2021 (10) TMI 190 - HC - Customs

Advance License scheme - Invocation of Bank Guarantee - failure to achieve export obligation - waiver of statutory interest - regularisation under clause 4.28 of the Handbook of Procedures - power of judicial review under Article 226 of the Constitution of India - HELD THAT - The case of the petitioner, on admitted facts, will fall under clause 4.28 (iii). Clause 4.28 deals with the situation where the export obligation has been fulfilled in value terms but there is a shortfall in the terms of quantity and clause 4.28 (ii) deals with the situation where the export obligation is fulfilled in quantity but there is a shortfall in value. Both situations contemplated by clauses 4.28 (i) and 4.28 (ii) provide separate methods for calculation of the amount payable for regularisation. Clause 4.28 (iii) provides that where the export obligation is not fulfilled both in terms of quantity and value the amount payable will be as the amount calculated under clauses 4.28 (i) and 4.23 (ii). A combined reading of clauses 4.28 (i), (ii) (iii) leads to the conclusion that the petitioner will have to pay interest also if it intends to regularise its default in terms of clause 4.28. From the facts as pleaded in the writ petition, it appears that the petitioner never applied for regularisation in terms of clause 4.28 of the Handbook of Procedures. Whether the delay in disposal of Ext.P1, should result in an order relieving the petitioner of the liability to pay interest as demanded in Ext.P11. Interest under the Customs Act is statutory? - HELD THAT - The petitioner admittedly paid the amount due on account of failure to meet the export obligation only on 27-08-2013. The advance licence was issued in 2004 and the export obligation period was 18 months from the date of issue. Even accounting for the 6 months extension granted by the original authority, the period of export obligation would have expired in 2006. The petitioner was able to import materials without payment of customs duty only in terms of the advance licence. The petitioner, on failure to meet the export obligation, was required to pay customs duty on the imported material. The export obligation period having ended in the year 2006 (even after the extension) the petitioner was bound to pay customs duty in the year 2006. The petitioner has paid the customs duty only in the year 2013. The petitioner could have opted to remit customs duty under protest - the petitioner cannot claim any exemption from the payment of interest. Petition dismissed.

Summary

Issues Involved:
1. Legality of the rejection of the review petition by the Policy Relaxation Committee.
2. Liability of the petitioner to pay interest for the period during which the review petition was pending.

Issue-wise Detailed Analysis:

1. Legality of the rejection of the review petition by the Policy Relaxation Committee:

The petitioner, a company registered under the Companies Act, 1956, availed an advance licence to import raw materials without duty, contingent on meeting specified export obligations. Due to uncontrollable circumstances, the petitioner failed to meet these obligations within the stipulated time and sought an extension, which was denied. The petitioner’s review petition was also rejected by the Policy Relaxation Committee, which noted that the petitioner admitted to making zero exports within the original validity period of the licence. The Committee observed that despite an extension until 30-09-2008, no exports were made, leading to the decision not to grant further extensions. The Committee suggested the petitioner could apply for regularisation under clause 4.28 of the Handbook of Procedures. However, it was found that the petitioner’s case did not fall under clauses 4.28 (i) or 4.28 (ii), but under clause 4.28 (iii), which necessitated the payment of interest for regularisation. The petitioner did not apply for regularisation as per clause 4.28. The court found no merit in the petitioner’s argument that the rejection of the review petition warranted interference under judicial review, as the petitioner had not fulfilled the export obligations and had not applied for regularisation.

2. Liability of the petitioner to pay interest for the period during which the review petition was pending:

The petitioner contended that they should not be liable for interest during the pendency of the review petition. However, the court held that interest under the Customs Act is statutory and cannot be waived unless explicitly provided by the Act. The petitioner imported materials without paying customs duty based on the advance licence and failed to meet the export obligations, thus necessitating the payment of customs duty in 2006. The duty was paid only in 2013, and the petitioner enjoyed the benefit of the money payable to the Customs Department during this period. The court emphasized that interest is compensation for the retention of money and cannot be waived. The petitioner’s reliance on interim orders to stay the invocation of the bank guarantee did not exempt them from paying interest. The court referenced the Supreme Court’s decision in Voltas Ltd. v. State of A.P., which established that tax becomes due when returns are filed, and deferral of payment does not negate the due date. The court concluded that the petitioner was not entitled to relief from paying interest due to the statutory nature of the interest and the lack of provisions for waiver under the Customs Act.

Conclusion:

The writ petition was dismissed, upholding the Policy Relaxation Committee’s decision and the petitioner’s liability to pay interest. The court reiterated that statutory obligations must be met, and equity cannot override clear legal provisions.