2008 (7) TMI 793 - AT - Customs

Customs Act: Interest on Warehoused Goods Clarified by Supreme Court Decision

The case addressed the interpretation of Sections 59(1)(b) and 61(2) of the Customs Act, 1962 concerning interest on warehoused goods. The Supreme Court ... Interest on warehoused goods - Expiry of warehousing period Issues:- Interpretation of Sections 59(1)(b) and 61(2) of the Customs Act, 1962 regarding interest on warehoused goods.- Applicability of interest on goods beyond the permitted warehousing period.- Competency of authorities to issue orders for extension of warehousing period and waiver of interest.Analysis:1. Interpretation of Sections 59(1)(b) and 61(2) of the Customs Act, 1962:The case involved a dispute regarding the payment of interest on warehoused goods beyond the permitted period. The Commissioner (Appeals) relied on the decision of the Hon'ble High Court of Delhi and the Supreme Court, emphasizing that interest liability arises only after the issuance of a demand notice under Section 59(1)(b) of the Customs Act, 1962. The judgment clarified that interest accrual is triggered by the invocation of bond obligation and can only be collected from the date specified in the demand notice. The Supreme Court's interpretation highlighted that the importer's liability to pay interest commences after the period prescribed in the notice of demand.2. Applicability of interest on goods beyond the permitted warehousing period:The Revenue contended that interest at a fixed rate should be payable on warehoused goods beyond the permitted period, as per Section 61(2) of the Customs Act, 1962. They argued that interest serves as a compensatory penalty for delayed duty payment. However, the Commissioner (Appeals) and the Appellate Tribunal held that interest liability does not automatically accrue beyond the permitted warehousing period and can only be enforced upon the issuance of a demand notice under Section 59(1)(b). The Tribunal emphasized that interest cannot be collected for periods not covered by Section 61(1) of the Act.3. Competency of authorities to issue orders for extension of warehousing period and waiver of interest:The respondents had applied for an extension of the warehousing period and waiver of interest to the Chief Commissioner. The Tribunal noted that no decision had been taken by the Chief Commissioner regarding these applications. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that interest liability can only arise post the issuance of a demand notice. They emphasized that in the absence of a decision by the competent authority, demanding interest would not be justified. The Tribunal dismissed the Revenue's appeal, affirming the legality of the Commissioner (Appeals)'s order based on the Supreme Court's interpretation of the Customs Act provisions.In conclusion, the judgment clarified the specific conditions under which interest liability on warehoused goods arises, emphasizing the importance of a demand notice under the relevant sections of the Customs Act, 1962. The decision highlighted the need for a clear trigger for interest accrual and underscored the significance of competent authorities' decisions in matters of extension of warehousing periods and waiver of interest.