2018 (1) TMI 530 - HC - Customs

Interest liability for overstay of goods beyond warehousing period - time limitation - Refund of interest - consequences of reduction of warehousing period from one year to six months on existing goods - Section 27 of the Customs Act 1962 - Held that - A reading of Section 59 (1) shows that an importer who seeks to have the imported goods warehoused has to first have the goods assessed under Section 17 or Section 18 as the case may be and then execute a bond binding himself to pay double the amount of duty assessed on the said goods and undertaking to pay on or before a date specified in a notice of demand all duties rent and charges claimable on account of such goods under this Act together with interest on the same from the date so specified at the rate of six per cent per annum or such other rate as is for the time being fixed by the Board. In Commissioner of Customs Chennai Vs. Lakshmi Electrical Control Systems Ltd. 2016 (4) TMI 767 - MADRAS HIGH COURT it was held that in so far as Section 61(2) is concerned it refers only to the interest that becomes payable under Section 47. As a matter of fact the present Sub-Section (2) of Section 61 was amended only by Act 27 of 1999. The amendment on which strong reliance is placed by the department to Section 27(1) came in 1991. Yet Section 61(2) does not refer to Section 27. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Applicability of time limit for claiming refund of interest under Section 27 of the Customs Act, 1962.
2. Consideration of unjust enrichment in refund claims.
3. Reliance on the Apex Court judgment in M/s. Bangalore Wire Rod Mills.
4. Applicability of warehousing period based on the date of deposit of goods.
5. Settlement of interest-free warehousing period by the Apex Court.

Detailed Analysis:

1. Applicability of Time Limit for Claiming Refund of Interest:
The primary issue was whether the time limit for claiming a refund of interest under Section 27 of the Customs Act, 1962, was applicable. The Tribunal held that the time limit was not applicable by relying on an outdated Board's Circular No.475/39/90-Cus, VII, dated 8/8/1990, which was deemed irrelevant after the Customs Amendment Act, 1991. The High Court referred to the case of Commissioner of Customs, Chennai Vs. Lakshmi Electrical Control Systems Ltd., which clarified that the amended Section 27(1) includes interest paid on duty, but the warehousing interest under Section 61(2) is distinct from customs duty, hence Section 27 does not apply to the refund of such interest.

2. Consideration of Unjust Enrichment:
The Tribunal was criticized for not discussing the question of unjust enrichment. The High Court, however, did not find merit in this argument as the Tribunal's decision was based on the interpretation of legal provisions and prior judgments, which did not necessitate a separate discussion on unjust enrichment for the refund claims.

3. Reliance on Apex Court Judgment in M/s. Bangalore Wire Rod Mills:
The Tribunal relied on the judgment in M/s. Bangalore Wire Rod Mills, where the Apex Court held that the interest is chargeable only after the expiry of the period prescribed in the notice of demand. The High Court upheld this reliance, noting that the Apex Court's interpretation of Section 59(1)(b) was clear and that interest liability arises only after the specified period in the demand notice.

4. Applicability of Warehousing Period Based on the Date of Deposit:
The Tribunal held that the warehousing period applicable would be the period in force on the date of deposit of the goods in the warehouse. The High Court supported this view, referencing the Union of India Vs. Bangalore Wire Rod Mill case, which established that the warehousing period should be considered based on the date of warehousing, not subsequent amendments.

5. Settlement of Interest-Free Warehousing Period by the Apex Court:
The Tribunal concluded that the issue of the interest-free warehousing period was settled by the Apex Court. The High Court affirmed this conclusion, noting that the Apex Court's decision in Union of India Vs. Bangalore Wire Rod Mill provided a clear interpretation that the interest-free period is determined by the law as it stood at the time of warehousing.

Conclusion:
The High Court dismissed the Civil Miscellaneous Appeals, answering all substantial questions of law against the revenue. The Court found no merit in the appeals, affirming the Tribunal's decisions based on established legal interpretations and prior judgments. The appeals were dismissed with no costs.

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