1996 (3) TMI 134 - SC - Customs

Interest on warehoused goods - Held that - The liability to pay interest arises only after the expiry of the period prescribed in the notice of demand. It has been held by the High Court that the present matter is not governed by Section 61(2), as it stood at the relevant time, but by Section 59(1) alone. Indeed, it is submitted that when the respondent applied for extension of time of warehousing under Section 61(2), the Government told it that the said provision had no application and hence, time cannot be extended thereunder. Once that is so, we must go by what Section 59(1) says. According to it, the duty became due on issuing the notice of demand. The notice prescribed fifteen days for payment. Interest is chargeable only thereafter as held by the High Court, which, in our opinion, is a reasonable way of understanding the provision. Thus no justification or legal basis for the appellants plea that the interest must be paid taking the rate of the duty at ninety percent for the said entire period. As a matter of fact, the rate of duty on the said goods was not ninety percent throughout the period March 22, 1985 to September 9, 1988. It was varying. The High Court s direction, therefore, to take the actual rate in force from time to time is a reasonable one. We are, therefore, of the opinion that the judgment of the High Court does not call for any interference. Appeal dismissed of assessee.

Summary

Issues:
1. Interpretation of Sections 58 and 59 of the Customs Act, 1962 regarding warehousing of goods without paying duty.
2. Calculation of interest payable on duty for warehoused goods.
3. Applicability of Section 61(2) in determining the period for payment of interest.
4. Dispute over the rate of duty for calculating interest on the duty amount.

Analysis:

1. The case involved the respondent importing a 'high reversible mill' in 1982 and warehousing it without paying duty as per Sections 58 and 59 of the Customs Act, 1962. The authorities issued a notice in 1985 to clear the goods, which the respondent did in 1988 after paying duty and interest. The respondent filed a writ petition in the Karnataka High Court challenging the interest calculation from 1983 to 1988, seeking a refund of excess interest collected.

2. The Division Bench of the Karnataka High Court directed the authorities to re-compute the interest payable by the respondent from 1985 to 1988 based on the prevailing duty rates during that period. Both the Union of India and the importer appealed against this decision, leading to the Supreme Court's judgment.

3. The Supreme Court analyzed the relevant provisions of the Customs Act, particularly Sections 59(1) and 61(2), to determine the liability of the importer to pay interest. It held that interest is chargeable only after the expiry of the period specified in the notice of demand, as per Section 59(1)(b). The Court rejected the argument that interest should be calculated at a fixed rate of ninety percent for the entire period, emphasizing the varying duty rates during the relevant period.

4. The Court dismissed the appeals, upholding the High Court's decision on interest calculation. It emphasized that the duty became due upon issuing the notice of demand, and interest is chargeable thereafter. The Court found the High Court's direction to calculate interest based on the actual duty rates in force at different times reasonable. Therefore, the judgment of the High Court was upheld, and the appeals were dismissed with no costs awarded.