New Delhi, June 13, 2025
In a crucial verdict shaping the regulatory powers of Indian Railways, the Supreme Court on Wednesday held that railway authorities are legally empowered to recover penal charges for misdeclared goods even after the delivery of such consignments. The judgment offers significant clarification on the interpretation of Section 66(4) of the Railways Act, 1989, resolving long-standing legal ambiguity surrounding the timing of such recoveries.
A Division Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra ruled that the absence of a specific time limitation in Section 66(4) allows the railways to pursue penalties at any point, including post-delivery, if the goods were found to have been transported under false or misleading declarations.
Background of the Case
The case arose from appeals filed by Indian Railways challenging decisions of the Railway Claims Tribunal and the Gauhati High Court, which had previously ruled in favor of transport operators who contested demand notices issued for misdeclaration of goods transported in 2011–2012. The railways had imposed penal charges on the basis that the weight and classification of the goods were deliberately understated to reduce freight charges.
The respondents had argued that such penalties could only be imposed prior to the delivery of goods, drawing parallels with overloading provisions under Sections 73 and 78 of the Act, where penalties are time-bound and restricted to pre-delivery actions.
The Supreme Court rejected this reasoning, stating that the language of Section 66(4) is distinct and does not contain any such time-based limitations. The Court observed:
“There is no restriction in Section 66 that would limit the recovery of charges only to the pre-delivery stage. The rule does not become redundant merely because delivery has been completed.”
The Court further clarified that the Railways’ right to recover penalties for misdeclaration is independent of provisions dealing with overloading or other physical discrepancies, and must be viewed in the context of fraud or material misstatement by the consignor.
Key Takeaways from the Judgment
• Railways can raise penal charges even after delivery if misdeclaration of goods is discovered later.
• Section 66(4) is not subject to the same pre-delivery conditions as other penal sections of the Railways Act.
• Earlier tribunal and high court rulings limiting Railways’ power in such cases have been overturned.
• The judgment strengthens the regulatory mechanisms to curb freight manipulation and protect public revenue.
This ruling is expected to tighten compliance in the logistics and freight sector, where misclassification of goods to evade higher freight rates has been a persistent issue.
Case Title: UNION OF INDIA Versus M/S KAMAKHYA TRANSPORT PVT. LTD. ETC.
