1993 (6) TMI 62 - HC - Customs

Summary

Issues Involved:
1. Applicability of Sections 59, 60, and 61 of the Customs Act, 1962 to goods warehoused under Section 85.
2. Validity of interest demand under Section 61(2) of the Customs Act, 1962.
3. Constitutionality of Section 61(2) under Article 19 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Applicability of Sections 59, 60, and 61 of the Customs Act, 1962 to goods warehoused under Section 85:

The petitioners argued that the provisions of Sections 59, 60, and 61 are not applicable to goods warehoused under Section 85 of the Act. They contended that Section 85 allows the warehousing of goods without the assessment of duty, and thus, the bond requirement under Section 59 does not apply. The court rejected this argument, stating that Section 85 merely exempts the goods from import duty but does not exclude them from being assessed. The court emphasized that the assessment of duty and the liability to pay duty are distinct, and the provisions of Sections 59 to 61 apply to all warehoused goods, including those under Section 85. The court concluded that goods entered for warehousing, even if meant to be supplied as stores to vessels, are bound by the provisions of Sections 59 to 61 of the Act.

2. Validity of interest demand under Section 61(2) of the Customs Act, 1962:

The petitioners challenged the demand for interest on warehoused goods under Section 61(2), arguing that it was not applicable to goods under Section 85. The court held that Section 61(2) is applicable and that the interest charged is compensatory in nature, not a penalty. The court explained that the interest serves as compensation for the delay in returning foreign exchange to the country due to the extended warehousing period. The court found that the method of calculating interest based on the amount of duty payable ensures a reasonable and non-arbitrary determination of the compensatory amount.

3. Constitutionality of Section 61(2) under Article 19 of the Constitution of India:

The petitioners argued that Section 61(2) violates their fundamental right to carry on business under Article 19 of the Constitution. The court dismissed this argument, stating that the provision is reasonable and serves a legitimate purpose. The court noted that the petitioners are permitted to import goods with the expectation that they will be sold to vessels within a reasonable period, thereby returning foreign exchange to the country. The court found that the interest charged under Section 61(2) is a reasonable measure to ensure timely clearance of warehoused goods and does not deprive the petitioners of their right to carry on business. The court also highlighted that the proviso to Section 61(2) allows the Board to waive the interest in cases of genuine hardship, further mitigating any potential adverse impact on the petitioners.

Conclusion:

The petition was dismissed, and the rule was discharged with costs. The court upheld the applicability of Sections 59, 60, and 61 to goods warehoused under Section 85, validated the demand for interest under Section 61(2), and found no violation of Article 19 of the Constitution. The court refused the petitioners' application for continuation of interim relief.