1992 (11) TMI 116 - HC - Customs

Summary

Issues Involved:
1. Interpretation and scope of Section 61(2) of the Customs Act, 1962.
2. Liability of importers to pay interest on duty under the DEEC Scheme after the statutory warehousing period.
3. Application of Exemption Notification and the DEEC Scheme to warehoused goods.
4. Legal distinction between Sections 59(1)(b) and 61(2) of the Customs Act regarding interest on duty.
5. Impact of judicial precedents and conflicting High Court rulings on the matter.

Detailed Analysis:

1. Interpretation and Scope of Section 61(2) of the Customs Act, 1962
The core issue revolves around whether importers are liable to pay interest on duty assessed at the time of warehousing under Section 61(2) of the Customs Act, 1962, even when the goods are later cleared duty-free under the DEEC Scheme. The court analyzed the statutory language and determined that interest accrues on the duty amount from the expiry of the statutory warehousing period until the goods are cleared, irrespective of the duty being ultimately nil due to the DEEC Scheme.

2. Liability of Importers to Pay Interest on Duty under the DEEC Scheme
The petitioners argued that since the duty assessed was nil at the time of clearance under the DEEC Scheme, no interest should be payable. The court rejected this argument, stating that interest is an independent liability under Section 61(2) and is payable from the expiry of the warehousing period until the clearance date. The court held that the importers are liable to pay interest on the duty amount withheld during the warehousing period.

3. Application of Exemption Notification and the DEEC Scheme to Warehoused Goods
The petitioners contended that the Exemption Notification and the DEEC Scheme should be deemed effective from the date of warehousing, thereby nullifying the duty and interest liabilities. The court disagreed, emphasizing that the Advance Licence and Exemption Notification are prospective and cannot retroactively apply to the date of warehousing. The court clarified that the benefit of the DEEC Scheme applies only at the time of clearance, not retrospectively.

4. Legal Distinction between Sections 59(1)(b) and 61(2) of the Customs Act
The court distinguished between Sections 59(1)(b) and 61(2) of the Customs Act. Section 59(1)(b) involves a demand notice for duties and interest, whereas Section 61(2) automatically accrues interest on the duty amount after the warehousing period. The court noted that interest under Section 61(2) is delinked from the principal duty amount and is recoverable at the time of clearance. This distinction was crucial in rejecting the petitioners' reliance on the Kerala High Court's decision, which was based on Section 59(1)(b).

5. Impact of Judicial Precedents and Conflicting High Court Rulings
The petitioners relied on the Kerala High Court's decision in Thungabhadra Fibres Ltd. v. Union of India, which linked interest to the existence of duty. The court found this decision distinguishable and preferred the Karnataka High Court's ruling in Bangalore Wire Rod Mills v. Union of India, which supported the independent accrual of interest under Section 61(2). The court emphasized the need for a uniform interpretation of the Customs Act across India and upheld the Karnataka High Court's reasoning.

Conclusion
The court concluded that the importers are liable to pay interest on the duty amount assessed at the time of warehousing from the expiry of the statutory period until the clearance date, even if the duty is ultimately nil under the DEEC Scheme. The writ petitions were dismissed, and the rule was discharged with costs. The court refused leave to appeal to the Supreme Court of India but stayed the operation of its order till 1st March 1993, allowing the petitioners to seek interim reliefs from the Supreme Court.