2015 (12) TMI 656 - AT - Customs

Demand of interest on duty paid on DTA clearances of warehoused goods - 100% EOU - Held that - Impugned goods were imported duty free and warehoused as per the warehouse provisions. The warehousing provisions specify that the same can be warehoused till expiry of three years as per Section 61 (i) (a) of the Customs Act, 1962. The duty liability on the goods will arise only after expiry of such time limit, or when the goods are cleared from the warehouse before that time limit. In the instant case, the appellants had imported the goods during the period June 2010 to March 2011 and they had cleared the goods on 13.09.2011. Therefore, clearances of the goods have been done clearly within the permitted period of three years and there is no contravention. As regards the duty, the appellant had sought permission from the Customs department for clearing the goods, and they had deposited the duty amount voluntarily. Therefore, there is no occasion to demand interest from the appellant as there is no delay in payment of the duty. Interest can be levied only if there is delay in payment of duty, which is not the case herein. Therefore, we find no reason to demand interest from the appellant. Consequently, there is also no reason for imposition of penalty, as the appellant has not violated any of the provisions nor delayed the payment of duty. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues involved:
- Liability to pay interest on duty deposited by the appellant
- Imposition of penalty by lower authorities

Analysis:
1. Liability to pay interest on duty deposited by the appellant:
The appellant, a 100% EOU, imported duty-free pharmaceutical goods and warehoused them due to market conditions. Upon seeking permission to clear the goods to Domestic Tariff Area, Customs authorities demanded interest along with duty. The appellant contested the interest payment, arguing that duty liability arises only upon expiry of warehousing period or clearance to DTA. The Tribunal found merit in the appellant's argument, noting that duty liability arises after expiry of the warehousing period or clearance from the warehouse. Since the appellant cleared the goods within the permitted period, there was no delay in duty payment, warranting no interest. Citing Para 6.15 (a) (ii) of the Foreign Trade Policy and Customs Circular No. 15/2009, the Tribunal held that interest is leviable only when duty becomes payable, thus setting aside the interest demand.

2. Imposition of penalty by lower authorities:
The lower authorities confirmed duty liability, interest, and imposed a penalty on the appellant for non-payment of interest. However, the Tribunal disagreed with this decision. It emphasized that since there was no delay in duty payment, there was no basis for imposing a penalty. As the appellant had not violated any provisions or delayed duty payment, the Tribunal found no justification for the penalty. Referring to Circular No. 15/2009, the Tribunal highlighted that interest on warehoused goods is payable only when they exceed the permitted warehousing period, further supporting its decision to set aside the penalty imposed on the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside both the interest demand and the penalty imposed by the lower authorities. The impugned order-in-original and Order-in-Appeal were modified accordingly, and the appeal was disposed of based on the above findings.