NVOCC Cannot Charge Demurrage On Customs-Seized Goods Despite 60-Day SCMTR Rule: CESTAT Mumbai

On 24 September, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai held that a Non-Vessel Operating Common Carrier (NVOCC) acting as a Customs Cargo Service Provider (CCSP) cannot charge rent or demurrage on goods seized or detained by Customs, even if the Sea Cargo Manifest and Transhipment Regulations, 2018 (SCMTR) permit recovery of detention charges after 60 days in specified circumstances.

A Bench comprising Judicial Member Ajay Sharma and Technical Member M.M. Parthiban dismissed Aegon Shipping India Pvt. Ltd.'s appeal against the suspension of its SCMTR registration. It held that Aegon Shipping, as an NVOCC and CCSP, had to comply with the waiver directions issued by Customs. The Tribunal observed:

“Further, under Regulation 6(l) of HCCAR, a Customs Cargo Service Provider (CCSP) shall not charge any rent or demurrage on the goods seized or detained or confiscated by the Customs authorities. It is fact on record, that the Directorate of Revenue Intelligence had investigated on the subject imported goods covered in this case and have seized the same. Therefore, in terms of the Regulation 6(l) of HCCAR, the appellant is debarred from charging any detention or demurrage charges on the impugned goods held in two containers.”

The dispute concerned two containers carrying Electrolytic Tough Pitch Copper Wire Rod imported from Jebel Ali, United Arab Emirates, to Nhava Sheva. Customs issued a detention and demurrage waiver certificate recommending waiver of charges from the date the goods were held until their delivery.

Aegon Shipping did not comply with the waiver directions after the 60-day period contemplated under Regulation 10(1)(l) of the SCMTR. The Commissioner of Customs thereafter ordered immediate suspension of its registration under Regulation 11(2)(a) and (c) of the SCMTR.

The Tribunal distinguished the 60-day provision under Regulation 10(1)(l) of the SCMTR from the prohibition under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR). It noted that Regulation 10(1)(l) permits an authorised carrier to recover detention charges after 60 days in specified circumstances, while Regulation 6(1)(l) separately prohibits a CCSP from charging rent or demurrage on goods seized, detained or confiscated by Customs. Since the Directorate of Revenue Intelligence had seized the goods, the HCCAR prohibition applied.

It also referred to a Public Notice issued by the jurisdictional Commissioner, which clarified that shipping lines, freight forwarders and NVOCCs handling imported or exported goods in customs areas are CCSPs and must comply with the HCCAR.

The Bench held that Aegon Shipping's failure to comply with Regulation 6(1)(l) of the HCCAR also amounted to non-compliance with Regulation 10(1)(m) of the SCMTR, which requires authorised carriers to comply with the Customs Act and the regulations made under it.

It further relied on directions issued by the Bombay High Court requiring Customs authorities to issue and facilitate implementation of the detention and demurrage waiver certificate. It held that Aegon Shipping's continued failure to comply with the waiver directions justified the Commissioner's decision to suspend its SCMTR registration. It observed:

“Since, as we have concluded that the appellant did not comply with the Regulation 6(1)(l) of HCCAR, the failure to fulfill the requirement of Regulation 10(1)(m) of SCMTR is attracted and therefore, the impugned order in ordering immediate suspension of the appellant's registration is legally valid and therefore the same is sustainable.”

Accordingly, the CESTAT upheld the suspension of Aegon Shipping's registration and dismissed the appeal. It also recorded that the Commissioner had given Aegon Shipping an opportunity to make its representation before passing the suspension order, satisfying the requirements of natural justice.

Counsel for the Appellant: Rafiq Mohammed, Advocate

Counsel for the Respondent: Mahesh Patil, Authorised Representative