2007 (8) TMI 590 - AT - Customs

Interest on warehoused goods - duty payable is Nil - Held that - when the liability to duty on the warehoused goods is nil there cannot be liability to pay interest.

Summary

Issues:
Revenue's application for stay of operation of Order-in-Appeal, Dispute over interest on warehoused goods cleared beyond 90 days, Interpretation of DEPB scheme, Applicability of interest on delayed clearance.

Analysis:
The Revenue filed applications seeking a stay on the Order-in-Appeal passed by the Commissioner of Customs and Central Excise (Appeals) regarding interest on warehoused goods cleared beyond 90 days. The impugned order dealt with appeals against demands for interest on goods cleared under the DEPB scheme. The lower authority ruled that no interest was payable as the duty liability on the warehoused goods was nil, citing the precedent set in Pratibha Processors v. UOI. The Revenue contended that DEPB scrip was a mode of duty payment, unlike in the Pratibha Processors case where goods were duty-exempt upon clearance. Additionally, Circulars clarified the liability for education cess debited from DEPB scrip, supporting the Revenue's stance on interest payment for delayed clearances.

The Commissioner (Appeals) had allowed the appeals based on the absence of duty liability on the warehoused goods, in line with judicial precedents and Tribunal decisions. The DEPB scheme exempted goods from basic customs duty and CVD upon clearance with DEPB scrip, eliminating duty payment. The High Court's ruling in Thungabhadra Fibres Ltd. v. UOI emphasized that interest liability is tied to duty liability, reinforcing the position that no interest is payable when duty is exempt. The Tribunal's previous decisions and legal provisions supported this interpretation, with Circulars not conflicting with the established legal principles.

After reviewing the case records and arguments, the judge upheld the impugned order, citing the exemption under the DEPB scheme and the consistent legal stance on interest liability. The High Court's decision and Tribunal precedents emphasized the absence of interest liability when duty is not payable, aligning with the DEPB scheme's duty exemption provisions. The specific provisions allowing CVD credit and exempting cess for DEPB clearances further supported the conclusion that no interest was due in this case. Consequently, all four appeals by the Revenue were dismissed based on the legal principles and precedents presented by the respondents' counsel, maintaining the stance that no interest was payable due to the nil duty liability on the warehoused goods.