1996 (10) TMI 88 - SC - Customs

Is it open to the Revenue to demand interest from the assessees under Section 61(2) of the Act? Held that - The High Court erred in holding that the importers assessees are liable to pay interest in the instant cases in respect of warehoused goods, though at the time of clearance the goods were exempt from payment of duty. The common judgment of the Bombay High Court dated 19th November, 1992 is reversed. All the appeals are allowed with costs, including counsel fee ₹ 5,000/- in each case.

Issues Involved:
1. Interpretation of Section 61(2) of the Customs Act.
2. Liability to pay interest on duty for warehoused goods cleared under Advance Licence after the statutory period.

Detailed Analysis:

1. Interpretation of Section 61(2) of the Customs Act:

The core issue in this batch of 31 appeals is the interpretation of Section 61(2) of the Customs Act. The High Court of Bombay had dismissed a batch of 36 writ petitions, holding that importers who cleared goods under an Advance Licence issued under the DEEC Scheme after the expiry of the statutory warehousing period were liable to pay interest on the duty assessed at the time of warehousing. The Supreme Court was tasked with determining whether interest could be charged when the duty assessed at the time of clearance was nil due to the exemption.

2. Liability to Pay Interest on Duty for Warehoused Goods Cleared Under Advance Licence After the Statutory Period:

The petitioners, a public limited company and its shareholder, challenged the action of the customs authorities who demanded interest at 18% per annum on the duty assessed at the time of warehousing, despite the goods being cleared duty-free under an Advance Licence. The petitioners argued that no interest was payable since no duty was due at the time of clearance.

The facts of the case were consistent across all appeals: the petitioners had imported goods under Open General Licence (OGL), warehoused them under Section 59, and later cleared them under an Advance Licence after the three-month statutory period had expired. The customs authorities demanded interest on the duty assessed at the time of warehousing, which the petitioners refused to pay.

The Bombay High Court had concluded that interest started accruing after the expiry of the three-month period until the date of clearance, and that the petitioners were liable to pay interest on the amount of duty payable at the time of warehousing.

Supreme Court's Judgment:

The Supreme Court examined the relevant statutory provisions, including Sections 2(14), 2(15), 12, 15, 25, 59, 61, and 68 of the Customs Act, as well as the General Exemption Notification and the Import-Export (Trade) Policy, 1990-93. The Court noted that the entire scheme, including the exemption notification and the import policy, allowed importers to clear goods duty-free under a valid Advance Licence, even if the goods were initially warehoused under OGL.

The Court emphasized that the liability to pay duty arises only at the time of clearance from the warehouse. Since the goods were cleared duty-free under the Advance Licence, no duty was payable at the time of clearance, and consequently, no interest could be charged on a non-existent duty. The Court held that interest under Section 61(2) is linked to the duty payable, and if no duty is payable, no interest can be charged.

The Court distinguished the present case from the decision in Union of India v. Bangalore Wire Rod Mill, where interest was charged on goods that were exigible to duty at the time of clearance. In the present case, the goods were exempt from duty at the time of clearance, making the earlier decision inapplicable.

Conclusion:

The Supreme Court concluded that the High Court erred in holding that the importers were liable to pay interest on warehoused goods cleared duty-free under an Advance Licence. The judgment of the Bombay High Court was reversed, and all appeals were allowed with costs, including counsel fees of Rs. 5,000/- in each case.

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