1990 (8) TMI 153 - HC - Customs

Summary

Issues:
- Demand for payment of interest on duty amount for warehoused goods
- Challenge of demand made by Collector of Customs
- Liability to pay interest on duty amount even after duty withdrawal
- Interpretation of provisions of the Customs Act, 1962

Analysis:
The judgment revolves around the demand by the Collector of Customs for payment of interest on the duty amount for certain goods that were warehoused, despite the subsequent withdrawal of duty by the Government. The importer, who was asked to pay the interest, challenged this demand through an Original Petition. The petitioner, a company engaged in manufacturing, imported wood pulp from America. The goods were kept in the warehouse as the duty was not paid upon arrival at Cochin Port. The petitioner executed bonds under Section 59 of the Customs Act, binding to pay duties with interest and remove the goods for home consumption by specified dates. Despite a subsequent duty exemption notification, the Collector insisted on interest payment on the original duty amount, preventing clearance without such payment.

The Collector argued that since the goods were dutiable until a specific date, the importer remained liable to pay interest, even though no duty was payable upon clearance. The judgment delves into the provisions of the Customs Act, particularly Sections 12, 15, and 68. Referring to the Supreme Court's decision in Prakash Cotton Mills (P) Ltd. v. B Sen, it was established that the crucial date for duty payment is upon removal from the warehouse. Section 25 empowers the Central Government to exempt goods from duty, as done in this case for wood pulp. The Act outlines the procedures for warehousing, including execution of bonds under Section 59, which binds the importer to pay duties, charges, and interest upon demand.

The Court emphasized that the liability to pay interest is connected to the duty payment, and both must be considered together. The wording of "together with interest" in Section 59 indicates the link between duty and interest. The importer's obligation to pay duty arises upon clearance from the warehouse, and if goods are duty-exempt before removal, interest on a non-existing duty cannot be imposed. Consequently, the Court directed the Collector to release the goods without insisting on interest payment on the duty prior to the exemption date. The Original Petition was disposed of in favor of the petitioner, clarifying the interplay between duty, interest, and exemptions under the Customs Act, 1962.