1993 (5) TMI 30 - HC - Customs

Summary

Issues Involved:
1. Liability to pay interest on warehoused goods.
2. Validity of the public notice dated 2nd November 1989.
3. Impact of the DEEC on the liability to pay duty and interest.
4. Right of the Customs Authorities to proceed under Section 72 of the Customs Act, 1962.
5. Interpretation of relevant sections of the Customs Act, 1962.

Detailed Analysis:

1. Liability to Pay Interest on Warehoused Goods:
The petitioner argued that the liability to pay interest was linked with the liability to pay duty. Since the goods were exempted from payment of duty, there was no question of payment of interest. The respondents contended that the goods remained dutiable even when cleared, and the petitioner was liable to pay interest on the duty payable when the goods were warehoused under Section 61(2) of the Customs Act, 1962. The court concluded that the petitioner's liability to pay interest arises under Section 59 of the Act from the date specified in the demand notice. The interest is to be calculated on the duty assessed at the time of warehousing after the expiry of the period specified under Section 61(2) of the Act.

2. Validity of the Public Notice Dated 2nd November 1989:
The petitioner challenged the public notice dated 2nd November 1989, arguing that it had no statutory force. The court referred to the decision in Birla Jute and Industries Ltd. v. Assistant Collector of Central Excise and held that the public notice was in keeping with the exposition of the law. The public notice was binding on the Central Excise Officers but not on the assessee or any quasi-judicial or judicial authority.

3. Impact of the DEEC on the Liability to Pay Duty and Interest:
The petitioner purchased a duty-free Advance Import Licence (DEEC) and contended that the goods were entitled to be cleared without payment of duty. The court noted that the DEEC scheme is a general exemption granted under Section 25(1) of the Customs Act, 1962, by the Central Government. The goods themselves were exempted from payment of duty subject to the fulfilment of certain conditions. However, the court held that the right acquired by the purchase of the DEEC was to clear the goods duty-free, but this did not include interest. Therefore, the public notice did not take away any accrued right of the petitioner.

4. Right of the Customs Authorities to Proceed Under Section 72 of the Customs Act, 1962:
The respondents issued notices under Section 72(1) and 72(2) of the Customs Act, 1962, demanding payment of duty and interest. The court found that there was no proof of despatch or service of any notice on the petitioner. Because there was no effective demand, the petitioner's liability to pay duty had not crystallized on that date. The court held that the Customs Authorities could not take action under Section 72(2) for any default as there was no opportunity to comply.

5. Interpretation of Relevant Sections of the Customs Act, 1962:
The court analyzed Sections 59, 61, 68, and 72 of the Customs Act, 1962, to understand the statutory provisions. Section 59 requires the importer to execute a bond to pay all duties and interest payable under Section 61(2). Section 61 provides for the period of warehousing and the payment of interest if the goods remain in the warehouse beyond the specified period. Section 68 allows the clearance of warehoused goods for home consumption upon payment of all dues. Section 72 empowers the customs authorities to raise a demand and sell the goods in default of such demand being met. The court concluded that the liability to pay interest is linked with the duty assessed at the time of warehousing and continues till the date of clearance.

Conclusion:
The court directed the Customs Authorities to release the balance LDPE Granules to the petitioner subject to the petitioner making payment of interest at the rates of duty as applicable from time to time after the expiry of the statutory period under Section 61. The writ application was disposed of with no order as to costs.