In a significant judgment, UNION OF INDIA Versus M/S KAMAKHYA TRANSPORT PVT. LTD. ETC.ETC., 2025 LiveLaw (SC) 683, the Supreme Court of India has held that Indian Railways can impose penalties for misdeclared goods even after delivery under Section 66 of the Railways Act, 1989. The bench comprising Justices Sanjay Karol and PK Mishra overturned the Gauhati High Court’s decision, which had ruled that penal charges could not be levied post-delivery. The Supreme Court clarified that Section 66 does not specify any time limit for imposing such charges, allowing Railways to recover penalties at any stage.
Background of the Case
The dispute arose when Indian Railways imposed penal charges on multiple transport companies, including M/s Kamakhya Transport Pvt. Ltd., for allegedly misdeclaring goods in their consignments. Between October 2011 and April 2012, the Railways issued four demand notices, seeking higher freight charges after discovering discrepancies in the declared versus actual contents. The transporters paid under protest but later approached the Railway Claims Tribunal (RCT), Guwahati Bench, seeking refunds. They argued that Sections 73 and 74 of the Railways Act, 1989 permitted recovery only before delivery, making post-delivery demands illegal.
In January 2016, the RCT ruled in favor of the transporters, directing the Railways to refund the amounts with 6% interest. The Gauhati High Court upheld this decision in December 2021. Challenging both rulings, the Union of India filed an appeal before the Supreme Court, which ultimately reversed the High Court’s judgment.
Key Observations by the Supreme Court
The Supreme Court, in its judgment authored by Justice Sanjay Karol, held:
“It is borne from the above (Section 66 of the Railways Act) that a consignee/owner of goods/person having charge of goods who has brought goods for the purpose of carriage has to give the Railway authorities a written statement regarding the description of the goods, to enable them to charge the appropriate rate of carriage. Under sub-section (4), if the statement is found to be materially false, the Railway authority is empowered to charge the goods at the required rate. No reference is made to the stage at which such a charge can be made, i.e., either before or after delivery. Consequently, it can be seen that the legislative intent had to be, to permit levy of charge under this Section, at either stage and not at a specific one.”
The Court also distinguished the Jagjit Cotton Textile Mills v. Chief Commercial Superintendent N.R. and Ors. (1998) 5 SCC 126 case, relied upon by the High Court, clarifying that it dealt with Section 54(1) (delivery conditions) and not Section 66 (misdeclaration penalties).
Final Ruling & Implications
The Supreme Court allowed the appeal, ruling that Indian Railways can recover misdeclaration penalties even after goods are delivered. This judgment ensures that Railways have broader authority to penalize fraudulent declarations, safeguarding revenue interests.
Appearance:
- For Petitioner(s): Mr. Amrish Kumar, AOR; Mr. K.M. Nataraj, A.S.G.; Mrs. Ameyavikrama Thanvi, Adv.; Mr. Vatsal Joshi, Adv.; Mr. B.K. Satija, Adv.; Mr. Chinmayee Chandra, Adv.; Mr. Gaurang Bhushan, Adv.; Mr. Sudarshan Lamba, AOR
- For Respondent(s): Mr. Divyansh Rathi, Adv.; Mr. Himanshu Makkar, Adv.; Mr. Gunjan Kumar, AOR
This landmark ruling strengthens Railway freight regulations and ensures stricter compliance with goods declaration norms under the Railways Act, 1989. Businesses and transporters must now exercise greater caution in declaring consignment details to avoid penalties.