2006 (3) TMI 164 - HC - Customs

2001 (8) TMI 118 - SC

Issues Involved:
1. Liability to pay interest on delayed payment of duty under Section 28AA of the Customs Act, 1962.
2. Proper calculation of the interest amount demanded by the respondent.

Issue-Wise Detailed Analysis:

Re: Question One
Liability to Pay Interest on Delayed Payment of Duty:

1. Background and Facts:
- M.J. Exports imported 53 Haemodialysis Machines and claimed exemption under notification No. 208/81-cus.
- The Customs Department issued show-cause notices for exporting the machines without processing and evading customs duty.
- The Collector of Customs determined a duty of Rs. 2,94,42,867/- and imposed a penalty of Rs. 1,00,00,000/- on 28th January, 1994.
- M.J. Exports appealed to CEGAT, which allowed the appeal, but the Supreme Court later restored the Collector's order on 14th August, 2001.

2. Legal Provisions:
- Section 28AA of the Customs Act, 1962, inserted by Act 22 of 1995, mandates interest on delayed payment of duty if not paid within three months from the date of determination.
- The proviso to Section 28AA allows a concession period of three months from the date the section came into force (26th May, 1995).

3. Arguments:
- Petitioner's Argument: M.J. Exports argued that the liability to pay duty was suspended during the pendency of their appeal and interim orders, and thus, interest should only be levied from three months after the Supreme Court's decision on 14th August, 2001.
- Respondent's Argument: The respondent contended that the duty was determined on 28th January, 1994, and since M.J. Exports failed to pay within three months of Section 28AA coming into force, they are liable to pay interest from 26th August, 1995.

4. Court's Analysis:
- The court noted that the duty was determined by the Collector of Customs on 28th January, 1994, and the liability existed despite the interim orders and the appeal.
- The expression "fails to pay such duty" was interpreted to mean non-payment within the concessional period, irrespective of the reasons for non-payment.
- The court concluded that since M.J. Exports did not pay the duty within three months from 26th May, 1995, they are liable to pay interest from 26th August, 1995.

5. Conclusion:
- The demand of interest from 26th August, 1995, is legal and valid as per Section 28AA of the Customs Act, 1962.

Re: Question Two
Proper Calculation of the Interest Amount:

1. Background:
- The respondent demanded Rs. 4,67,02,251/- as interest on unpaid duty from 26th August, 1995.
- The calculation was based on the duty amount of Rs. 2,94,42,867/-.

2. Arguments:
- Petitioner's Argument: M.J. Exports had deposited Rs. 50,00,000/- on 22nd April, 1995, under an interim order, which should be considered in the interest calculation.
- Respondent's Concession: The respondent acknowledged that interest should not be charged on the Rs. 50,00,000/- from 26th August, 1995, until its refund.

3. Court's Analysis:
- The court agreed that the calculation of interest should exclude the period during which Rs. 50,00,000/- was deposited.
- The interest rate should be as per the notifications issued by the Central Government under Section 28AA.

4. Conclusion:
- The initial calculation of interest was set aside.
- The respondent was directed to re-calculate the interest, excluding the period Rs. 50,00,000/- was deposited and applying the correct interest rates.

Final Order:
1. The demand of interest from 26th August, 1995, is upheld as legal and valid.
2. The initial calculation of interest is set aside.
3. The respondent is directed to re-calculate the interest, excluding the period Rs. 50,00,000/- was deposited and applying the correct interest rates.
4. No costs are awarded.

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