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of <h1>Customs duty calculation based on sale proceeds; bank guarantee refund ordered</h1> <h3>UNION OF INDIA & ORS. Versus M/s. ASSOCIATED CONTAINER TERMINAL LTD.</h3> UNION OF INDIA & ORS. Versus M/s. ASSOCIATED CONTAINER TERMINAL LTD. - 2020 (371) E.L.T. 817 (SC), [2020] 12 G S.T.R. - OL 178 (SC) Issues Involved:1. Legality of the demand raised by the appellants.2. Distribution of sale proceeds from auctioned goods.3. Calculation of customs duty on auctioned goods.4. Applicability of Section 150 of the Customs Act.Issue-wise Detailed Analysis:1. Legality of the Demand Raised by the Appellants:The High Court of Delhi's order dated 28th November 2007, which directed the appellants to refund Rs. 27,47,146/- with interest, was challenged. The High Court found the demand raised by the appellants via letters dated 17th February 2005 and 19th April 2005 to be without authority of law.2. Distribution of Sale Proceeds from Auctioned Goods:The respondent argued that the warehousing charges should be recovered from the auction sale proceeds before customs duty. The High Court agreed, stating, 'the Petitioner was justified in recovering the warehousing charges due to it from the auction sale proceeds in terms of Section 63(2) of the Act.'3. Calculation of Customs Duty on Auctioned Goods:The appellants contended that customs duty should be assessed on the date of deemed removal of goods from the warehouse. They relied on the Supreme Court's judgment in Kesoram Rayon v. Collector of Customs, which held that 'goods which are not removed from a warehouse within the permissible period are treated as goods improperly removed from the warehouse.' However, the respondent argued that customs duty should be calculated based on the sale proceeds as per the Central Board of Excise and Customs Manual and Circular dated 28th November 2001, which states, 'the Customs duty shall be determined by backward calculation considering the sale proceeds of unclaimed/uncleared goods as the cum-duty price.'4. Applicability of Section 150 of the Customs Act:Section 150(2) of the Customs Act specifies the order of priority for the application of sale proceeds:(a) expenses of the sale,(b) freight and other charges,(c) customs duty,(d) charges due to the person having custody of the goods,(e) any amount due to the Central Government.The Supreme Court concluded that the customs duty should be calculated based on the sale proceeds and not on the date of deemed removal from the warehouse. The Court stated, 'the custom duty is to be calculated on the sale price and not on the duty as is payable on the date of deemed expiration of permitted period of warehouse.'Conclusion:The Supreme Court directed that the customs duty should be calculated in accordance with the sale proceeds and adjusted as per the priority specified in Section 150(2) of the Customs Act. If the bank guarantee of Rs. 27,47,146/- had been invoked, the amount should be refunded to the respondent after due adjustments. The appeal was disposed of with no order as to costs.
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