rent under Section 150(2) of the Customs Act, 1962. The Commissioner of Customs (Appeals), Customs House, Cochin, before whom the above challenge was raised, rejected the same as per Annexure 1 order dated 11.07.2012. The respondent preferred an appeal before the Tribunal. By Annexure 2 order dated 22.10.2018, the Tribunal set aside the Annexure 1 order and remanded the matter to the original authority. The Tribunal has found that the warehouse rent and the charges are inbuilt into the bond amount as per Section 69 of the Customs Act, 1962, that under Section 63 the warehouse keeper has a statutory right to sell the warehouse goods for recovering the unpaid rent and warehouse charges, that Section 150 does not make any difference between sale of goods in terms of Section 48 or other Sections, that interest on customs duty cannot take precedence over rent and other claims of the warehouse keeper and that the method of calculation of duty was not in accordance with the Circular dated 28.11.2001. The appellant is aggrieved by Annexure 2 order.

4. Heard Sri P.R.Sreejith, Senior Standing Counsel (CBIC) on behalf of the appellant and Advocate Sri S.Santhosh Kumar on behalf of the respondent. According to the counsel for the appellant, the scheme of the Customs Act is such that the control over any goods brought into India from a place outside India, remains with the proper Officer and even goods which are warehoused are under the control of the proper Officer. The counsel further submits that the right of the warehouse keeper for receiving rent has to be exercised under Section 63 of the Customs Act. But in the case on hand, it is not a sale conducted by the warehouse keeper for realising his dues. He further submits that Section 62 vests control over the warehoused goods in the proper Officer. Counsel contends that in the above circumstances, the claim of the warehouse keeper can only be after satisfaction of the entire claim of the Customs Department. According to the counsel, the mere warehousing of goods does not mean that the warehouse keeper is in custody of the goods so as to justify a better claim under Section 150(2)(d) of the Customs Act. It is the Customs Department or the proper Officer who has the custody of the goods, is the argument.

5. The counsel for the respondent on the other hand submits that the warehouse keeper is a person in custody of the goods having regard to the fact that the Statute permits the warehouse keeper to sell the goods for realisation of his dues. He further submits that the Central Board of Excise and Customs has clarified that the interest on customs duty cannot take precedence over the rent and other claims of the warehouse keeper as per the clarification dated 22.5.1990.

6. The Hon'ble Supreme Court has in its decision in Union of India and others v. Associated Container Terminal Ltd. reported in [2020 (371) ELT 817 (SC)] held that the customs duty in case of sale of the goods has to be calculated working backwards on the price realised.

7. The following substantial questions of law arise for consideration;

(a) Whether the warehouse keeper is the custodian of goods under Chapter IX of the Customs Act, 1962?

(b) Whether the proceeds of auction sale conducted as ordered by the District Court under Section 72 are to be appropriated as provided in Section 150 of the Customs Act?

(c) Whether the quantification of customs duty is to be made by following cum-duty method ?

(d) Whether interest on customs duty can have precedence over the claims of the warehouse keeper?

8. In order to appreciate the contentions of the parties, it is helpful to extract Sections 48, 62, 63, 72 and 150 of the Customs Act, 1962, as they stood at the relevant time.

48. Procedure in case of goods not cleared, warehoused, or transhipped within [thirty days] after unloading.—If any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transhipped within thirty days from the date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer be sold by the person having the custody thereof:

Provided that —

(a) animals, perishable goods and hazardous goods, may, with the permission of the proper officer, be sold at any time;

(b) arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct.

Explanation.— In this section, “arms” and “ammunition” have the meanings respectively assigned to them in the Arms Act, 1959 (54 of 1959).

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62. Control over warehoused goods.

(1) All warehoused goods shall be subject to the control of the proper officer.

(2) No person shall enter a warehouse or remove any goods therefrom without the permission of the proper officer.

(3) The proper officer may cause any warehouse to be locked with the lock of the Customs Department and no person shall remove or break such lock.

(4) The proper officer shall have access to every part of a warehouse and power to examine the goods therein.

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63. Payment of rent and warehouse charges.

(1) The owner of any warehoused goods shall pay to the warehouse keeper rent and warehouse charges at the rates fixed under any law for the time being in force or where no rates are so fixed, at such rates as may be fixed, at such rates as may be fixed by the Commissioner of Customs.

(2) If any rent or warehouse charges are not paid within ten days from the date when they became due, the warehouse-keeper may, after notice to the owner of the warehoused goods and with the permission of the proper officer cause to be sold (any transfer of the warehoused goods notwithstanding) such sufficient portion of the goods as the warehouse-keeper may select.

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72. Goods improperly removed from warehouse, etc.— (1) In any of the following cases, that is to say,—

(a) where any warehoused goods are removed from a warehouse in contravention of section 71;

(b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under section 61 to remain in a warehouse;

(c) where any warehoused goods have been taken under section 64 as samples without payment of duty.

(d) where any goods in respect of which a bond has been executed under section 59 and which have not been cleared for home consumption or [export] are not duly accounted for to the satisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with [interest, fine and penalties] payable in respect of such goods

(2) If any owner fails to pay any amount demanded under sub-section (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may [deem fit].

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150. Procedure for sale of goods and application of sale proceeds.—

(1) Where any goods not being confiscated goods are to be sold under any provisions of this Act, they shall, after notice to the owner thereof, be sold by public auction or by tender or with the consent of the owner in any other manner.

(2) The proceeds of any such sale shall be applied—

(a) firstly to the payment of the expenses of the sale,

(b) next to the payment of the freight and other charges, if any, payable in respect of the goods sold, to the carrier, if notice of such charges has been given to the person having custody of the goods,

(c) next to the payment of the duty, if any, on the goods sold,

(d) next to the payment of the charges in respect of the goods sold due to the person having the custody of the goods,

(e) next to the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to customs,

and the balance, if any, shall be paid to the owner of the goods.

Provided that where it is not possible to pay the balance of sale proceeds, if any, to the owner of the goods within a period of six months from the date of sale of such goods or such further period as the [Principal Commissioner of Customs or Commissioner of Customs] may allow, such balance of sale proceeds shall be paid to the Central Government.

9. Section 48 of the Act deals with the situation where goods imported are not cleared for home consumption or warehoused or transhipped within 30 days after unloading. The Section permits the sale of such goods by the”person having the custody” with the permission of the proper officer after notice to the importer. Section 48 can thus be seen to deal with cases where the goods have not been warehoused and resultantly, the question of custody of warehouse keeper does not arise.

10. Section 61 of the Act provides for the period during which goods may remain warehoused. Section 62 says that warehoused goods shall be “subject to the control of the proper officer”. Section 62 does not say that the warehouse keeper does not have custody of these goods. A reading of Section 63 however, will show that the warehouse keeper is entitled to receive rent and warehouse charges from the owner of any warehoused goods, at the rates fixed under any law for the time being in force or where no rates are fixed, at the rates fixed by the Commissioner of Customs. Section 63 further says that if the above said charges or rent are in default, the warehouse keeper can cause to be sold such portion of the goods, which he may select, with the permission of the proper officer. In our opinion, unless the warehouse keeper is bestowed with custody of the warehoused goods, there can never be the question of any entitlement to rent and charges and the right to sell the goods after notice to the owner. The Section does not even contemplate the permission of the owner to sell the goods. It contemplates only the permission of the proper Officer, since the said officer has control over the warehoused goods under the Statute. Sections 62 and 63 do not in any way indicate statutorily as to the person in custody, which will have to be inferred on the factum of actual possession; which is with the warehouse keeper, who holds it in lieu of the owner and in a situation of non payment; by virtue of the right conferred to choose and sell goods has to be the custodian of the goods he chooses to sell. We infer so from the indication given in Section 48 where the “person in custody”; prior to the goods being cleared for home consumption or warehoused or transhipped within thirty days from the date of the unloading thereof at a customs station or within such further time as the proper officer permits or if the title to any imported goods is relinquished, to sell such goods after notice to the importer and with the permission of the proper officer. Such custodian as referred to in Section 48 is the Container Freight Station as rightly pointed out by the learned Standing Counsel. The sale in such circumstance too has to be with the permission of the proper Officer, who is defined as the person in control under Section 63 as distinguished from being in custody.

11. Section 72 of the Act deals with the right of proper officer to sell the warehoused goods in certain situations other than the instance of a sale permitted by the warehouse keeper. When the proper Officer resorts to a sale invoking the power under subsection (2) of Section 72; it visits upon him an obligation to pay the rent to the warehouse-keeper as provided in Section 63(1); which again is subject to the charge by apportionment of priority as created in Section 150.

12. A reading of the provisions contained in Chapter IX of the Act will clearly show that warehouses are places where dutiable goods are deposited and they function under licenses issued by the Principal Commissioner of Customs or Commissioner of Customs. Several statutory duties are placed on the warehouse keeper under the Act. We notice that Section 73A has been brought in by way of an amendment by Finance Act, 2016 dated 14.5.2016, which reads as follows:

“73A. Custody and removal of warehoused goods. –

(1) All warehoused goods shall remain in the custody of the person who has been granted a licence under section 57 or section 58 or section 58A until they are cleared for home consumption or are transferred to another warehouse or are exported or removed as otherwise provided under this Act.

(2) The responsibilities of the person referred to in subsection (1) who has custody of the warehoused goods shall be such as may be prescribed.

(3)Where any warehoused goods are removed in contravention of section 71, the licensee shall be liable to pay duty, interest, fine and penalties without prejudice to any other action that may be taken against him under this Act or any other law for the time being in force.“

13. Section 73A(1), when it says that all warehoused goods shall remain in the custody of the person who has been granted a licence under Section 57 or 58 or Section 58A until they are cleared for home consumption, clearly speaks about the period of custody. The said Section, even though it was inserted only on 14.5.2016, clarifies the position that the warehouse keeper has custody of the goods which are warehoused. Considering the above statutory provisions, we answer Question No.(a) raised in the appeal in favour of the respondent and against the appellant.

14. Regarding the question whether a sale under Section 72 is covered by Section 150 of the Customs Act, all that is required is a reading of Section 150(1). The Section clearly provides for sale by public auction or by tender or with the consent of the owner in any other manner, of any goods not being confiscated goods and that too under any provisions of the Act. Section 72 deals with sale of goods which are warehoused. As such, sale of goods by invoking Section 72 comes within the ambit of Section 150, since it is not a sale of confiscated goods. Confiscation of goods and its consequences are dealt with in Chapter XIV of the Act. Question No.(b) is thus answered against the appellant and in favour of the respondent.

15. The Question Nos.(c) and (d) raised in the appeal are being considered together. The Hon'ble Supreme Court has in Union of India and others v. Associated Terminal Ltd. (supra) considered the question of the principles to be followed for arriving at the customs duty when the goods are auctioned off and the manner in which the sale proceeds are to be applied. Paragraphs 9 and 10 of the above judgment are extracted below;

“9. Learned counsel for the respondent refers to Chapter 21 of Central Board of Excise and Customs Manual relating to disposal of unclaimed/uncleared cargo. The relevant clauses from the Manual read as under:

“7. Once the goods are sold, the Customs duty on the goods is calculated. For calculation of Customs duty, the sale proceeds from the sale of unclaimed/uncleared goods is taken as cum-duty price (value + duty) and customs duty is calculated working backwards on the price realised.

Apportionment of sale proceeds of goods:

8. On the unclaimed/uncleared goods, liabilities towards customs duty as well as carrier’s charges and storage charges arise, which are to be recovered from the sale proceeds. In addition, sales expenses incurred on sale of such goods are to be recovered. In most of the cases, the sale proceeds of such goods may not be sufficient to meet liabilities of all the agencies. In such cases, question arises as to which liability is to be met first. To take care of such a situation, provisions have been made in Section 150(2) of the Customs Act. The sale proceeds of any such sale of unclaimed/uncleared goods is to be applied in following manners:

(a) first, to the payment of the expenses of the sale,

(b) next to the payment of the freight and other charges, if any, payable in respect of the goods sold, to the carrier, if notice of such charges has been given to the custodians,

(c) next to the payment of the duty, if any, on the goods sold,

(d) next to the payment of the charges in respect of the goods sold due to the person having the custody of the goods,

(e) next to the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to Customs.

After making above-said payments, if any balance remains, that is to be paid to the owner of the goods.”

10. Reference is made to another Circular dated 28th November, 2001 issued by the Central Board of Excise and Customs. The Circular reads as under:

“A reference was received from the Container Corporation of India (CONCOR) stating that there is a divergence of practice in Custom Houses with regard to apportionment of sale proceeds from disposal/sale of unclaimed/ uncleared goods under Section 150 of the Customs Act, 1962. It was reported that some Custom Houses determine the Customs duty payable on auctioned goods after deducting the sales expenses from the sale proceeds of the goods whereas other Custom Houses are determining duty on the basis of sale proceeds without allowing any deduction.

2. The matter has been examined. It is clarified that –

(a) the Customs duty shall be determined by backward calculation considering the sale proceeds of unclaimed/uncleared goods as the cumduty price. For calculation of duty, total sale proceeds without allowing any deduction towards sales expenses or any other charge is to be taken as cum duty price.

(b) After determination of the Customs duty, sale proceeds of unclaimed/ uncleared goods is to be appropriated in the manner as provided in section 150(2) of the Customs Act, 1962.

3. These instructions may be brought to the notice of all concerned by way of issuance of suitable Public Notice/Standing Order.

4. Difficulties, if any, in implementation of these instruction, may be brought to the notice of the Board. Kindly acknowledge receipt of this Circular.”

16. On a reading of the above extract, it is seen that the Customs Manual very clearly says that for calculation of customs duty, the sale proceeds from the sale of unclaimed/uncleared goods is taken as cum-duty price (value + duty) and customs duty is calculated working backwards on the price realised. The above provision contained in the Manual has been further clarified in the Circular extracted in paragraph 10 of the above judgment. While clarifying on the backward calculation, the Circular further says that the total proceeds without allowing any deduction towards sale expenses or any other charge is to be taken as cum-duty price, which will be Rs.5,00,00,001/- in the case on hand. The clarification further says that after determination of the customs duty in such manner, the sale proceeds have to be appropriated in the manner provided in Section 150(2) of the Act. In the light of the above factual position, as clearly stated by the department itself, there can be no further doubt regarding the manner in which the customs duty has to be arrived at in case of sale of uncleared goods. In the case on hand, admittedly, the customs duty has not been arrived by following the cum-duty method. The finding of the Tribunal on the above question cannot be faulted in any manner.

17. On the question whether the interest on customs duty can have precedence over the right of the warehouse keeper, Section 150 of the Act clearly says that the expenses of sale, expenses towards freight and other charges in respect of the goods sold and the customs duty on the goods sold will have precedence over the charges in respect of the goods sold which are due to the person having custody of the goods. The Section does not speak about interest on customs duty. A strict interpretation of the words used in the Section does not hence allow any precedence for claim for interest on customs duty over the warehousing charges or rent. Then the only question is, whether the interest on customs duty can also be treated as part of the duty itself. The counsel for the respondent places reliance on a clarification issued by the Central Board of Excise and Customs, New Delhi, which is extracted below;

“Warehousing interest-Treatment of warehousing

interest in the apportionment of sale proceeds

under Section150 of Customs Act, 1962

F. No. 473/94/89-Cus. VIII, dated 22-5-1990

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Treatment of warehousing interest in the apportionment

Subject : of Sale proceeds under Section 150 of the Customs Act, 1962.

Reference to D.O. letter F.No. 5/6-Gen, 1246/89 bonds dated 8-11-1989 (copy enclosed) from the Collector of Customs, Bombay on the above mentioned subject.

The matter has been considered by the Board. It is observed that interest on customs duty. on warehoused goods levied under Section 61(2) of the Customs Act, is distinct from the customs duty. In fairness, it cannot take precedence over the rent and other claims of the warehouse keeper who is providing a definite service, by keeping the custody of the goods and in the process incurring considerable costs. It is, accordingly, decided that there is no justification to amend the Customs Act for giving interest charges overriding precedence on par with customs duty under Section 150 of the Customs Act, 1962.

The above decision may be kept in view while deciding on the apportionment of various charges under Section 150 of the Customs Act on the disposal of warehoused goods.”

18. It can be seen from the above that the Department itself has understood the provision in Section 150 to mean that the interest on customs duty cannot take precedence over rent and other claims of the warehouse keeper. The above clarification has been issued as early as on 22.05.1990 and is very much in accordance with the language of Section 150. The order of precedence contained in Section 150(2) does not leave any room for doubt. Since the amount is received as a result of a public sale, the first priority is given as per Section 150(2)(a) to the expenses for sale. The second priority is given, as per Section 150(2)(b) to the expenses that were incurred prior to the goods coming into custody of the warehouse keeper, ie. Freight etc. The third priority is to the State for its claim towards Customs Duty as can be seen from Section 150(2)(c). The fourth priority is for the dues to the warehouse keeper in the form of rent and charges as is seen from Section 150(2)(d). What is most relevant is Section 150(2)(e), which says that after the claim under Sub clause 2(d), the next priority is for the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to customs. Any claim other than customs duty, which comes under sub rule (2)(c), under the Act, can be settled only after the claim under Section 150(2)(d) is settled. In our opinion, the claim for interest can come only under Section 150(2)(e).

19. We are hence of the opinion that even without the aid of the above clarification, Section 150 can be understood only to mean that interest on customs duty cannot have precedence over the charges and rent due to the warehouse keeper. The clarification dated 22.05.1990 can in our opinion be treated as a contemporaneous exposition.

20. It is well settled that the principle of contemporanea expositio is a principle which can be applied while interpreting a provision of a Statute. The principle has been followed from very early times. As far as independent India is concerned, one of the earliest decision is was the decision of the Hon'ble Supreme Court in Desh Bandhu Gupta and Co. and others v. Delhi Stock Exchange Association Ltd. reported in [(1979) 4 SCC 565]. The Apex Court refers to the decision in Mathura Mohan Saha v. Ramkumar Saha reported in [AIR 1916 Calcutta 136] and in

paragraph 9 states thus; 9. It may be stated that it was not disputed before us that these two documents which came into existence almost simultaneously with the issuance of the notification could be looked at for finding out the true intention of the Government in issuing the notification in question, particularly in regard to the manner in which outstanding transactions were to be closed or liquidated. The principle of contemporanea expositio (interpreting a statute or any other document by reference to the exposition it has received from contemporary authority) can be invoked though the same will not always be decisive of the question of construction (Maxwell 12th ed. p. 268). In Crawford on Statutory Construction (1940 ed.) in para 219 (at pp. 393-395) it has been stated that administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with ex-ecuting a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight; it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass' the principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha has been stated by Mookerjee, J. thus: It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it... I do not suggest for a moment that such interpretation has by any means a controlling effect upon the courts; such interpretation may, if occasion arises, have to be disregarded for cogent and persuasive reasons, and in a clear case of error, a court would without hesitation refuse to follow such construction. Of course, even without the aid of these two documents which contain a contemporaneous exposition of the Government's intention, we have come to the conclusion that on a plain construction of the notification the proviso permitted the closing out or liquidation of all outstanding transactions by entering into a forward contract in accordance with the rules, bye-laws and regulations of the respondent. “ 21. The decision in Desh Bandhu Gupta (supra) has been quoted with approval in the decisions of the Hon'ble Supreme Court in Rohitash Kumar and others v. Om Prakash Sharma and others reported in [(2013) 11 SCC 451] and Spentex Industries Limited. v. Commissioner of Central Excise and others reported in [(2016) 1 SCC 780]. In the light of the above, we hold that interest on customs duty does not have precedence over the warehousing charges and rent. The questions (c) and (d) are thus answered against the appellant and in favour of the respondent. The appeal fails and is dismissed, however, without any order as to costs.