2016 (8) TMI 181 - AT - Customs

Demand of interest - extension of warehousing period after the expiry - Held that - The present case of the appellant is that when the goods entered the warehouse, there was no EPCG license with the appellant. But during storage of the goods in warehouse, appellant got EPCG license. Based on such license clearance was allowed. The adjudicating authority has recorded that the period of storage having been expired under section 61(1) of the Customs Act 1962, extension was granted to it under the proviso thereunder. Once such an extension is granted and the EPCG license was with the appellant at the time of clearance, the case clearly falls within the purview of section 68 of the Customs Act, 1962. This distinguishes the case from the purview of section 72 where none of the circumstance of section 72(1) was present. - Interest is not payable - Decided in favor of assessee.

Summary

Issues:
1. Interpretation of provisions related to interest on warehoused goods under the Customs Act, 1962.
2. Determining the applicability of section 72 in a case involving clearance of goods under exemption.
3. Analysis of the impact of possessing an EPCG license on the clearance of goods from a warehouse.

Issue 1: Interpretation of interest on warehoused goods:
The appellant contended that interest paid under protest, which was otherwise not payable during duty-free clearance, should not be levied. Citing the decision in Pratibha Processors Vs. Union of India, it was argued that interest on warehoused goods is linked to the principal amount and is not separately recoverable if the principal is not paid. Section 61(2) of the Customs Act, 1962 was emphasized as not having an independent existence for interest. The extension of warehousing under section 61 led to the clearance under section 68, making the case fall outside the scope of section 72.

Issue 2: Applicability of section 72 in exemption cases:
The Revenue contended that even in cases of clearance under exemption, section 72 applies if the appellant did not have an EPCG license earlier. The Tribunal considered the circumstances under section 72, which involve contraventions related to warehoused goods, non-removal within the permitted period, sample taking without duty payment, and unaccounted goods under a bond. The proper officer may demand duty, penalties, rent, interest, and other charges in such cases.

Issue 3: Impact of EPCG license on clearance:
The appellant's case revolved around the absence of an EPCG license when the goods entered the warehouse, later obtaining the license during storage. The adjudicating authority granted an extension under section 61(1) due to the expired storage period. With the EPCG license in possession during clearance, the case was deemed to fall under section 68, not meeting the circumstances of section 72. Following the precedent set by Pratibha Processors, where interest on warehoused goods is considered accessory to the principal, the Tribunal allowed the appeal, ruling that no interest is recoverable from the appellant.

In conclusion, the judgment clarified the interpretation of interest on warehoused goods, the applicability of section 72 in exemption cases, and the impact of possessing an EPCG license on clearance. The decision favored the appellant based on the specific circumstances and legal principles established in previous cases, ultimately allowing the appeal.