1995 (2) TMI 444 - Commissioner - Customs

Summary

Issues Involved:
1. Competence of the Original Authority to confirm the demand.
2. Merits of the demand.
3. Limitation period for raising the demand.
4. Application of the law of estoppel.

Issue-wise Detailed Analysis:

1. Competence of the Original Authority to Confirm the Demand:
The appellants argued that the Original Authority was not competent to issue the demand notice as it was not covered under Section 28 of the Customs Act, 1962, which deals with the demand of duty and not interest. Section 28 also stipulates a time limit of six months, but the demand notice was issued after about two years. The appellants contended that there was no other section in the Customs Act authorizing the Original Authority to demand interest and that the demand was not raised in terms of the bond executed by the appellant.

The judgment clarified that Section 61(3) of the Customs Act, 1962, as it stood prior to its amendment, stipulated that the importer shall pay interest on the amount of duty from the expiry of seven days from the date on which the Bill of Entry is returned to the importer for warehousing the goods under Section 59A until the date of clearance from the warehouse. The judgment stated that the Customs Authority was reasonable in giving the importer an opportunity to explain why the interest should not be recovered. It was noted that Section 142 of the Customs Act provided for the recovery of any amount due under the terms of any bond executed under the Act.

2. Merits of the Demand:
The appellants argued that the Custom House had made the correct interpretation of Section 61(3) in Public Notice No. 211/91, which stated that interest should be charged from the date the Bond Department returned the Bill of Entry to the importer. This practice was changed by Public Notice No. 109/93, which stated that interest is chargeable from the date on which the Bill of Entry is returned to the importer by the Licence Section for depositing duty and executing the bond.

The judgment noted that there was confusion and doubt as to the meaning of the words in Section 61(3), which left room for more than one interpretation. It was observed that if there is any doubt in the construction of any statutory provisions in a taxing statute, the benefit of doubt should go to the assessee. The judgment acknowledged that the Public Notice No. 211/91 made an interpretation of Section 61(3) that was favorable to the assessee, and this interpretation was later clarified by Public Notice No. 109/93.

3. Limitation Period for Raising the Demand:
The appellants contended that the demands were hit by limitation as the provisions of the Limitation Act are applicable only in court proceedings and not in any proceedings before Customs Authorities. They argued that a reasonable time limit should be adopted, citing judicial pronouncements that in the absence of a specific time limit, a reasonable period should be read into it. They suggested that the reasonable time limit for demand notice under Section 61(3) should be six months, as provided under Section 28 of the Customs Act, 1962.

The judgment referenced the CEGAT's decision in the case of M/s. Kirloskar Pneumatic Co. Ltd., which held that the limitation prescribed under Section 28 is not applicable to demands related to interest. However, it was noted that this would apply only if the demands are enforceable in terms of the bond or by resorting to Section 142. Since the bonds had lapsed, the judgment concluded that the demands were time-barred, taking the reasonable time limit as six months.

4. Application of the Law of Estoppel:
The appellants argued that the law of estoppel should apply against the Government Department. They cited Supreme Court judgments which held that the doctrine of promissory estoppel is applicable against the Government, and the Government cannot go back on its representations if the other party has acted upon them.

The judgment agreed with the appellants, stating that the law of estoppel applies in cases where the Department has conveyed some sort of direction and assurance to the assessee, which has been complied with by the assessee. The judgment noted that the Public Notice No. 211/91 had given a clear understanding that interest would be levied from the date the Bond Department returned the Bill of Entry to the importer. This instruction was modified only on 29-9-1993. Therefore, from 23-12-1991 to 29-9-1993, the Department should be bound by the said Public Notice No. 211/91. The judgment concluded that the Orders-in-Original should be quashed on the grounds of estoppel and limitation.

Conclusion:
The judgment quashed the 11 Orders-in-Original and allowed the appeals, citing the grounds of estoppel and limitation.