2017 (6) TMI 930 - HC - Customs

Warehousing of goods - extension of warehousing period - CBEC Circular 47/2002 dated 29.07.2002 - Whether the Tribunal mis-directed itself in coming to the conclusion that the first proviso to Section 61 of the Act does not require that an application be made prior to the expiry of the warehousing period? - whether there is any impediment under the Act in the Revenue extending the warehousing period after it has expired? - Held that - reading of the provisions of Section 61 of the Act as it obtained at the relevant time would show that there is no such impediment. This view has also found favor with the Bombay High Court in the matter of Sunil Jugalkishore Gupta Vs. Union of India and Others 1987 (1) TMI 103 - HIGH COURT OF JUDICATURE AT BOMBAY albeit in the context of Section 61 of the Act which was some what differently worded. The moot point however which was decided by the Court was that in the absence of any statutory impediment the extension of warehousing time application could be entertained even after the initial period of warehousing had expired - In the context of Section 61 of the Act as obtaining at the relevant point in time the initial warehousing period could be extended on a sufficient cause being shown. There is nothing in Section 61(1)(b)(i)(B) which is suggestive of the fact that an application for that purpose was required to be moved prior to the expiry of the initial period of warehousing. Liability of interest - whether any interest as demanded by the Revenue was payable by the Assessee - Held that - the Assessee had obtained a licence as indicated above under the EPCG Scheme on 20.03.2013 and accordingly the subject capital goods were cleared from the warehouse without being mulct with duty. The record shows that the Bills of Entries were assessed on the following dates 12.09.2013 23.06.2015 and 23.06.2015 - Since the goods were cleared against zero per cent duty no interest could have been levied. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the Tribunal mis-directed itself in concluding that the first proviso to Section 61 of the Customs Act, 1962 does not require an application to be made prior to the expiry of the warehousing period.
2. Whether the Assessee could be called upon to pay interest as contended by the Revenue.

Detailed Analysis:

Issue 1: Application for Extension of Warehousing Period

The Tribunal concluded that the first proviso to Section 61 of the Customs Act, 1962 does not mandate that an application for extension of the warehousing period must be made before the expiry of the initial period. The High Court supported this view, referencing Section 61, which allows for an extension of the warehousing period on "sufficient cause" being shown. The Court emphasized that there is no statutory impediment in the Act preventing the extension of warehousing time even after the initial period has expired. This interpretation is consistent with the judgment of the Bombay High Court in Sunil Jugalkishore Gupta Vs. Union of India and Others, which held that an application for extension could be entertained even after the expiry of the initial warehousing period, provided no coercive recovery steps had been taken by the authorities.

Issue 2: Levy of Interest

The Revenue argued that since the warehousing period had expired and a demand was raised under Section 72(1) of the Act, the Assessee was liable to pay interest. However, the High Court found this argument misconceived. The Court noted that although a demand notice under Section 72(1) was issued, the Revenue eventually confined its demand to interest only, as indicated in its communication dated 09.04.2013. Importantly, the Assessee had obtained an EPCG licence on 20.03.2013, allowing it to clear the goods against zero percent duty. Consequently, since the goods were cleared without being subject to duty, no interest could be levied. The Court relied on the provisions of Section 61(2)(ii) of the Act and the Supreme Court's judgment in Pratibha Processors Vs. Union of India, which clarified that interest is linked to the duty payable. If no duty is payable due to an exemption, then no interest can be levied.

Conclusion:

The High Court dismissed the Revenue's appeal, holding that:
1. The Tribunal correctly interpreted Section 61 of the Act, allowing for an extension of the warehousing period even after the initial period had expired.
2. Since the goods were cleared against zero percent duty under the EPCG Scheme, no interest was payable by the Assessee.

The questions of law were answered in favor of the Assessee, and the Revenue was directed to release the subject capital goods within two weeks. There was no order as to costs, and the connected miscellaneous petition was also closed.