2006 (4) TMI 155 - HC - Customs

Summary

Issues Involved:

1. Demand for interest on imported goods.
2. Rejection of request for extension of bond period.
3. Application of Export Promotion Capital Goods (EPCG) Scheme.
4. Calculation and payment of customs duty and interest.
5. Legal provisions under the Customs Act relevant to warehousing and duty payment.

Detailed Analysis:

1. Demand for Interest on Imported Goods:
The company and its shareholder challenged the demand for interest on three consignments of imported goods. The goods were kept in a bonded warehouse, and the bond periods had expired before the company filed bills of entry for home consumption. The company argued that no interest was payable since the goods were imported under the EPCG scheme, which allowed for zero duty. The court, however, found that the goods were deemed to have been improperly removed from the warehouse after the expiry of the bond period, making the company liable for both duty and interest.

2. Rejection of Request for Extension of Bond Period:
The company applied for an extension of the bond period on 19th December 1996, which was rejected on 13th January 1997. The rejection was based on public notice No.102/96 dated 5th June 1996. The court noted that the company did not receive any communication regarding their representation to the Chief Commissioner of Customs. Despite this, the court held that the goods were improperly removed from the warehouse after the bond period expired, justifying the demand for duty and interest.

3. Application of Export Promotion Capital Goods (EPCG) Scheme:
The company applied for and was granted a license under the EPCG scheme, which initially had an error but was corrected to endorse 'zero duty' on 19th September 1997. The company executed a bond and furnished a bank guarantee for 100% of the duty saved. Despite this, the court found that the EPCG scheme did not exempt the company from paying interest on the duty for goods deemed to have been improperly removed from the warehouse after the bond period expired.

4. Calculation and Payment of Customs Duty and Interest:
The court examined the provisions of the Customs Act, particularly Sections 2(43), 2(44), 15(1)(b), 57, 58, 61, 68, and 72. It was determined that the duty and interest were correctly calculated from the date of expiry of the bond period. The company's argument that no duty was payable under the EPCG scheme was rejected because the goods were not cleared within the bond period, making them subject to duty and interest as per Section 72 of the Customs Act.

5. Legal Provisions under the Customs Act Relevant to Warehousing and Duty Payment:
The court relied on the Supreme Court's judgment in Kesoram Rayon v. Collector of Customs, Calcutta, which clarified that goods not removed from a warehouse within the permitted period are deemed to have been improperly removed. Consequently, the importer is liable to pay duty and interest from the date of expiry of the bond period. The court concluded that Sections 68 and 15(1)(b) did not apply as the goods were not cleared within the bond period, and the company was liable for duty and interest as per Section 72.

Conclusion:
The court dismissed the writ petition, holding that the company was liable to pay the customs duty and interest on the imported goods. The respondent was directed to finally assess the duty and other charges payable by the company and recover the same. The court also imposed costs of Rs. 10,000/- on the petitioners.