DEPB debit counts as duty payment, so interest applies on delayed clearance of warehoused goods under customs law.

Debit in DEPB scrips constitutes discharge of customs duty by a permissible credit mode, not a true exemption, so warehoused goods cleared beyond the permitted period remain subject to interest under section 61(2) of the Customs Act, 1962. The Madras HC distinguished the DEPB scheme from the DEEC scheme, noting that under DEPB the importer satisfies the duty liability through debit in the scrip rather than cash, and the duty so adjusted is treated as paid for the relevant purpose. On that basis, the Court upheld levy of interest on delayed clearance of warehoused goods and rejected the assessee's challenge.

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Issues: Whether duty discharged by debit in DEPB scrips is to be treated as payment of duty in cash for the purpose of levy of interest under section 61(2) of the Customs Act, 1962 on warehoused goods cleared beyond the permitted period.

Analysis: The scheme of the DEPB notification and the Board circular showed that, unlike a complete exemption, clearance under DEPB involved discharge of customs duty by debit entry in the scrip, with the duty so adjusted being eligible for CENVAT-related treatment. The Court distinguished the DEEC scheme considered in earlier precedent, where the goods were cleared duty free, from the DEPB scheme, under which the importer pays duty through credit and not by cash. Since section 61(2) fastens interest on the duty payable on warehoused goods when clearance is delayed, and the goods cleared under DEPB were not exempt but duty-paid through a permissible mode, the liability to interest survived.

Conclusion: Debit in DEPB scrips is equivalent to payment of duty for the purpose of section 61(2), and interest is payable on delayed clearance of warehoused goods; the contention of the assessee fails.

Final Conclusion: The appeals were rejected and the levy of interest on warehoused goods cleared through DEPB debit was upheld.

Ratio Decidendi: Where warehoused goods are cleared under a scheme that permits discharge of customs duty by debit in a transferable credit scrip, such discharge is not a true exemption from duty, and interest under section 61(2) of the Customs Act, 1962 is chargeable on delayed clearance because the duty liability remains payable in that mode.

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