2024 (3) TMI 508 - AT - Customs

Liability to pay interest upon finalization of provisional assessment prior to insertion of sub-section (3) in Section 18 of the Customs Act, 1962 - case of appellant is that the said provisional assessment had been undertaken prior to the incorporation of the said provisions Section 18(3) in law carried out by Taxation Laws Amendment Act 2006 with effect from 13.07.2006. Whether the differential duty is payable upon finalization on the entire duty leviable or only on the differential component of duty paid by the importer upon finalization of the goods? Whether Section 18(3) would come into play for provisional assessments having taken place prior to the date of its insertion in the statute, i.e. to say if applicable, would it have a retrospective applicability? HELD THAT - A perusal of sub-section (3) of Section 18 shows that an assessee becomes liable to pay interest on the differential duty calculated at the time of final assessment at the rate fixed under Section 28AB of the Customs Act, 1962. It is a common principle of law that a legislation is always prospective in nature unless when by express words or by necessary implication the provisions are declared or construed to have retrospective effect - Also it is well established that a substantive provision of law cannot be considered to be retrospective unless specified to the contrary by the Legislature. The court s have repeatedly held the amendment to Section 18 of the Act, as a substantive piece of legislation and it cannot be considered to be of a clarificatory nature. The same cannot be therefore given a retrospective effect. The provisions of Section 18(3) of the Act, would have no application to the present case and the Assessment Order demanding payment of interest, in respect of provisional assessment made prior to 13.07.2006 is not in accordance with law. The said issue being no more res integra, it need to be also pointed out that with the reference to similar provisions on the excise side, incorporated vide Rule 7(4) of the Central Excise Rules, 1944, the Board Vide Order- Instruction- Central Excise issued vide their Reference No.- F.No. 354/66/2001 TRU dated 21.06.2001, had clarified that provisions relating to charging of interest will apply only to cases in which provisional assessment is resorted to after the date of promulgation and had specifically indicated the date 01.07.2001. It clarified that such provisions would not be applicable with respect to provisional assessments carried out in the past period, even if the assessments were finalized on or after the said date of incorporation of similar provisions on the excise side for charging of interest. The question of demand of interest either on the entire duty amount or on the differential duty is no more relevant - the order of the lower authority suffers from inherent defect of misinterpretation of law and therefore is liable to be quashed - Appeal allowed.

Summary

Issues Involved:
1. Liability to pay interest upon finalization of provisional assessment prior to insertion of sub-section (3) in Section 18 of the Customs Act, 1962.
2. Whether Section 18(3) of the Customs Act, 1962 has retrospective applicability.

Summary:

Issue 1: Liability to Pay Interest Upon Finalization of Provisional Assessment Prior to Insertion of Sub-section (3) in Section 18 of the Customs Act, 1962

The appellant, M/s. Century Pulp and Paper, Kolkata, contested the liability to pay interest upon finalization of provisional assessment for goods imported under project import regulations in 1997-98. The provisional assessment was finalized in 2011-12, and the appellant paid the differential duty of Rs. 92,83,716/-. The appellant argued that they were not liable to pay interest on the duty amount as the provisional assessment was undertaken prior to the incorporation of sub-section (3) in Section 18 of the Customs Act, 1962, which was inserted with effect from 13.07.2006.

Issue 2: Retrospective Applicability of Section 18(3) of the Customs Act, 1962

The Tribunal examined whether interest is payable on the differential duty calculated at the time of final assessment and if Section 18(3) of the Customs Act, 1962, which deals with interest liability, has retrospective applicability. The Tribunal referred to several judicial precedents, including Binani Industries Ltd. Vs. CCT, CIT (Central), New Delhi Vs. Vatika Township Private Limited, and Commissioner of Customs Vs. Hindalco Industries Ltd., which established that a substantive provision of law cannot be considered retrospective unless specified by the Legislature.

The Tribunal concluded that there were neither "express words" nor "necessary implication" to consider Section 18(3) as retrospective. The provisions of sub-section 3 to Section 18, inserted on 13.07.2006, do not have retrospective applicability. The amendment in law is substantive and applies only to provisional assessments made post the insertion of the provision in the statute book.

Additionally, the Tribunal noted that the Board had clarified in a similar context on the excise side that provisions relating to charging of interest apply only to cases where provisional assessment is resorted to after the date of promulgation. Therefore, the demand for interest on the differential duty in the present case is not in accordance with law.

Conclusion:

The Tribunal held that no interest is leviable in the present matter as the provisional assessment was undertaken prior to the insertion of sub-section (3) in Section 18 of the Customs Act, 1962. The order of the lower authority was quashed, and the appeal filed by the appellant was allowed with consequential relief as per law.

(Pronounced in the open court on 09. 02. 2024)