2013 (3) TMI 432 - HC - Customs

Interest on the differential duty for the period prior to amendment - Section 18(3) was inserted by way of Taxation Laws (Amendment) Act, 2006 - Retrospective or prospective - Provisional assessment - Final assessment - Section 28-AB of the Customs Act, 1962 - Held that - This case of the Revenue is not acceptable inasmuch as the charging provision for interest on any differential amount of duty paid on finalization of provisional assessment is Section 18(3) of the Act. This is a substantive provision of law, which, in the absence of express mention of retrospective effect, cannot be given retrospective operation so as to cover the provisional assessment made prior to 13.07.2006. It is not possible to agree with the contention of revenue that such amendment has to be understood as clarificatory in nature. This is more so, when one reads the amendments made in 1998 and the amendment made in Rule 9B of the Central Excise Rules in 1999 considering the pronouncement of the Apex Court as to the distinction between making of a refund and claiming of a refund; the amendment cannot be considered to be retrospective in nature; and cannot be made applicable to pending proceedings. - Decided against the revenue.

Issues Involved:
1. Applicability of Section 18(3) of the Customs Act, 1962, inserted by the Taxation Laws (Amendment) Act, 2006, for charging interest on differential duty.
2. Retrospective application of Section 18(3).
3. Interest chargeability under Section 28-AB post-final assessment.
4. Commencement date for interest chargeability.
5. Interrelation between Sections 18(3) and 28AB for interest charging.
6. Reliance on the CESTAT decision in the case of M/s. Sterlite Industries (India) Ltd.

Detailed Analysis:

1. Applicability of Section 18(3) of the Customs Act, 1962:
The primary controversy revolves around whether the department could charge interest under Section 18(3) of the Customs Act for the differential duty between the provisional and final assessments. The provisional assessment was made on 25.04.2005, and the final assessment was completed on 30.01.2009, with an additional duty demand of Rs. 2,99,428/- along with interest.

2. Retrospective Application of Section 18(3):
Section 18(3), effective from 13.07.2006, states that the importer or exporter shall be liable to pay interest on any amount payable to the Central Government from the first day of the month in which the duty is provisionally assessed until the date of payment. The Tribunal in Sterlite Industries (India) Ltd. concluded that Section 18(3) cannot be applied retrospectively to provisional assessments made prior to 13.07.2006. This is because Section 18(3) is a substantive provision of law, and without explicit mention of retrospective effect, it cannot cover provisional assessments made before its enactment.

3. Interest Chargeability under Section 28-AB:
The Tribunal clarified that Section 28-AB, which was in force during the period of provisional assessments, does not independently authorize the levy of interest on differential duty. Instead, Section 18(3) is the specific charging provision for interest, and it cannot be retroactively applied to provisional assessments made before 13.07.2006.

4. Commencement Date for Interest Chargeability:
Interest under Section 18(3) can only be charged from the date of its insertion, i.e., 13.07.2006. Any levy of interest on differential duty for provisional assessments made before this date would amount to retrospective application, which is not permissible unless explicitly stated.

5. Interrelation between Sections 18(3) and 28AB:
The substantive provision for interest on differential duty is Section 18(3), and Section 28AB prescribes the rate of interest. The Tribunal emphasized that Section 28AB alone does not create the liability to pay interest; it merely provides the rate once Section 18(3) establishes the liability.

6. Reliance on the CESTAT Decision in M/s. Sterlite Industries (India) Ltd.:
The Tribunal's decision in Sterlite Industries (India) Ltd. was upheld, where it was determined that no interest could be levied on provisional assessments made before 13.07.2006. The Tribunal's reliance on this case was deemed appropriate, and the appeal against the CESTAT's decision was dismissed.

Conclusion:
The Gujarat High Court reaffirmed that Section 18(3) of the Customs Act, 1962, cannot be applied retrospectively to provisional assessments made before its enactment on 13.07.2006. Consequently, interest on differential duty can only be charged from 13.07.2006 onwards. The appeal was dismissed, aligning with the Tribunal's decision and similar judgments in related cases.

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