2011 (11) TMI 334 - HC - Customs

Court affirms Tribunal's power to rectify errors in interest levying, rules in favor of assessee

The High Court upheld the Tribunal's decision to rectify the error in levying interest under Section 129B(2) of the Customs Act, 1962, stating that the ... Levy of interest on duty forgone under notification No.96/93-Cus dated 02.03.1993 - assessee claimed exemption from payment of duty under said notification – failure to produce any documentary evidence showing discharge of export obligation – duty levied with interest - CESTAT rectified the order u/s 129B(2) of the Customs Act, 1962 on an application made by assessee – Revenue contending that the Tribunal has reappreciated the entire material on record – period of limitation – Held that:-Apex Court in the case of Sunitadevi Singhania Hospital Trust Vs. Union Of India (2008 - TMI - 48287 - Supreme Court Of India) have held that limitation of six months prescribed is applicable only if the Tribunal exercise suo-moto power. The said period of limitation is not applicable to application filed by the aggrieved party – Decided against the revenue.In the notification, admittedly it is not mentioned that any interest is payable on the duty foregone during the relevant period. The said error is apparent from the face of the record. Therefore, exercising the power conferred u/s 129B Tribunal have rectified the said error on being pointed by assessee. It is not a case of reappreciation of the facts on record – Decided against the Revenue. Issues:1. Rectification of mistake in levying interest under Section 129B(2) of the Customs Act, 1962.2. Legality of the order passed by the CESTAT in rectifying the mistake.3. Whether the Tribunal exceeded its powers in reappreciating the material on record.4. Interpretation of exemption notification No.96/93 and the obligation of the assessee to fulfill conditions for duty exemption.Issue 1: Rectification of mistake in levying interest under Section 129B(2) of the Customs Act, 1962:The appeal was filed by the revenue against the order passed by the CESTAT rectifying the mistake of levying interest under Section 129B(2) of the Customs Act, 1962. The Tribunal had confirmed the levy of interest, but the assessee contended that the notification No.96/93 did not provide for the payment of interest on duty foregone. The Tribunal, accepting the assessee's argument, deleted the interest portion. The High Court upheld this decision, stating that the error in levying interest was apparent from the face of the record and needed rectification under Section 129B(2) of the Act.Issue 2: Legality of the order passed by the CESTAT in rectifying the mistake:The substantial questions of law admitted for consideration were whether the order of the CESTAT was legally sustainable in amending the Miscellaneous Order beyond six months and if there was any misinterpretation of law. The High Court referred to previous judgments and held that the period of limitation for rectification proceedings did not apply to applications filed by aggrieved parties. The Court ruled in favor of the assessee, stating that the Tribunal had the power to rectify the error in levying interest under Section 129B(2) of the Act.Issue 3: Tribunal's reappreciation of material on record:The revenue contended that the Tribunal reappreciated the material on record, leading to an order contrary to the original decision, which was impermissible under Section 129B(2) of the Act. However, the High Court clarified that the Tribunal did not reappreciate facts but rectified the error based on the terms of the notification and the order. The Court found no merit in the revenue's argument and upheld the Tribunal's decision to delete the interest portion.Issue 4: Interpretation of exemption notification No.96/93 and assessee's obligation:The Tribunal had held that the assessee did not fulfill the conditions of the exemption notification No.96/93 as they failed to provide sufficient evidence that the imported components were used in manufacturing goods exported or for research purposes. The Court emphasized that the assessee must satisfy authorities regarding the utilization of duty-exempt components and that mere vague statements were insufficient. The Tribunal found the assessee liable to pay duty foregone due to non-compliance with customs procedures and export obligations.In conclusion, the High Court dismissed the revenue's appeal, upholding the Tribunal's decision to rectify the error in levying interest and emphasizing the assessee's obligation to comply with exemption notification conditions for duty exemption.