Interest on warehoused goods cannot be demanded when duty liability is nil under the DEPB exemption scheme.

Interest on warehoused goods cleared under the DEPB exemption scheme was held not payable where the duty liability on the goods was nil. The principle applied was that interest cannot exist independently of an underlying duty liability, so once the goods were cleared without payment of basic customs duty and CVD against production of DEPB scrips, no interest could be charged for delayed clearance. Departmental circulars relied on by the revenue did not override that principle, and the importers' appeals were correctly allowed.

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Issues: Whether interest was payable on warehoused goods cleared under the DEPB exemption scheme when the duty liability on such goods was nil.

Analysis: The goods were cleared under Notification No. 96/2004-Cus. without payment of basic customs duty and CVD, subject to production of DEPB scrip. The legal position applied was that liability to interest cannot be divorced from liability to pay duty. Since the duty liability on the warehoused goods was nil, no interest could arise for delayed clearance. The departmental circulars relied upon did not displace this principle.

Conclusion: Interest was not payable, and the order allowing the importers' appeals was correct.

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