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TMI Blog1992 (11) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... all these writ petitions, facts are almost identical. For the purpose of this judgment we may set out facts of Writ Petition No. 1854 of 1991. 3.The Ist petitioner is a Public Limited Company incorporated under the Companies Act, 1956. The 2nd petitioner is the Senior Accountant of the Ist petitioner and also a share-holder. Petitioner-Company is engaged in the business as Importers, Exporters and Manufacturers. They are having their factory at the address shown in the title of the petition. The Ist respondent is the Union of India. 2nd and 3rd respondents are Assistant Collectors in the Customs Department at Bombay. 4.The petitioners imported Polyester Filament Yarn of Tiwan origin. The said goods were shipped by the foreign suppliers from the port of shipment, Keelunj and on removal of the goods the petitioners filed 6 Bills of Entry for warehousing. The goods were allowed to be warehoused under 6 Bonds all dated 4th December, 1990, expiring on 3rd March, 1991. On or about 9th May, 1991, the petitioners filed 6 Bills of Entry for Ex-bond clearance for home consumption. Copies of these Bills of Entry for Ex-bond are at Exhibits B-I to B-6. In view of the Advance Licence produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the duty assessed at the time of warehousing the goods. 8.Mr. Bharucha, learned counsel appearing for the petitioners urged that interest is essentially payable only if there is principal (duty). If on the date of clearance of the goods under Section 68 of the Act, the duty assessed was nil, then there was no question of paying any interest thereon. He then urged that even if exemption is conditional one, no interest is payable. He then contended that the date of actual removal of the goods from the warehouse would be relevant date for determining the duty amount under the Customs Tariff Act, [1975]. If any duty is payable then alone on such duty amount of interest could be charged. Since duty was nil, no question of charging interest would arise. Mr. Bharucha heavily relied upon Exemption Notification dated 30th March 1988 ( No. 116/88) issued by the Ist respondent under Section 25(1) of the Act. Relying upon this Exemption Notification and the DEEC scheme, Mr. Bharucha urged that by virtue of the Exemption Notification read with DEEC scheme, the importers who have obtained Advance Licence goods in question were not chargeable to any duty at the time of clearance from the war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of duty i.e. quantum leviable on the goods has to be determined with reference to sub-section (b) of Section 15(1) of the Act, which provides that duty on warehoused goods is payable on the date on which the goods [are] actually removed from the warehouse. Hence interest is payable on the amount i.e. quantum of duty leviable at the rate in force when goods were actually removed from the warehouse. Mr. Patel further urged that interest is an accessory of the principal. If there is no principal, question of paying any interest would not arise since it is an accessory. Exemption Notification issued under Section 25(1) of the Act exempts goods imported into India against Advance Licence from the whole of the duty of customs leviable thereon. The true impact of Exemption Notification on DEEC Scheme and the Advance Licence is that the exemption must relate to the date of import and the goods must be deemed to have been imported against Advance Licence. Under the said notification, no duty was leviable on the goods when cleared from the warehouse and, therefore, no interest can be recovered from the importer. 10A.Mr. Nankani, learned counsel appearing for some of the petitioners urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e months as in the present case, is claimable by the respondents till the date of clearance of the goods from the warehouse. There cannot be any dispute that the warehoused goods can be cleared under Section 68 of the Act. Mr. Sethna further urged that when goods were imported into India, upon filing of Bills of Entry for warehousing under Section 59 of the Act, the Assistant Collector made assessment and also determined the amount of duty and it was so endorsed on Bills of Entry at the time of keeping goods in the warehouse. There is no challenge to the assessment made by the Assistant Collector and determination of the amount of duty made by him on the Bills of Entry. It is open to the Assistant Collector to recover the amount of duty together with interest thereon in exercise of powers under Section 59(1)(b) of the Act, but if no such notice is issued under Section 59(1)(b) of the Act it does not mean that liability of the importer to pay interest on the assessed duty amount ceases merely because warehoused goods were allowed to be cleared against Advance Licence. Mr. Sethna urged that the language used in Section 61 is quite clear and it permits the Respondents to claim interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective only from the date when it is filed before the Assistant Collector for clearing warehoused goods. The importer, who has obtained Advance Licence may be entitled to claim exemption of duty under the Act. This Advance Licence cannot have the effect of erasing the liability of interest accrued till the date of clearing of goods. Mr. Sethna, therefore, urged that contentions raised on behalf of the petitioners are devoid of any substance and the same may be rejected. 11.In order to appreciate rival contentions it would be necessary to refer to relevant provisions under the Customs Act. Sec. 2(14) of the Act defines "dutiable goods" to mean any goods which are chargeable to duty and which has not been paid. Section 2(15) defines "duty" to mean a duty of customs leviable under this Act. Section 12 is a charging section and it reads thus : "12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs, shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or exported from India. (2)......." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the amount of the duty assessed on such goods - to observe all the provisions of this Act and the rules and(a) regulations in respect of such goods; to pay on or before a date specified in a notice of demand all(b) 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; and to discharge all penalties incurred for violation of the(c) provisions of this Act and the rules and regulations in respect of such goods. for the purposes of sub-section (1), the Assistant Collector(2) of Customs may permit an importer to enter into a general bond in such amount as the Assistant Collector of Customs may approve in respect of the warehousing of goods to be imported by him within a specified period. A bond executed under this section by an importer in respect(3) of any goods shall continue in force, notwithstanding the transfer of goods to any other person or the removal of the goods to another warehouse : Provided that where the whole of the goods or any part thereof are transferred to another person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and DEEC Scheme. The importers have imported the goods under OGL and warehoused the same in terms of Section 59 of the Act. The goods so imported and warehoused were assessed to duty and the amount of duty was also determined at the rate prevailing under the Customs Tariff Act, 1975 at the time of warehousing. These importers thereafter in terms of DEEC Scheme applied for Advance Licence and obtained the same. The importers, therefore, at the time of clearance of goods from the warehouse, claimed the benefit of Exemption Notification dated 30-3-1988 as amended against Advance Licence. It is, therefore, necessary, at this stage to refer to DEEC Scheme and the Exemption Notification dated 30-3-1988 (116/88), Exhibit B as amended from time to time and last amendment is dated 20-2-1990. It reads thus : "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 44/87, Customs G.S.R. 101 (E) dated the 19th February, 1987, the Central Government, being satisfied that it is necessary in the public interest so to do, her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme, it will be open to him to import such items in advance under OGL or against his own licences and keep the same in Customs Bond for getting clearance against valid licence issued subsequently under Duty Exemption Scheme. Clearance of the items from the Customs Bond can, however, be effected after obtaining the licence under the said scheme and without which the benefit of duty exemption will not be admissible. The declared supporting manufacturer of the applicant can also avail of this facility by effecting imports of OGL items as an Actual User and get the same cleared subsequently against a valid licence issued under the said scheme in favour of the applicant, provided the supporting manufacturer holds a valid letter of authority issued by the applicant in his favour in terms of para 352 above. The facility of the aforesaid provisions for import of items(2) against other licences will be available subject to the condition that the licence in question debited at the time of import will not be re-credited after clearance made against a licence issued under Duty Exemption Scheme. It is, however, clarified that in case the applicant is already in possession of a valid licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If they get such Advance Licence, they may clear the goods thereafter without payment of duty but certainly Advance Licence cannot relate back as if effective from the date of importation of goods and/or date of warehousing because export obligations cannot be delinked. Date of export obligation starts from the date of clearance. This date cannot relate back to the date of importation and warehousing. If exemption Notification is read in the context of the scheme, counsel urged, that the importer will get benefit of this Advance Licence only against payment of duty at the time of clearance of goods from the warehouse. 14.After giving careful thought to the rival contentions and after perusing Exemption Notification and para 355 thereof, we are of the opinion that this facility is given to the importers to import the goods falling under OGL and keep them in the warehouse without payment of duty and thereafter apply for Advance Licence. If it is granted, the importer may clear the goods from warehouse without payment of duty. It is difficult to accept the contention of the petitioners that the said Advance Licence be deemed to have been issued on the date of the importation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence. It is one of the incidents of a debt which in the absence of the latter has no sanction for enforcement. The importer's liability to pay duty is at the time of clearance of the goods from a warehouse. He has no obligation to pay duty as long as goods remained in the warehouse. When goods are exempted from duty before they are removed from the warehouse, the natural as well as legal corollary is that none can be mulcted with the burden to pay interest on a non-existing duty." With respect, we are unable to agree with the aforesaid ratio, but, however, we must make it clear that we are not called upon to decide the scope of Section 59(1)(b) of the Act. Admittedly, in the case before us, no notice of demand was issued to the importers by the Assistant Collector in exercise of powers under Section 59(1)(b) of the Act. The decision of the Kerala High Court is clearly distinguishable and will not apply to the facts of the present case. As indicated earlier, language used in Section 59(1)(b) and Section 61(2) is quite different. 17.Before we consider the petitioner's contention based on Section 61(2) of the Act, we must make it clear that there is no dispute before us that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of duty and tariff valuation of imported goods, viz. in the case of goods cleared from a warehouse under Section 68 of the Act, on the date on which goods are actually removed from the warehouse. 19.Under Section 15 of the Act, rate of duty and valuation in force on the date when goods were cleared from the warehouse under Section 68 of the Act is applicable. Since no duty was payable on the date of clearance, petitioners were not liable to pay any interest under Section 61(2) of the Act. In our opinion, this submission again does not appeal to us. Section 2(14) defines "dutiable goods" and as soon importation is complete under the Customs Act, goods become dutiable, see Apar Private Ltd. v. Union of India - 1985 (22) E.L.T. 644 (Bom.). The Full Bench of this Court held that import can be said to have taken place as soon as goods entered the territorial waters of India. Taxable event occurs as laid down by Section 12 when goods are imported into India. From the moment, the goods are imported continued to be imported goods as defined in Section 2(25) of the Act until they were cleared for home consumption. In other words, they acquire the character of imported goods within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porter to pay duty at rate of 90% within two weeks. The said demand notice was subject matter of challenge before the Karnataka High Court. The learned Single Judge of the Karnataka High Court allowed the petition partly. Petitioner-importer as well as Union of India filed appeals and they were heard together by the Division Bench of the Karnataka High Court. It will be seen from the reported decision that there was variation in the rate of duty under the Customs Tariff Act. The Assistant Collector called upon the importer to pay interest on the amount of duty under Section 59 of the Act at the rate of 90% under the Customs Tariff Act being the rate of duty then in force. It may be stated that prior to 1988, twice they were called upon to pay duty at 90% at the prevailing rate together with interest, under Section 59(1) of the Act. In para 12, the Karnataka High Court has given how variation occurred in the rate of duty under the Customs Tariff Act. In para 14, controversy between the parties has been set out. After analysing scheme of Section 59(1)(b) and unamended provisions of Section 61(1) and (2) of the Act, it is observed as under : "Sub-section (2) of section 61 which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was unnecessary for the legislature to insert sub-section (2) in Section 61. Therefore, we find no merit in the stand taken by the learned Central Government Standing Counsel contrary to the stand taken by the respondents in the statement of objections." In paragraph 18 of the judgment it was further observed as follows : "The answer to the question depends upon true meaning of Section 59(b). It speaks of the liability of the importer to pay interest on the amount of excise duty claimable. It is well-settled position of law that the interest is compensatory in character and it has to be paid by a party, who has withheld the payment of principal amount payable to the person to whom he has to pay the same." For this proposition, the Karnataka High Court relied upon a decision of the Supreme Court in A.C.C. v. Commercial Tax Officer, AIR 1981 SC 1887, and in particular para 23 thereof. Following the above principles, the Karnataka High Court at page 39 of the report worked out the amount of duty recoverable from the petitioners-importers from time to time and thereafter directed that the amount of duty on the said basis be recovered together with interest and not at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the material difference in Section 59(1)(b) and 61(2) of the Act. After reading these provisions we are of the opinion that under Section 59(1)(b) of the Act, duty and interest are linked up and, therefore, notice of demand has to be for all duties, rent charges, etc. together with interest, whereas under Section 61(2) of the Act, interest is delinked from the principal amount i.e. duty amount and interest thereon is recoverable at the time of clearance of goods from the warehouse. Unless we read this distinction between Sections 59(1)(b) and 61(2) of the Act, it would not be possible to construe both these sections harmoniously. If we accept the contention of the petitioners, it will lead to anomalous situation. In a given case, where demand notice under Section 59(1)(b) of the Act is issued to the importer who has not cleared warehoused goods would be required to pay interest on the duty amount so determined at the prevailing rate under the Customs Tariff Act. But, where no notice is issued under Section 59(1)(b), but such demand is made at the time of clearance of the warehoused goods under Section 61(2) of the Act, the importer would escape without payment of interest. This w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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