2011 (3) TMI 1705 - HC - Customs

Summary

Issues Involved:
1. Levy of statutory interest on delayed payment of cost recovery charges for customs staff.
2. Jurisdiction and authority to levy interest under the Customs Act, 1962.
3. Applicability of Section 28AA and Section 142 of the Customs Act, 1962.
4. Estoppel and equitable principles in levying interest.
5. Administrative versus adjudicatory proceedings in the context of cost recovery charges.

Issue-wise Detailed Analysis:

1. Levy of Statutory Interest on Delayed Payment of Cost Recovery Charges for Customs Staff:
The petitioner challenged the imposition of statutory interest on purported arrears of cost recovery charges for customs staff, as ordered by the Commissioner of Customs, Gujarat. The petitioner argued that there was no statutory provision under the Customs Act, 1962, authorizing the levy of interest on delayed payment of such charges. The court examined the notifications and guidelines governing the appointment of the petitioner as Custodian and found no provision for the levy of interest. Consequently, the court concluded that the demand for interest was without legal backing and thus invalid.

2. Jurisdiction and Authority to Levy Interest under the Customs Act, 1962:
The petitioner contended that the levy of interest lacked jurisdiction and authority under the Customs Act. The court noted that Section 28AA of the Act provides for interest on delayed payment of duty, but reimbursement of customs staff costs does not equate to the levy of duty. The court also referenced the Madras High Court ruling in TAN India Limited vs. Collector of Central Excise, which held that interest cannot be levied in the absence of a statutory provision. The court determined that the respondent had no jurisdiction to levy interest on cost recovery charges.

3. Applicability of Section 28AA and Section 142 of the Customs Act, 1962:
The court analyzed the applicability of Sections 28AA and 142 of the Act. Section 28AA pertains to interest on delayed payment of duty, which was not applicable to the cost recovery charges. Section 142, which deals with the recovery of sums due to the government, could not be invoked for non-statutory dues like cost recovery charges. The court held that the respondent could not use Section 142 to recover interest on such charges.

4. Estoppel and Equitable Principles in Levying Interest:
The respondents argued that the petitioner was estopped from challenging the interest levy since it had requested installment payments. The court rejected this argument, stating that the petitioner's request for installments did not imply consent to pay interest. Furthermore, the court emphasized that interest could not be levied on equitable grounds without statutory authority. The respondents would need to seek recovery through legal proceedings if they wished to claim interest on equitable grounds.

5. Administrative versus Adjudicatory Proceedings in the Context of Cost Recovery Charges:
The court identified a mix-up between adjudicatory and administrative proceedings in the respondent's actions. The show-cause notices issued to the petitioner included both quasi-judicial and administrative elements. The court clarified that while the respondent could initiate adjudicatory proceedings under Section 45(1) for non-compliance with cost recovery charges, the recovery of such charges was an administrative matter. The court found that the respondent had improperly combined these proceedings, leading to an invalid order.

Conclusion:
The court concluded that the levy of statutory interest on delayed payment of cost recovery charges was without legal authority. It quashed the impugned orders to the extent they levied interest at statutory rates. The petition was allowed, and the rule was made absolute with no order as to costs.