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TMI Blog2009 (8) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice an application came to be filed by the petitioners under Section 127B of the Customs Act, 1962, hereinafter referred to as the Customs Act before the Settlement Commission on 17th December, 2007. In the application the petitioners have specifically given the details of the admitted duty liability, the interest thereon and the payment made. By the prayer clause the petitioners prayed for immunity from prosecution for any offence under the Customs Act, 1962, imposition of any penalty under the Customs Act, 1962 and grant of immunity from imposition of any fine in respect of the goods under settlement and some other reliefs. There was no relief sought for refund of interest paid or for waiver of interest. 3. The Commission by its order of 25th April, 2009 after considering the contention that there is no power to waive interest was pleased to direct that interest which was paid could not be charged and has to be refunded within 30 days. It also passed some consequential orders with which we are really not concerned as the main relief in the petition is whether it was open to the Settlement Commission to direct refund of the interest when the petitioners themselves had v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional duties of customs. 8. Before we proceed to consider these contentions we may briefly consider the provisions pertaining to settlement as they existed before 1st June, 2007 and after 1st June, 2007. Before 1st June, 2007 under Section 127D no application could be made unless additional amount of duty accepted by the applicant in his application exceeded two lakh rupees. There was no provision for payment of admitted amount of duty. However, under Section 127C on the Commission allowing the application to be proceeded with, payment had to be made of the additional duty which was admitted. Under Section 127C(9) every order passed under sub-section (7) had to provide for terms of settlement including any demand by way of duty, penalty or interest and the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective. Under Section 127H power was conferred on the Commission on an applicant satisfying the requirements of Section 127H (1) to grant immunity from prosecution or from the imposition of any penalty, fine and interest under the Act in respect of the case covered by the settlement. 9. The provisions pertaining to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper officer then passes an order for permitting clearance for home consumption in terms of Section 47(1) of the Customs Act. If the goods are not cleared within the stipulated time the custodian is entitled to sell the imported goods after notice to importer in terms of Section 48 of the Customs Act. Thus the scheme of the Act as originally enacted is to ascertain all material and necessary facts for the assessment of goods and collect the duty before the clearance of the goods from the customs control. Section 28 is a specific provision which confers power on the proper officer of customs to levy duty by issuance of show cause notice in those cases where duty has not been levied or has been short levied or erroneously refunded or when any interest payable has not been paid, part paid or erroneously refunded. Under Section 28AB which was inserted by Finance Act, 1996, in cases covered by Section 28 in addition to duty, interest is liable to be paid as set out under the Section for the time being, in terms of the Notification as fixed by the Central Government. 11. In the case of M/s. Kamat Printers Pvt. Ltd. & Anr. v. Union of India & Ors., Writ Petition No. 2131 of 2003 decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of Customs, Bombay v. M.J. Exports Ltd., 2001 (132) E.L.T. 514 (S.C.) to contend that even in a case where goods have been imported by taking the benefit of exemption notification it is open to the authorities to exercise the power under Section 28. Reliance is also placed in the judgment of this Court in Shree Vindhya Paper Mills v. Union of India, 2005 (187) E.L.T. 442 (Bom.), that even if refund of interest is directed that would be subject to Section 27 of the Customs Act. Reliance is also placed in the judgment of the co-ordinate Bench of this Court in the case of Krishnakant Sakharam Ghag v. Union of India - 2006 (206) E.L.T. 1117 (Bom). 12. On behalf of the respondents their learned Counsel submits that no interest is chargeable if the Act or the Rules do not provide for the same. In the instant case it is submitted that at the highest duty is payable as notice was issued for confiscation by virtue of Section 125(2) of the Customs Act. Section 125 does not provide for any interest. Section 28 is not attracted and consequently Section 28AB would not be attracted. Reliance is placed on the judgment in the case of Commissioner of Customs (Import) Mumbai v. Jagdish Cancer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be made. The Delhi High Court in Pioneer Silk Mills Pvt. Ltd. v. Union of India, 1995 (80) E.L.T. 507 (Delhi) had taken a similar view which has been affirmed by the Supreme Court in 2002 (145) E.L.T. A74 (S.C.). It is specifically submitted that for non-payment of additional duty of customs under Section 3(1) of the Customs Tariff Act the provisions either of Section 28AA or Section 28AB cannot be made applicable considering Section 3(6) of the Customs Tariff Act, as at the highest by that sub-section the provision for notice, adjudication and recovery have been incorporated. It, however, does not incorporate the provisions of Section 28AB of the Customs Act. In answer to the contention raised on behalf of the petitioners that as the interest paid was voluntary and consequently the Tribunal had no jurisdiction it is submitted that the Settlement Commission on arriving at a finding that Section 28AB was not attracted, Settlement Commission did have jurisdiction in directing refund of the interest. 13. The Settlement Commission is a creature of statute with the powers as conferred under Chapter XIVA including Section 127C. Its jurisdiction under Section 127C(5) is to decide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide the machinery for the levy and collection of the tax. In order to ensure prompt collection of the tax due certain penal provisions are made to deal with erring dealers and defaulters and these provisions being penal in nature would have to be construed strictly. But the machinery provisions need not be strictly construed. The machinery provisions must be so construed as would enable smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 11B provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. We will do so at the appropriate stage but for the present we may notice the thrust of this Court's decision in the case of Associational Cement Co. Ltd." Gainful reference may also be made to the following observations:- "16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention is accepted it leads to conflicts and create certain anomalies which could never have been intended by the legislature." (emphasis supplied). 14. This view has also been reiterated India Carbon Ltd. & Ors. v. State of Assam, (1997) 6 SCC 479 where the Court observed that interest can be levied and charged on delayed payment of tax only when the taxing statute makes a substantive provision in that behalf. In that case what was under consideration was the provisions of the Central Sales Tax Act and the Court observed that as there was no substantive provisions under the Central Act requiring the payment of interest under the Central Sales Tax. Therefore, if there be no substantive provision in the Central Act which obliges the assessee to pay interest on delayed payment of Central Sales Tax then no interest can be demanded. Another Constitution Bench in V.V.S. Sugars v. Government of A.P., and Ors., (1999) 4 SCC 192 observed with reference to A.P. Sugarcane (Regulation of Supply and Purchase) Act, 1961 that the Act is a taxing statute and taxing statute must be interpreted as it reads, with no additions and no subtractions, on the ground of legislative intendment or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dments:- 1. under the existing section, a fine in lieu of confiscation has to be imposed even if the import or export of goods is prohibited. Under the amended proviso, in the case of prohibited goods it will be within the discretion of the adjudicating officer to release the goods on payment of a fine in lieu of confiscation or not. It would thus be possible to confiscate absolutely goods endangering public order, obscene pictures, etc. whereas at present the only remedy is to impose a disproportionately heavy fine which may be objected to on the ground that it makes the option illusory. (ii) a proviso has been added to the clause for making it clear that the fine in lieu of confiscation shall not exceed the market-price of the goods less in the case of imported goods, the import duty leviable thereon. This proviso has been inserted in order that the option given should be real and not illusory. Sub-clause (2) has been newly introduced to remove doubts regarding the payment of duty in cases where a fine in lieu of confiscation is imposed." This would make it clear that Clause 125(2) was clarificatory i.e. merely because fine was imposed does not absolve the importer/exporter fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods. The question was whether Section 28 would be attracted as also the period of limitation. The Court held that there was a suppression of the fact by the importer that he was seeking to export the goods. In other words there was wilful suppression on the part of the respondents. Had this been known to the Customs Authorities the importer would not have been given the benefit, as the Notification would then be inapplicable. Considering this the Court held that the extended period to the proviso to Section 28 would be leviable. There also it may be noted that the Collector of Customs ordered the confiscation of goods. The Supreme Court held that in such cases Section 28 would be attracted. 21. We then come to the judgment relied upon by the respondents, to submit that when there is an order of confiscation duty is payable not by virtue of Section 28 but by virtue of Section 125(2). In case of Jagdish Cancer & Research Centre's case the goods were imported duty free based on a notification. Much after the import it was found that there was a breach. CEGAT against the order passed by the Authority held that the confiscation was not valid. The Centre was, however, liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er & Research Centre (supra) and C.T. Scan Research Centre (supra) would apply when there is no dispute on there being a breach about the quantum of duty. As rightly pointed out on behalf of the Petitioners for a party disputing its liability Section 28 is the only provision. There is no machinery for adjudication under Section 125(2). Notice to satisfy the principles of natural justice will be no answser in the absence of an adjudicating machinery. 24. Considering the interpretation of the provisions of Sea Customs Act as it then stood, the Objects and Reasons clause as earlier noted and the judgment in M.J. Exports (supra) though the judgment in Jagdish Cancer & Research Centre is of a Bench of three Judges vis-a-vis the Judgment in Union of India v. Security & Finance (P) Ltd., (supra) and M.J. Exports Ltd. (supra), in our opinion, in addition it would be open under Section 28 for the Competent Authority, to issue a show cause notice. Section 28 is the provision under the Act, if there has been nonpayment or short payment and the like, to adjudicate the dispute to decide whether there has been a breach and/or the like and consequently recovery of duty which has not been paid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is short levy of duty or non-payment thereof the requirement of serving a notice under Section 28 arises. The decision, therefore, would be as held by us in M/s. Kamat Printers Pvt. Ltd. (supra) that once duty is ascertained then by operation of law, such person in addition shall be liable to pay interest at such rate as fixed by the Board. The Proper Officer, therefore, in the ordinary course would be bound once the duty is held to be liable to call on the party to pay interest as fixed by the Board. 27. We may at this stage only note that various Notifications under the Customs Act have been brought to our attention. These are notifications issued under Section 25(1) of the Customs Act. Under the Notifications in exempting the goods from the whole of duty of customs the importer has to execute a bond binding to pay an amount equal to the duty together with interest as set out in the Notification. The interest varies from time to time depending on the nature of the Notification. There are Rules also framed called Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In terms of these Rules for failure to comply with the conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by operation of law under Section 28AB. Secondly, when there is a dispute as to whether there is a breach of the notification, then Section 28 can be resorted to Section 125(2) in addition can be resorted to when there is no dispute. 28. We may now proceed to consider the third proposition, whether provisions for interest under the Customs Act are not incorporated either under Section 3 or under Section 3A of the Customs Tariff Act. We may first refer to the relevant provisions of Section 3(1) and 3(6) which read as under:- "3. Levy of additional duty equal to excise duty. - (1) Any article which is imported into India shall, in addition, be liable to a duty (hereinafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article. Explanation.- In this section, the expression "the excise duty for the time being leviable on a like article if produced or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is only after 18th April, 2006 that the Customs Tariff Act, 1975 provides for interest. It is in this context that this Court would have to consider the true import of the meaning of the expression that that provisions of the Customs Act, Rules and Regulations made thereunder as far as may be, apply to the duty charged under this Act. It is no doubt true that the provisions of Customs Tariff Act themselves do not provide for interest. However, we may gainfully refer to the expression "duty" under Section 2(15) of the Customs Act, which reads as under:- ""duty" means a duty of customs leviable under this Act." A reading thereof would indicate that the provisions of the Customs Act pertaining to duty would also apply duty payable under the Customs Tariff Act. The law as now settled is that the charging Section for Customs Duty is Section 12 whereas the charging Section in so far as the Customs Tariff Act is Section 3. However, relevant for our discussion would be the Sections 3, 3A and their relevant sub-sections. Would a construction of these provisions, result in holding that interest be treated as having been incorporated under the provisions of the Customs Tariff Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded. The petitioner there had already paid the interest. The Commission, therefore, suo motto could not have ordered refund of interest in the application the petitioner had not sought for refund of interest paid or for waiver of interest. Apart from that as we have now held, interest was payable. If interest was not payable under the Act the question of the Commission exercising jurisdiction, directing the refund would also not arise. This is irrespective of the fact that any issue pertaining to refund of interest would be subject to the provisions of unjust enrichment. In our opinion Rule in this Petition will have to be made absolute both on the count that interest was payable and alternatively on the ground that the Commission had no jurisdiction to direct refund of interest. 33. In Writ Petition No. 1106 of 2009 interest was not paid at all and there was a specific prayer that interest is not payable. The Commission on adjudication held that interest is not payable. Considering our above discussion, in our opinion, the impugned order to that extent must be set aside and it must be held that interest was payable. The matter is remanded to the Commission for determining the int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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