2018 (1) TMI 644 - HC - Customs

Settlement Commission's Order Upheld, Petitioner Liable for 15% Interest

M/s. Halgona Radiators Pvt. Ltd. Versus The Customs & Central Excise, Settlement Commission, Director General of Foreign Trade, The Deputy Commissioner (EPCG)

The court upheld the Settlement Commission's order under the Customs Act, ruling that the petitioner was liable to pay interest at 15%. The judgment ... Interest on delayed payment of duty - the petitioner s imports were in February 1994, much prior to the insertion of Section 28AB of the Act - order of the Settlement Commission - Held that: - In the case of Commissioner of Customs (Port) v. Settlement Commission, Cus. & C. Ex. [2004 (8) TMI 116 - HIGH COURT AT CALCUTTA], the Court considered somewhat a similar issue and held that as per Section 127H of the Act, the power of the Settlement Commission is relatable to waiver either partial or full amount of interest under the Act only. Further, it was held that the rate of interest of 24% was not the interest chargeable under the Act, but under the bond, which is contractual document in nature and this contractual question has not been examined by the Commission - the Hon’ble Supreme Court in the case of Rexnord Electronics and Controls Ltd., v. Union of India [2008 (3) TMI 8 - SUPREME COURT] held that the interest payable under the bond is not an interest payable under the Act. There is no error in the order passed by the Settlement Commission - appeal dismissed. Issues:Challenge to order passed by Settlement Commission under Customs Act, 1962 regarding liability to pay interest at 15%.Analysis:The petitioner challenged the order passed by the Settlement Commission under the Customs Act, particularly objecting to being held liable to pay simple interest at 15%. The petitioner argued that Section 28AB of the Customs Act, providing for interest on delayed payment of duty in special cases, was inserted after the petitioner's imports in February 1994, making the levy of interest without jurisdiction. The petitioner relied on the judgment in Akbar Knitting Co. v. Commissioner of Customs (Exports) to support the argument that enforcing the bond to recover interest for duties 'not paid' or 'short levied' before the insertion of Section 28AB was beyond Customs authorities' jurisdiction.The petitioner further cited the case of Commissioner of Customs (Port) v. Settlement Commission, Cus. & C. Ex., where it was held that the Settlement Commission's power is limited to waiving interest under the Act only, not under contractual obligations like bonds. The court emphasized that the rate of interest under the bond was not chargeable under the Act but was a contractual obligation. The judgment highlighted that any reduction in the interest rate stipulated in the bond would be a variation of the contract terms, subject to acceptance by the importer.The Calcutta High Court's decision in Commissioner of Customs (Port) was upheld by the Supreme Court in Rexnord Electronics and Controls Ltd. v. Union of India, affirming that interest payable under a bond is not the same as interest payable under the Act. Based on these precedents, the court concluded that the Settlement Commission's order was not erroneous. Consequently, the writ petition was dismissed, with no costs awarded.This comprehensive analysis of the judgment showcases the legal arguments presented, the interpretation of relevant provisions of the Customs Act, and the application of precedent cases to determine the liability for interest payment under the Act and contractual obligations like bonds.