JUDGMENT - M.L. PENDSE, J. :---Messrs. Indian Sugar Industries Export Corporation had filed four drawback shipping bills for export of 11500 metric tons of Indian sugar. The sugar bags were to be transported by a vessel from Bombay to Indonesia. Mackinnon Mackenzie and Company Limited are the owners of vessel known as MV Teesta and the said vessel was berthed in Indira Docks on March 7, 1977 and had been engaged to carry a cargo of 11500 metric tons of sugar. The loading operation commenced on March 7, 1977. On March 8, 1977, fire was reported in Hatch No. 4 of the vessel. The fire was brought under control but the fire caused heavy damage to most of the bags in the hatch. A survey of the damage was carried out and surveyors advised the shipping company to mitigate their losses and avoid further damage by unloading the bags forthwith. The bags were then unloaded and stored at the wharf. On March 11, 1977, the shipping company requested for removal of the bags to Bombay Port Trust Warehouse.

The surveyors report indicated that the cargo was damaged and sugar had lost its colour and crystals had turned into lumps and cakes. The shipping company then obtained licence from Director of Sugar and Vanaspati for sale of Cargo and entrusted the work to Lloyds Surveyors and Tata Finlay Limited to dispose of the bags. Tenders were invited and the highest tender received was from Bombay Hotels Association and the rate quoted was Rs. 2.80 per kilogram. The highest tender was accepted and the sugar was sold for a price of Rs. 19,69,550/-.

2. On May 25, 1977, the shipping company filed bill of entry for home consumption by clearance of damaged sugar and the value shown in the bill of entry was Rs. 19,69,550/-. The customs authorities demanded payment of Rs. 8,86,297.50 as counter vailing duty prior to the clearance and, accordingly, the shipping company made the payment on June 13, 1977 and the damaged sugar bags were handed over to the highest tenderer.

On December 12, 1977, the shipping company filed an application seeking refund of excess duty paid of Rs. 2,98,162.30. The shipping company claimed that duty was paid under the mistake of law as there was a difference between the value declared and price recovered. The refund application was rejected by Assistant Collector of Customs but the order was set aside and the matter remanded back in appeal. On remand, the Assistant Collector directed payment of refund of excess duty of Rs. 2,98,162.30 on July 3, 1980.

3. On November 20, 1980, the Assistant Collector of Customs addressed a letter to the shipping company demanding back the amount of excess duty of Rs. 2,98,162.30 refunded under the refund order dated July 3, 1980. The Assistant Collector claimed that the refund was made erroneously. The shipping company filed a reply and, thereafter, on March 20, 1981, addressed a letter claiming that the appellants were not entitled to levy any duty in respect of damaged sugar cleared for home consumption and, consequently, the entire amount of duty recovered of Rs. 8,86,297.50 should be refunded. The Assistant Collector of Customs, by order dated October 19, 1983, held that the claim of refund of entire duty of Rs. 8,86,297.50 made by the shipping company is not tenable. The Assistant Collector further held that the refund of Rs. 2,98,162.30 granted earlier in favour of the shipping company was erroneous and the shipping company should refund the same forthwith.

The order passed by the Assistant Collector was challenged by the shipping company by filing Writ Petition No. 2718 of 1983 under Article 226 of the Constitution of India before the learned Single Judge sitting on the Original Side of this Court. The learned Judge, by the impugned judgment dated September 27, 1990, held that recovery of duty in respect of damaged sugar was without any authority of law and, consequently, the claims of the shipping company for refund of the entire duty was justified. The learned Single Judge further held that

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