2013 (12) TMI 1247 - HC - Customs

Utilization of advance license - Whether the petitioner proprietorship of U.K. Paint (India) Limited can utilise advance licences in respect of goods imported earlier - Held that - advance licences could be issued subsequently even after the goods had been imported or arrived. The only stipulation was that the goods should not have been cleared. It is not the case of the Revenue that the goods had been cleared. The Advance license in terms of paragraph 65 of the policy could have been used for clearing the goods in question. Section 72 does not relate to clearance of goods but refers to the term removal of goods and the duty payable on deemed removal. The case of the Revenue/respondents is that the duty had to be paid and was calculated in terms of Section 72(1) on the date the period of warehousing came to an end i.e. on 27th January 1996. Whether the petitioner is liable to pay interest under Section 61(2) of the Customs Act 1962 - Held that - as the petitioner has already paid custom duty in terms of the interim order we do not think it will be appropriate to ask petitioner to furnish advance/duty free licences with DEEC book at this stage. This may also not be in the interest of the respondents as they will have to refund duty paid with interest. Accordingly it is directed that customs duty paid by the petitioner in terms of the interim order dated 25th February 1999 will be treated as final and binding and no interest for delayed payment will be recoverable - Decided in favour of assessee.

Issues Involved:
1. Utilization of advance licenses for goods imported earlier.
2. Liability to pay interest under Section 61(2) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Utilization of Advance Licenses for Goods Imported Earlier:

The first issue is whether the petitioner can utilize advance licenses for goods imported earlier. The petitioner, a manufacturer of paints, imported 136 metric tons of Titanium Dioxide Rutile in August 1994 and warehoused the goods under bond on 27th January 1995. The respondents issued a notice on 19th April 1996 to pay customs duty and interest within fifteen days, failing which the goods would be auctioned. The petitioner requested an extension and stated that their advance licenses were pending revalidation. The respondents rejected the petitioner's request for release of goods against advance licenses.

The court referred to Paragraph 65 of the Import and Export Policy, 1992-97, which allows goods imported but not cleared from customs to be cleared against Duty-Free Licenses issued subsequently. The court concluded that the advance licenses could be used for clearing the goods in question as they had not been cleared from customs. The court rejected the respondents' contention that advance licenses issued subsequently could not be used for goods imported earlier.

2. Liability to Pay Interest Under Section 61(2) of the Customs Act, 1962:

The second issue concerns the liability to pay interest under Section 61(2) of the Customs Act. The court noted that Section 72 creates a deeming fiction where warehoused goods not removed within the permissible period are treated as improperly removed, making customs duty immediately chargeable and payable. Interest on non-payment of duty begins to run from the date the duty became payable.

The petitioner argued that no interest was payable as they had produced advance licenses, making no duty payable. The court referred to the Supreme Court's decision in Pratibha Processors, which held that interest is chargeable only when duty is payable. Since the advance licenses exempted the petitioner from paying customs duty, no interest was chargeable.

The court distinguished the case from Kesoram Rayon, where the issue was the rate of customs duty for goods remaining in a bonded warehouse beyond the permitted period. The court also distinguished the case from SBEC Sugar Limited, where the goods were imported and warehousing had ceased before the notification extending the benefit of the EPCG Scheme.

Conclusion:

The court held that:
1. Advance Licenses could be utilized against earlier imports as the goods had not been cleared from customs.
2. No interest was payable on exempt duty upon furnishing advance licenses, but interest would be payable for any duty not covered by the advance licenses.

The court concluded that the respondents had erred in rejecting the advance licenses submitted by the petitioner. The customs duty paid by the petitioner in terms of the interim order was treated as final and binding, and no interest for delayed payment was recoverable. The writ petition was disposed of without any orders as to costs.

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