Court rules interest on customs duty starts from demand notice date, not warehousing expiration. Recalculation ordered.

The court held that the petitioner was liable to pay interest on customs duty from the date specified in the demand notice under Section 59 of the Customs Act, 1962, and not from the expiration of the warehousing period or the amended Section 61(2). Interest was to be calculated based on the customs duty rate prevailing at the time specified in the demand notice. The court directed the respondents to recalculate the interest payable by the petitioner and refund any excess collected. Writ Appeal No. 1275/1991 was allowed for the recalculation of interest, while Writ Appeal No. 2419/1991 was dismissed.

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Issues Involved:
1. Liability to pay interest on customs duty for goods left in the warehouse.
2. Basis for calculating the interest on customs duty.

Summary:

Issue 1: Liability to Pay Interest on Customs Duty

The primary issue was whether the petitioner was liable to pay interest on customs duty for the period beyond the permitted warehousing period u/s 61(1) of the Customs Act, 1962, or from the date specified in the demand notice u/s 59 of the Act, or in terms of the amended Section 61(2) of the Act effective from 13-5-1983. The court held that the petitioner's liability to pay interest arose under Section 59 of the Act, which meant interest was payable only from the date specified in the demand notice issued under Section 59 and not from the date the warehousing period expired. The court rejected the application of Section 61(2) to the case as the goods were warehoused before the amendment came into force.

Issue 2: Basis for Calculating the Interest on Customs Duty

The second issue was whether the interest should be calculated based on the customs duty rate prevailing on the date of deposit in the warehouse, the rate on the date from which the petitioner became liable to pay interest, or the rate on the date of clearing the goods. The court concluded that interest should be computed on the amount of duty claimable as per the rate prevailing at the time specified in the demand notice and not on the higher rate prevailing on the date of clearance. The court emphasized that interest is compensatory and should be calculated on the amount of duty withheld from the date specified in the demand notice.

Conclusion:

1. The court directed the respondents to recompute the interest payable by the petitioner from 22-3-1985 to 9-9-1988 based on the customs duty rates prevailing during that period.
2. The respondents were instructed to refund any excess interest collected from the petitioner after the recalculation.

Order:

1. Writ Appeal No. 1275/1991: Allowed. The respondents were directed to recompute the interest and refund the excess amount.
2. Writ Appeal No. 2419/1991: Dismissed.

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