2014 (5) TMI 161 - HC - Customs

Liability of duty Imposition of Penalty and interest - Non performance of export obligation Issuance of Notice - Duty and interest paid before the service of notice - Once the duty is not paid within the specified time the liability to pay interest is automatic and the assessee is bound to pay interest for the delayed payment of duty - When the entire duty and interest payable was paid on 6-1-2003, the issue of notice on 7-3-2003 was one without jurisdiction In view of Section 28(2B) if the duty and interest is paid before the service of notice and the said payment is informed to the proper officer, then the proper officer shall not serve any notice under sub-section (1) in respect to the duty or the interest so paid - If the amount of Rs. 7,24,161/- had been deposited more than what is actually due by the assessee after appropriating the amount due towards duty and interest, the balance amount should have been refunded to the assessee, question of imposition of penalty in these circumstances would not arise - Therefore, the order of the adjudicating authority imposing penalty is one without jurisdiction. Thus, order of the Tribunal setting aside the imposition of penalty is upheld - The order of the Tribunal setting aside the entire interest portion is set aside - The adjudicating authority shall calculate the interest payable for each year on the amount of duty payable that the said duty was due from the day it was due till the date of 6-1-2003 at the rate of 15% recalculating the interest and after apportioning the said interest portion, the remaining amount is to be refunded to the assessee - The matter is remitted back to the adjudicating authority to recalculate the interest Decided partly in favour of assessee.

Summary

Issues:
Challenge to order setting aside penalty and interest by Revenue.

Analysis:
The case involved a dispute where the assessee failed to meet export obligations, leading to a duty liability. The assessee deposited an amount towards duty and penalty, which was appropriated by the adjudicating authority. The Tribunal set aside the penalty and interest imposition, stating that as duty was paid before the show cause notice, penalty and interest were unjustified. The Revenue appealed against this decision.

The High Court analyzed the situation, emphasizing that non-payment of duty within the specified time automatically triggers interest liability. Referring to Section 28(2B), it noted that if duty and interest are paid before notice service, no notice should be issued. As the entire duty and interest were paid before the notice, the subsequent notice was without jurisdiction. The Court highlighted that if an amount exceeding the due sum is deposited, penalty imposition becomes unjustifiable.

Regarding interest calculation, the Court criticized the adjudicating authority for incorrectly calculating interest for three years uniformly at 15%. It clarified that interest is compensatory and should be calculated from the due date till payment. The Court directed the adjudicating authority to recalculate interest for each year separately at 15% till the payment date and refund the excess amount to the assessee.

In conclusion, the High Court partially allowed the appeal. It confirmed the Tribunal's decision on penalty but set aside the interest portion's cancellation. The matter was remitted to the adjudicating authority for accurate interest calculation. Each party was ordered to bear their own costs, and the substantial question of law was deemed unnecessary for consideration.