2021 (10) TMI 190 - HC - Customs

Court dismisses writ petition, upholds Policy Committee decision on interest payment obligation.

The court dismissed the writ petition, upholding the Policy Relaxation Committee's decision to reject the review petition and affirming the petitioner's ... Advance licence regularisation under para 4.28 of the Handbook of Procedures - statutory interest under the Customs Act - judicial review under Article 226 of the Constitution of India - delay in exercise of statutory power not automatically waiving statutory interest - equity cannot override clear statutory provisionAdvance licence regularisation under para 4.28 of the Handbook of Procedures - judicial review under Article 226 of the Constitution of India - Validity of the decision of the Policy Relaxation Committee and applicability of clause 4.28 for regularisation of the petitioner's default under the advance licence - HELD THAT: - The Policy Relaxation Committee recorded that the petitioner admitted zero exports within the original validity and that an extension and further period up to 30-09-2008 yielded no exports. On the admitted facts the Committee properly concluded that the petitioner's case did not fall within clauses 4.28(i) or 4.28(ii) but within clause 4.28(iii), which requires calculation as provided in clauses 4.28(i) and 4.28(ii) and contemplates payment of interest where regularisation is sought. The petitioner did not apply for regularisation under clause 4.28; therefore there was no demonstrable vice in Ext.P5 warranting interference under Article 226. The Committee's decision to direct regularisation under para 4.28 was consistent with the Handbook and the Foreign Trade Policy and is not amenable to judicial overturn on the present record. [Paras 4]Ext.P5 is upheld and the petitioner is not entitled to have Ext.P5 quashed on the grounds advanced.Statutory interest under the Customs Act - delay in exercise of statutory power not automatically waiving statutory interest - equity cannot override clear statutory provision - Whether delay in disposal of the review petition or pendency of proceedings relieves the petitioner from payment of statutory interest demanded by the Customs authorities - HELD THAT: - Interest under the Customs Act is statutory and the court cannot, in exercise of Article 226, waive such statutory interest unless the statute itself permits waiver. While statutory powers must be exercised within a reasonable time, unreasonable delay by the authority does not automatically absolve a party from payment of interest which is compensation for use or retention of money. The petitioner remained in possession of the benefit of deferred payment and paid the duty only in 2013 though the export obligation period had effectively ended by 2006. The petitioner could have remitted the duty earlier (including under protest) but did not; interim relief which restrained invocation of the bank guarantee did not amount to waiver of statutory interest. Equity cannot be invoked to defeat clear statutory obligations; consequently the petitioner is liable to interest as demanded. [Paras 5, 6]The petitioner must pay the statutory interest; delay in disposal of the review petition does not relieve the petitioner of that liability.Final Conclusion: Writ petition dismissed; Ext.P5 and the demand for interest upheld and no relief granted to the petitioner. Issues Involved:1. Legality of the rejection of the review petition by the Policy Relaxation Committee.2. Liability of the petitioner to pay interest for the period during which the review petition was pending.Issue-wise Detailed Analysis:1. Legality of the rejection of the review petition by the Policy Relaxation Committee:The petitioner, a company registered under the Companies Act, 1956, availed an advance licence to import raw materials without duty, contingent on meeting specified export obligations. Due to uncontrollable circumstances, the petitioner failed to meet these obligations within the stipulated time and sought an extension, which was denied. The petitioner’s review petition was also rejected by the Policy Relaxation Committee, which noted that the petitioner admitted to making zero exports within the original validity period of the licence. The Committee observed that despite an extension until 30-09-2008, no exports were made, leading to the decision not to grant further extensions. The Committee suggested the petitioner could apply for regularisation under clause 4.28 of the Handbook of Procedures. However, it was found that the petitioner’s case did not fall under clauses 4.28 (i) or 4.28 (ii), but under clause 4.28 (iii), which necessitated the payment of interest for regularisation. The petitioner did not apply for regularisation as per clause 4.28. The court found no merit in the petitioner’s argument that the rejection of the review petition warranted interference under judicial review, as the petitioner had not fulfilled the export obligations and had not applied for regularisation.2. Liability of the petitioner to pay interest for the period during which the review petition was pending:The petitioner contended that they should not be liable for interest during the pendency of the review petition. However, the court held that interest under the Customs Act is statutory and cannot be waived unless explicitly provided by the Act. The petitioner imported materials without paying customs duty based on the advance licence and failed to meet the export obligations, thus necessitating the payment of customs duty in 2006. The duty was paid only in 2013, and the petitioner enjoyed the benefit of the money payable to the Customs Department during this period. The court emphasized that interest is compensation for the retention of money and cannot be waived. The petitioner’s reliance on interim orders to stay the invocation of the bank guarantee did not exempt them from paying interest. The court referenced the Supreme Court’s decision in Voltas Ltd. v. State of A.P., which established that tax becomes due when returns are filed, and deferral of payment does not negate the due date. The court concluded that the petitioner was not entitled to relief from paying interest due to the statutory nature of the interest and the lack of provisions for waiver under the Customs Act.Conclusion:The writ petition was dismissed, upholding the Policy Relaxation Committee’s decision and the petitioner’s liability to pay interest. The court reiterated that statutory obligations must be met, and equity cannot override clear legal provisions.