Supreme Court Holds Railways May Levy Charges Under Section 66 Even If Demand Is Raised After Delivery

A bench of Justices Sanjay Karol and Prashant Kumar Mishra heard appeals filed by the Union of India challenging the Gauhati High Court’s affirmation of Railway Claims Tribunal orders that directed refund of demands raised by the Railways after delivery of consignments. The core issue was whether penal or additional charges under the Railways Act, 1989 — particularly Section 66 — could be validly imposed where demand notices issued after delivery alleged mis‑declaration of goods.

The Court allowed the appeals, set aside the High Court judgment dated 20 December 2021 and restored the Railways’ power to recover charges under Section 66 in the facts of these cases. The bench concluded that Section 66 did not prescribe the stage at which the charge must be made and therefore authorisation to charge for materially false declarations was not confined to the period before delivery. The Court, in its reasoning, observed: "It is borne from the above 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 noted that an observation in Jagjit Cotton Textile that "one such 'condition' could be by directing that penal charges could be collected before delivering the goods" was only an illustrative suggestion in the context of Section 54 and did not control the scope of Section 66.

Background The disputes arose from demand notices dated October 2011 and April 2012 issued by the Railways against several consignors, alleging mis‑declaration of goods for consignments carried by rail. The respondents paid the amounts and then filed separate claims under Section 16 of the Railway Claims Tribunal Act, 1987 seeking refunds on the ground that demands issued after delivery were illegal under Sections 73 and 74 of the Railways Act. The Tribunal allowed the claims by order dated 19 January 2016 and directed refunds with interest; the Gauhati High Court, in appeals, affirmed the Tribunal holding that penal charges could only be levied prior to delivery, relying on Jagjit Cotton Textile Mills v. Chief Commercial Superintendent (1998) and provisions such as Sections 73 and 78 and Rule 1820 of the Railway Commercial Manual.

The Union of India preferred these appeals asserting that the demands related to mis‑declaration and fell under Section 66 (power to require statement relating to the description of goods and consequences of materially false statements), not the overloading regime of Section 73. The Railways argued that Section 66 empowered them to detain, examine and charge even after delivery if mis‑description emerged. The respondents countered that demands raised after delivery were impermissible. The Supreme Court examined the text of Section 66 and held that subsection (4) did not limit the temporal stage for levy; the Court found the demand notices genuine in absence of contrary evidence and distinguished Jagjit Cotton as addressing Section 54 in a different factual matrix. Consequently, the Court set aside the Gauhati High Court’s order and allowed the civil appeals. Pending applications were disposed of; no further interim directions were recorded.

Case Details: Case No.: CIVIL APPEAL NOS. 7376–7379 OF 2025 (Arising out of SLP(C) Nos.11566–11569/2022) Case Title: Union of India … Appellant(s) Versus M/s Kamakhya Transport Pvt. Ltd. etc. … Respondent(s) Appearances: For the Petitioner(s): Additional Solicitor General (for Union of India) For the Respondent(s): Counsel for M/s Kamakhya Transport Pvt. Ltd. and others (names not indicated in the judgment)