Ambiguity in customs interest demand resolved for assessee, with retrospective reversal of a public notice barred.

Interest on warehoused goods was held recoverable under the Customs Act as a demand under the bond and recovery machinery, and a mistaken statutory reference did not invalidate the proceedings. For ambiguous wording on when interest under section 61(3) began to run, the construction favourable to the assessee was preferred, especially where an earlier public notice supported that basis and later clarification altered it only prospectively. The demands were also treated as time-barred because no express limitation applied, yet recovery had to be initiated within a reasonable time. The department was therefore bound by its earlier representation and could not enforce the revised basis retrospectively.

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Issues: (i) Whether demand of interest under the Customs Act, 1962 was competent and could be recovered in the manner adopted; (ii) Whether interest under section 61(3) was payable from the date the Bill of Entry was returned by the Licence Section or only from the date of return by the Bond Section after compliance with section 59A; (iii) Whether the demands were barred by limitation; and (iv) Whether the department was bound by its earlier public notice and was estopped from raising the demand retrospectively.

Issue (i): Whether demand of interest under the Customs Act, 1962 was competent and could be recovered in the manner adopted.

Analysis: The statutory scheme treated interest under section 61(3) as an amount payable on warehoused goods and the bond executed under section 59A bound the importer to pay duty and interest as leviable. Recovery could also be pursued under section 142. A notice demanding interest was therefore not invalid merely because section 28 deals with duty and not interest. A mistaken reference in the notice to section 61(1) did not vitiate the proceedings where the substance of the demand and the order made the relevant provision clear.

Conclusion: The demand was competent and the objection to jurisdiction failed.

Issue (ii): Whether interest under section 61(3) was payable from the date the Bill of Entry was returned by the Licence Section or only from the date of return by the Bond Section after compliance with section 59A.

Analysis: The wording of section 61(3), read with section 59A and section 60, was capable of more than one interpretation. One reading supported the departmental understanding that the relevant date was when the Bill of Entry was returned for compliance with the conditions for warehousing. Another reading supported the importers' construction that interest could run only after the conditions under section 59A were completed. Since the provision was ambiguous in a taxing statute, the interpretative doubt had to be resolved in favour of the assessee. The earlier public notice adopted the assessee-favourable understanding, and the later clarification changed that approach.

Conclusion: The assessee-favourable construction of section 61(3) prevailed for the period covered by the earlier public notice.

Issue (iii): Whether the demands were barred by limitation.

Analysis: No express limitation period was prescribed for recovery of interest under section 61(3). While section 28 was not directly applicable to an interest demand, recovery could not be kept alive indefinitely, especially where the demand was sought long after the bonds had expired and no enforcement action had been taken within the normal period. In the circumstances, a reasonable time had to be read into the provision, and the demands raised after about two years were treated as beyond reasonable time.

Conclusion: The demands were held to be time-barred.

Issue (iv): Whether the department was bound by its earlier public notice and was estopped from raising the demand retrospectively.

Analysis: The earlier public notice expressly indicated that interest would be charged from the date the Bill of Entry was returned by the Bond Department. The importers had acted on that representation and paid interest accordingly. The department could not, without legal justification, change the basis retrospectively to the prejudice of the assessees. The doctrine of promissory estoppel applied against the Government in these facts, and the subsequent change in stand could operate only prospectively.

Conclusion: The department was estopped from enforcing the revised basis retrospectively.

Final Conclusion: The common demands of interest could not be sustained in the manner adopted, and the orders confirming them were set aside, resulting in allowance of all appeals.

Ratio Decidendi: Where a taxing provision governing interest is ambiguous, the construction beneficial to the assessee applies, and an administrative representation on the basis of which assessees have acted cannot be withdrawn retrospectively to sustain a demand beyond a reasonable time.

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