Dismissed

Chowgule and Company Private Limited v. Union of India

Karnataka HC7 Oct 2021MFA/4012/2014

Case brief

AI extract

What is this about?

This common judgment dismissed two철 appeals against Railway Claims Tribunal orders rejecting refunds of excess railway freight. The Court held that Rates Circulars were prospective and not applicable to a pelletisation unit, and the refund claim was time-barred under Section 106(3) of the Railways Act as it was an overcharge, not an illegal charge.

What did the court decide?

The appeals filed against the Railway Claims Tribunal orders dismissing the claim applications for refund of excess railway freight were dismissed.

Chowgule and Company Private Limited Vs Union of India — Karnataka HC (2021) — LawSathi Research

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 7^th DAY OF OCTOBER, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE E.S.INDIRESH

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M.F.A.No.4012/2014 C/W M.F.A.No.6959/2014 (RCT)

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IN MFA No.4012/2014

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BETWEEN :

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CHOWGULE AND COMPANY PRIVATE LIMITED CHOWGULE HOUSE, MARMUGAO HARBOUR GOA-403 803 REP BY SRI RAMA ALIAS RAMESH BHIMA BILGUCHE, DIRECTOR (S & L) AND COMPANY SECRETARY OF THE COMPANY ...APPELLANT

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(BY SRI S.ANIL KUMAR, ADV. FOR SRI M.B.INAMDAR, ADV.)

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AND :

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1 . UNION OF INDIA REP BY ITS GENERAL MANAGER, SOUTH WESTERN RAILWAY, HUBLI-580 023.

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2 . THE CHIEF COMMERCIAL MANAGER (CLAIMS) SOUTH WESTERN RAILWAY, HUBLI-580 023. …RESPONDENTS

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(BY SRI ABHINAY Y.T., ADV.)

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THIS M.F.A. IS FILED UNDER SECTION 23 OF THE RCT ACT AGAINST THE ORDER DATED 12.03.2014 PASSED IN OA III/SBC/2010/0001 ON THE FILE OF THE RAILWAY CLAIMS TRIBUNAL, BANGALORE, DISMISSING THE CLAIM PETITION FOR COMPENSATION.

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IN M.F.A.No.6959/2014

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BETWEEN :

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CHOWGULE AND COMPANY PRIVATE LIMITED CHOWGULE HOUSE, MARMUGAO HARBOUR GOA-403 803 REP BY SRI RAMA ALIAS RAMESH BHIMA BILGUCHE, DIRECTOR (S & L) AND COMPANY SECRETARY OF THE COMPANY ...APPELLANT

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(BY SRI S.ANIL KUMAR, ADV. FOR SRI M.B.INAMDAR, ADV.)

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AND :

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1 . UNION OF INDIA REP BY ITS GENERAL MANAGER, SOUTH WESTERN RAILWAY, KESWAPUR, HUBLI-580 023.

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2 . THE CHIEF COMMERCIAL MANAGER (CLAIMS) HEAD OFFICES, SOUTH WESTERN RAILWAY, KESWAPUR, HUBLI-580 023. …RESPONDENTS

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(BY SRI ABHINAY Y.T., ADV.)

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THIS M.F.A. IS FILED UNDER SECTION 23(1) OF THE RAILWAY CLAIMS TRIBUNAL ACT AGAINST THE JUDGMENT DATED 17.07.2014 PASSED IN OA 1/SBC/2011/0001 ON THE FILE OF THE RAILWAY CLAIMS TRIBUNAL, BANGALORE BENCH, DISMISSING THE CLAIM APPLICATION FILED UNDER SECTION 16 OF THE RAILWAYS CLAIM TRIBUNAL ACT.

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THESE APPEALS HAVING BEEN HEARD AND RESERVED, COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, S. SUJATHA, J ., DELIVERED THE FOLLOWING:

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J U D G M E N T

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Since common and akin issues are involved in these appeals, they are heard together and disposed of by this common judgment.

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MFA No.4012/2014 is directed against the order dated 12.03.2014 passed in

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O.A.No.III/SBC/2010/0001 and MFA No.6959/2014 is directed against the order dated 17.07.2014 passed in O.A.No.I/SBC/2011/0001, both on the file of the Railway Claims Tribunal, Bangalore (‘Tribunal’ for short).

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The appellant is a private limited company

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with its registered office at Chowgule House, Marmugao Harbour, Goa. The appellant owns two iron ore mines in Hospet-Bellary area of Karnataka State and transports

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iron ore from Rail Head ‘Byaluoddigeri’ (BYO) and ‘Vyasankeri’ (VYS) to their private railway siding called

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‘Costi Siding’ for onward transport by appellant to their pelletisation plant at Shiroda, Goa. The appellant claimed that the pellets so manufactured are supplied to steel manufacturers in India and no part of it is exported.

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Pursuant to the Rates Circular No.24/2008 coming into force from 22.05.2008, the appellant had requested the railways to supply two rakes of 58 Box wagons i.e., 116 wagons for booking iron ore under Domestic Consumption under their demand for wagons dated 04.06.2008. The appellant having booked two train loads of iron ore as per invoices, both dated 05.06.2008, had tendered two forwarding notes for booking iron ore under Domestic Consumption which was said to have been accepted issuing railway receipts under 200X class rates applicable for export instead of 170 class rate for domestic consumption. It is the grievance of the appellant that it had coerced to book

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the goods under 200X class rate meant for export purpose paying higher class rate. The appellant made claim for refund of excess freight collected which was repudiated as time barred under Section 106 of the Railways Act, 1989. Against the rejection of the claim for refund, the appellant filed the applications before the Tribunal. The Tribunal dismissed the claim applications. Being aggrieved, the appellant is before this Court.

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Learned counsel for the appellant argued that the Tribunal grossly erred in holding that Rates Circular No.24/2008 applies to iron ore booked for Domestic Consumption by Iron and Steel Industries and not iron ore booked to pelletisation industry. It was submitted that Rates Circular No.24/2008 was issued mainly for the purpose of adjustment of classification of iron ore for export; the Tribunal failed to appreciate the evidence placed on record that iron ore booked for

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transportation from Bayaluvaddageri [BYO] and Vyasankeri [VYS] in Karnataka (Bellary) to their siding at Cost in Goa for pelletisation plant located at Shiroda, Goa was only for domestic consumption and no part of it was exported. As such, the rates under class 200X has no application to it and the appellant is entitled for refund of excess charges collected, the same being ‘illegal charge’ not ‘overcharge.’ Learned counsel placed reliance on the judgment of the Hon’ble Apex Court in the case of Union of India and others vs. West Coast Paper Mills Ltd., and another reported in AIR 2004 SC 3079 and the judgment of the Orissa High Court in the case of Union of India and others vs. Steel Authority of India Limited reported in AIR 1997 ORISSA 77.

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Learned counsel appearing for the railways supporting the impugned order submitted that the appellant is engaged in the business of export of iron

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ore. In order to claim the concessional rate under RC No.24/2008, the appellant has to establish that the iron ore transported through the subject consignments was put to domestic use by them as a steel manufacturing unit. But the appellant is running a pelletisation unit, which is not a steel manufacturing unit. Hence, the appellant is not entitled for the concessional tariff rate under class-170. Having considered these aspects, the Tribunal has rightly dismissed the applications filed by the appellant.

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We have heard the learned counsel for the

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parties and perused the material on record.

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The points that arises for our consideration

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are:

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1) Whether the appellant is entitled for concessional rate of tariff under Rates Circular No.24/2008?

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2) Whether the claim of refund made by the appellant is over charge and attracts Section 106(3) of the Railways Act, 1989?

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3) Whether the order of the Tribunal impugned is justifiable?

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Re. Point No.1

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It is not in dispute that the appellant owns

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two iron ore mines in Hospet-Bellary area of Karnataka State and the extracted iron ore have been transported to their pelletisation unit at Shiroda, Goa from the main head. The appellant had booked 178 train loads of Iron Ore for domestic consumption for the purpose of pelletisation during June 2007 to May 2008 and the entire production was supplied to steel manufacturing units in India. Admittedly, the appellant company unit at Goa is a Pelletization unit, not a steel manufacturing unit. Appellant booked five rakes as per Class-170 of Rates Circular 24/2008 for transportation of Iron Ore from BYO to Costi Siding under the invoices Nos.14 to

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The station manager BYO raised undercharges on the ground of non-submission of required documents and also that manufacture of pellets is not covered under steel or iron as notified in RC 24/2008. The appellant remitted the said amount of undercharges under protest to avoid restriction of booking. On issuance of the Circular 30/2008 on July 1^st 2008, in modification of RC No.24/2008, the applicant filed an application for refund of excess freight paid vide letter dated 21.07.2008 which was rejected by the Chief Claims Officer, of SW-Railway [MFA No.4012/2014].

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Para Nos. 4 and 5 of the Rates Circular

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No.24/2008 dated 12.05.2008 reads thus:

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“4. The classification of Iron Ore destined for domestic consumption is Class170.

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Accordingly, following footnote should be inserted below the Commodity Head

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“Mineral and Ores” at S.No.13 of the IRCA Goods Tariff No.45 Pt.I (Vol.II).

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Iron Ore Domestic will be charged at Class – 170 and Iron Ore for other than domestic consumption will be charged at Class-200X.

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5. Following conditions must be complied with while booking and granting delivery of Iron Ore traffic for domestic consumption :

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(i) For Iron Ore booked to private sidings (including Assisted sidings) of Steel manufacturing units: In order to avail the tariff rates for Iron Ore domestic traffic, all Iron and steel manufacturing units (including integrated steel plants and mini steel

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plants etc) having their own private sidings for handling inward iron ore will be required to make a one time submission of the following documents.

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(a) Certified copies of (i) Industrial Entrepreneur Memorandum (IEM); (ii) the

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Factory License; (iii) Certificate of registration under Contract Labor Act; (iv) Consent For Establishment (CFE); (v) Consent For Operation (CFO) from Pollution Control Board; (vi) Central Excise registration certificate; and (vii) monthly excise return.

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(b) An affidavit on non-judicial stamp paper of Rs.100/- in the format given below certifying that only iron ore for domestic consumption will be received in their siding.

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“It is certified under oath that all consignments of iron ore received at ----siding is meant for domestic consumption at the manufacturing unit ------ located at -----with Factory registration no -------- and Cenvat no ------. It is also certified that the iron ore received at --------will not be exported out of India under any circumstances. However, if at any stage, Iron Ore received at this siding is intended to be used wholly or partially for export purposes, the company undertakes to advise the concerned CCM and DRM well in time before receipt of such consignment in their siding.”

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(c) On receipt of an advice that Iron ore booked to such sidings are to be used wholly or partially for export, provisions of subpara 5 (ii) will apply for each rake booked thereafter.

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(d) The consignee must also furnish a stamped indemnity note to indemnify the railway against mis-declaration or any other misuse of the provision given above.”

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Rates Circular No.30/2008 dated

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01.07.2008 was issued by the Government of India [Bharat Sarkar] Ministry of Railways [Rail Mantralaya],

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Railway Board regarding classification of Iron ore, partially modifying RC 24 of 2008. The relevant paragraphs are extracted herein for ready reference:

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“1 Iron Ore will be charged at Class 200X for both train load and wagon load. Freight rates per tonne under Class 200X are given in Annexure to RC 24 of 2008.

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2 Notwithstanding Para 1 above, traffic of Iron Ore meant for domestic consumption for manufacture of Iron and Steel will be charged a lower freight at Class 170 subject to fulfillment of conditions laid down in Para 3 of this circular.

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3 Following conditions must be complied with while booking as well as while granting delivery of Iron Ore traffic for domestic consumption in terms of Para 2 above.

4 Other Conditions

(a) Under provisions of Para 3, railway receipt will be issued only in the name the consignee in respect of whom the prescribed documents have been submitted by the consignor to Railways.

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(b) Delivery of such consignments will only be made to the consignee mentioned on the railway receipt.

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(c) If conditions at 4 (a) and (b) above are not complied with, freight will be realized at Class 200X, by raising undercharges wherever necessary. CGS of destination terminal must keep a close watch on compliance of these instructions.

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5 Pelletization Unit

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Pelletization units receiving iron ore in their private or assisted sidings for conversion into iron ore pellets for consumption of iron and steel manufacturing plants will be treated at par with steel manufacturing units. However, they will need to comply with provisions of Para 3 (B) for availing freight rates as prescribed in Para 2.

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9. These instructions will come into force with effect from 10.07.2008.”

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12. In terms of the said Rates Circulars, freight

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relating to Iron Ore for domestic consumption shall be as per Class–170. Other than domestic consumption would be charged as per Class-200X subject to conditions specified therein. It is the contention of the appellant that the Iron Ore transported by it for domestic consumption would attract Class-170, relating BYO to Costi Siding [MFA 4012/2014], five rakes were booked under Class-170 for domestic consumption on May 25, 2008, June 1, 2008, June 2, 2008, June 3, 2008 and June 4, 2008, for which railway receipts were issued under Class-170. Subsequently, the Superintendent BYO raised undercharges for Rs.1,21,84,565/- on the premise that the appellant

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company is not a steel manufacturing unit [MFA No.4012/2014]. The appellants paid the undercharges demanded under protest and thereafter made claim for refund of excess freight which was rejected by the railways. As could be seen from the records, the main grounds for repudiation are: [i] Mandatory endorsement was not made on forwarding notes that iron ore is required for domestic consumption; [ii] That prime document Industrial Entrepreneur Memorandum [IEM] was not submitted; [iii]Under Rates Circular No.24 of 2008 pelletisation industry is not steel manufacturing unit.

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Two train loads of Iron Ore [MFA No.6959/2014] in invoice [1] dated 05.06.2008 Ex.BYO to Costi Siding and invoice [2] dated 06.06.2008 Ex.BYS

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to Costi Siding were booked under Class-200X railway receipts under Class 200X rates were issued. Claim

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made for refund was repudiated as time barred under

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Section 106[3] of Railways Act, 1989.

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The arguments of the appellant that para

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No.2 of Rates Circular No.24/2008 is applicable, cannot be acceded to, as one of the condition precedent is that the Iron Ore Tariff booked to private sidings/other than private sidings [including Assisted sidings] must be of Steel manufacturing units. Based on the Rates Circular No.30/2008, though it was stoutly argued that the Rates Circular No.24/2008 has been modified partially inasmuch as classification of Iron Ore and the same being clarificatory in nature is applicable to the case on hand cannot be countenanced for the reason that the said Circular explicitly makes it clear that the instructions of the said circular will come into force with effect from 10.07.2008 whereas the transaction in question refers to prior to the effective date. The Tribunal interpreting the said Circular, has held that

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these circular instructions are prospective in nature. We approve the same since the said Circular itself speaks about the effective date of the said instructions coming into force. Moreover it is settled law that, any notification/circular instructions would be prospective in nature unless it is explicitly specified as retrospective, subject to its legal effect. Hence, interpretation given by the Tribunal regarding para Nos.4 and 5 of the Circular 24/2008 read with Rates Circular No.30/2008 cannot be faulted with.

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Re. Point No.2.

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In MFA No.6959/2014, it is the grievance of the appellants that freight charges has been illegally collected from the appellants under Class-200X which is not applicable as the consignment was transported for domestic consumption. AW1 who was examined on behalf of the appellant before the Tribunal has admitted that the appellant had voluntarily booked two rakes

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under RR No.C-399367 dated 05.06.2008 and RR No.211000987 dated 06.06.2008. No documents were produced to show that the railways forced them to book under Class-200X. In order to claim refund of an overcharge in respect of goods carried by railway, SubSection 3 of Section 106 attracts, which reads thus:

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“(3) a person shall not be entitled to a refund of an overcharge in respect of goods carried by railway unless a notice therefore has been served by him or on his behalf to the railway administration to which the overcharge has been paid within six months from the date of such payment or the date of delivery of such goods at the destination station, whichever is later.”

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Indisputedly, for the freight charges said to have been paid in excess on 05.06.2008 and 06.06.2008, period of six months expires on 04.12.2008 and 05.12.2008 respectively. Admittedly, no notice under Section 106[3] was issued by the appellant. Learned counsel contends that the freight charges

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collected in excess is illegal charge not overcharge and the provisions of 106[3] of the Act would not be applicable. Thus, the crux of the controversy would be, what is overcharge? To answer this point, it would be beneficial to refer to the judgment of the Hon’ble High Court of Orissa reported in Steel Authority of India Limited supra, wherein it has been held thus:

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“13-A. The word "overcharge" has not been defined in the Act, Therefore, the common parlance meaning has to be taken to explain its meaning. In common parlance, the simple meaning of "overcharge" is anything charged in excess of what is actually to be charged for a particular thing; Taking this to be the meaning of "overcharge", it has to be seen as to whether the claim of the respondent is or is not for refund of overcharge. Admittedly, the goods were booked for being carried over the rationalised route which covers a distance of 1082 kilometres. It is neither the respondent's case nor the appellants' case that what was charged towards freight was in excess of

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what was payable for the distance of 1082 kilometres. In other words, the respondent was not "overcharged" because no freight in excess of what was payable for 1082 kilometres was realised.”

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17. In the case of West Coast Paper Mills Ltd.,

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and Another , supra, the Hon'ble Apex Court has held thus:

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“18. The term overcharge is not defined in the Act. In the dictionary meaning "overcharge" means "a charge of a sum more than as permitted by law" [see. The Law Lexicon, P. Ramanatha Aiyar, 1997 Edition. Page 1389]. The term came up for the consideration of the High Court of Gujarat in M/s Shah Raichand Amulakh (D) by his heir v. Union of India and Ors., (1971) 12 GLR 93. Chief Justice P.N. Bhagwati (as His Lordship then was) interpreted the term by holding that "Overcharge" is not a term of art. It is an ordinary word of the English language which according to its plain natural sense means any charge in excess of that prescribed or

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permitted by law. To be an overcharge. a sum of money must partake of the same character as the charge itself or must be of the same genus or class as a charge it cannot be any other kind of money such as money recovered where nothing is due. Overcharge is simply a charge in excess of that which is due according to law.”

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In the aforesaid case, West Coast Paper Mills Ltd., had their Mills situated at Dandeli in the state of Karnataka. They had transported their goods between Alnavar and Dandeli by railways sans giving any benefit of telescopic system of rates which was allowed by the railways to others in respect of other goods. As a result, by paying the freight charges at a flat rate, on certain goods, they had paid freight at 3 times compared what would have been payable under telescopic system of rates. In that context, the Tribunal having held that the railway administration had contravened the provisions of Section 28 of the Indian

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Railways Act, 1890 and West Coast Mills was treated with discrimination and unreasonableness, directed

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the railways to refund the freight illegally and unreasonably collected as the Tribunal was competent to grant declaratory relief and not the consequential relief. The freight paid by the plaintiff therein, was as per the rates notified. The rates were subsequently declared to be illegal. In such circumstances, the Hon'ble Apex Court has explained that a sum of money must partake of the same character as the charge itself or must be of same genus or class as a charge it cannot be any other kind of money such as money recovered where nothing is due, thereby distinguished the freight collected by the West Coast Paper Mills being illegal and held that the same was illegal charge, not an overcharge to attract the applicability of Section 78B of the Indian Railways Act, 1890. In the present case, as aforesaid the controversy boils-down to, the applicability of Class whether Class 170 or Class

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200X? On adjudicating upon this issue, the freight collected under Class 200X would be overcharge not the illegal charge as the said overcharge is coming under the same genus of charge or class as a charge not any other kind of money recovered where nothing is due, as enunciated by the Hon'ble Apex Court reported in West Coast Paper Mills Ltd., supra.

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Re. Point No.3.

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As discussed in the preceding paragraphs, the claim of Rs.48,60,057/- [MFA No.6959/2014] made by the appellant under the provisions of the Railways Act, 1989 relating to five rakes of Iron Ore from ex BYO to Costi Siding and ex VYS to Costi Siding under the two invoices dated 05.06.2008 and 06.06.2008 were rejected as barred by limitation under Section 106[3] of the Act inter alia holding that the Rates Circular RC 24/2008 and RC 30/2008 are not applicable to the facts of the present case. The main ground of the

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appellant that Section 106[3] of the Act is not applicable to the facts of the present case was negated distinguishing the overcharge and illegal charge in the light of the judgment of the Hon’ble Apex Court in the case of West Coast Paper Mills Ltd., supra and thereby holding that the case on hand certainly falls under Section 106[3] of the Act but no mandatory statutory notice was issued by the appellant within the time stipulated.

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On appreciation of the material evidence on record, it cannot be gainsaid that the appellant had paid freight charges of Rs.48,60,057/- in Class 200X voluntarily and without any protest having regard to the testimony of AW1 [MFA No.6959/2014]. The refund claimed by the appellant is on the ground that the appellant was liable to pay the freight in Class 170 but the same was paid under Class 200X. Ex.A24 would fortify that the applicant claimed the total difference in

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freight amounting to Rs.48,60,057/in M.F.A.No.6959/2014 and Rs.1,21,84,565/in

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M.F.A.No.4012/2014 though paid on the demand made by the Railways which according to the appellant were collected in excess. This very basis and nature of the claim made as per the pleadings and evidence would indicate that the dispute is with the excess freight charges paid/collected applying the inapplicable Class 200X. Thus, the controversy relating to freight charge would come within the realm of overcharge not the illegal charge as rightly held by the Tribunal.

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As could be seen, the fulcrum of dispute common in both the cases relate to the interpretation of Rates Circular RC 24/2008 read with RC 30/2008. As discussed in the preceding paragraphs, it cannot be held that the said Circulars were applicable to the appellant during the relevant period under consideration, the appellant being a pelletisation unit,

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not a manufacturing unit, the condition precedent that consignment of Iron Ore was meant for domestic consumption at the manufacturing unit would be defeated if it is interpreted that the Iron Ore booked was ultimately used by the steel manufacturing units and not exported out of the India. The incidence of charge is at the time of siding not the subsequent event.

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These aspects have been rightly appreciated by the Tribunal based on the oral and documentary evidence and no exception can be found with the same.

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For the reasons aforesaid, we find no grounds to interfere with the order impugned.

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In the result, appeals stand dismissed.

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Sd/JUDGE

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Sd/JUDGE

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PMR/NC

Chowgule and Company Private Limited v. Union of India

Case brief

What is this about?

What did the court decide?

Chowgule and Company Private Limited v. Union of India

Case brief

What is this about?

What did the court decide?

What the court decided

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