2023 (2) TMI 901 - AT - Customs

Interest demand on warehoused raw materials beyond 3 years deemed time-barred under Customs Act. Circulars can't extend statutory limitations.

M/s. DCM Hyundai Ltd. Versus Commissioner of GST & Central Excise, Chennai

The Tribunal held that the demand for interest on duty paid on raw materials warehoused beyond three years was unsustainable due to the Show Cause Notice ... Debonding of 100% EOU - Levy of interest on raw materials, lying in stock beyond the warehousing period - department was of the view that the duty paid on raw materials warehoused beyond the period of three years was liable to interest under Section 61 (2) (i) of Customs Act, 1962 at the rate of 15% per annum as per Notification No. 28/2002- Cus. (NT) dated 13.05.2002 - SCN is time barred or not. HELD THAT:- The SCN has been issued under Section 28 of the Customs Act,1962. It is clear from the above provision that the SCN has to be issued within a period of six months. The impugned raw materials were imported between 1995 and 2003. The SCN is dated 13.10.2008. The duty having been paid on the date of De-Bonding the relevant date to compute the demand would therefore be the date of debonding ie., 31.03.2007. The Ld. AR has submitted that as the appellant had filed a request for waiver, and also an undertaking; the date of rejection of the request for waiver has to be considered as the relevant date - The section does not speak of any extension of time based on a request for waiver. Further the request for waiver is filed as per the Board Circular. Circulars, though binding on the Department, is not so on the Tribunal. Thus, the SCN is time barred. The Tribunal in the case of Commissioner of Customs, Madras Vs Electronic Research Ltd. [[1999 (1) TMI 294 - CEGAT, MADRAS]] held that in absence of any limitation period for demanding interest in respect of Customs duty payable in term of Section 61(3) of Customs Act, in the case of warehoused goods, the limitation period would be the period prescribed in Section 28 of the Act ibid. Appeal allowed. Issues:1. Liability to pay interest on duty paid on raw materials warehoused beyond three years.2. Timeliness of the Show Cause Notice (SCN) issued under Section 28 of the Customs Act, 1962.Analysis:Issue 1: Liability to pay interest on duty paid on raw materials warehoused beyond three yearsThe appellant, a former 100% Export Oriented Unit (EOU), applied for De-Bonding into Domestic Tariff Area (DTA) and paid duties on various items, including raw materials warehoused beyond the prescribed three-year period. The department sought interest on the duty paid on such raw materials under Section 61(2)(i) of the Customs Act, 1962. The appellant contended that Circular No. 10/2006 directed not to demand interest on goods imported by 100% EOUs. The appellant also argued that the SCN issued on 13.10.2008 was time-barred as it was beyond the six-month limit prescribed by Section 28 of the Customs Act, 1962.The Circular aimed to provide relief to 100% EOUs by waiving interest liability, which was rejected by the Chief Commissioner in this case. The SCN for interest demand must be issued within six months under Section 28, which was not adhered to in this instance. The duty was paid on the debonding date, making it the relevant date for computation, not the rejection date of the waiver request. The Tribunal cited precedents to support the view that the demand of interest cannot be sustained due to the time-barred SCN.Issue 2: Timeliness of the Show Cause Notice (SCN) issued under Section 28 of the Customs Act, 1962The SCN dated 13.10.2008 was issued concerning the demand for interest on raw materials warehoused beyond the stipulated period. The appellant argued that the SCN was time-barred as per Section 28 of the Customs Act, 1962, which mandates issuance within six months from the relevant date. The duty was paid on the debonding date, and the rejection of the waiver request cannot alter the relevant date for computation. The Tribunal held that the SCN was indeed time-barred, emphasizing that Circulars, though binding on the Department, do not extend the statutory limitations prescribed by law.In conclusion, the Tribunal set aside the impugned order, allowing the appeal on the grounds that the demand of interest was unsustainable due to the SCN being time-barred. The decision was based on the statutory provisions of the Customs Act, 1962, and relevant precedents cited during the proceedings.