Warehoused goods interest and penalty are not leviable when duty is voluntarily paid within the permitted warehousing period.

Interest on warehoused imported goods is payable only when the goods are retained beyond the permitted warehousing period or duty is not paid on time. Where the goods are cleared to the domestic tariff area within the authorised period and duty is voluntarily deposited on clearance, no default or contravention arises, so the demand for interest is unsustainable. In the absence of any breach, the consequential penalty also cannot be sustained. The circular relied on was consistent with this interpretation, and the article concludes that interest and penalty were not leviable.

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Issues: Whether interest and penalty were payable on warehoused imported goods cleared to the domestic tariff area within the permitted warehousing period after voluntary payment of duty.

Analysis: The goods remained in warehouse within the period permitted under the warehousing provisions. Interest under the warehousing scheme becomes payable only when the goods remain beyond the permitted period and duty is not paid on time. Since the duty was deposited voluntarily upon clearance and there was no delay or contravention, the demand of interest was unsustainable. In the absence of any breach or default in payment of duty, the consequential penalty also could not survive. The circular relied upon supported the same interpretation.

Conclusion: Interest and penalty were not leviable, and the assessee succeeded.

Ratio Decidendi: Interest on warehoused goods is chargeable only for the period of unauthorized retention beyond the permitted warehousing period or for delay in payment of duty, and penalty cannot be sustained in the absence of any contravention or delayed duty payment.

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