1990 (9) TMI 203 - AT - Customs

Summary

Issues Involved:
1. Applicability of interest rate on warehoused goods.
2. Retrospective application of amended Section 61 of the Customs Act.
3. Validity of interest demand under Section 59 of the Customs Act.
4. Time-bar under Section 28 of the Customs Act.
5. Alleged calculation error in interest demand.

Detailed Analysis:

1. Applicability of Interest Rate on Warehoused Goods:
The appellants argued that no interest is chargeable on goods warehoused prior to 13-5-1983, as Section 61(2) of the Customs Act, which introduced the provision for charging interest, came into force only on 13-5-1983. They contended that a vested right accrued to them to warehouse goods without interest before this amendment. The Board's clarification dated 8-9-1983, based on the Law Ministry's opinion, supported this view, stating that amended provisions apply only to goods warehoused on or after 13-5-1983.

The respondent countered that under Section 59 of the Customs Act, the importer is required to furnish a bond for payment of duty and interest at 6%. The appellants had executed such a bond, and enforcement of dues arising from the bond is permissible under Section 142(2) of the Customs Act. Therefore, interest at 6% is chargeable on goods warehoused prior to 13-5-1983.

2. Retrospective Application of Amended Section 61 of the Customs Act:
The appellants contended that Section 61(2) of the Customs Act, introduced by the Finance Act of 1983, does not have retrospective effect. They cited legal interpretations and the Board's clarification to support their argument. The respondent agreed that the amendment is not retrospective but maintained that interest at 6% is still chargeable under Section 59, as the appellants had executed a bond agreeing to pay this interest.

3. Validity of Interest Demand Under Section 59 of the Customs Act:
The appellants argued that Section 59 is merely a machinery provision for furnishing a bond and not a charging section for interest. They claimed that the charging section was introduced only by the amendment of Section 61 in 1983. The respondent argued that Section 59 provides the legal authority for taking a bond, which includes an interest provision at 6%. The bond executed by the appellants is enforceable under Section 142 of the Customs Act.

4. Time-bar Under Section 28 of the Customs Act:
The appellants contended that the demand is time-barred under Section 28 of the Customs Act, which relates to duties not levied or short-levied. They argued that the demand letter dated 1-6-1988, for goods cleared on 29-12-1987, falls outside the six-month period. The respondent argued that Section 28 applies only to duties, not interest, and hence the general law of limitation should apply. The Tribunal concluded that the demand for interest can be enforced in terms of the bond executed under Section 59 and recovered under Section 142, making Section 28 inapplicable.

5. Alleged Calculation Error in Interest Demand:
The appellants claimed that the Assistant Collector made a calculation error in determining the interest amount. They provided alternate figures for the interest payable at 6%. The Tribunal noted that neither the Collector (Appeals) nor the Assistant Collector had addressed this calculation error. Consequently, the case was remanded to the Assistant Collector to examine the alleged calculation error and pass orders in accordance with the law.

Conclusion:
The Tribunal held that interest at 6% is chargeable on goods warehoused prior to 13-5-1983, as per the bond executed under Section 59 of the Customs Act. The demand for interest is enforceable under Section 142, and Section 28's time-bar does not apply. The case was remanded to the Assistant Collector to address the alleged calculation error in the interest demand.