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

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 (SCN) being time-barred under Section 28 of the Customs Act, 1962. The appellant's argument that Circular No. 10/2006 exempted interest on goods imported by 100% Export Oriented Units was rejected. The Tribunal emphasized that Circulars cannot extend statutory limitations. The impugned order was set aside, and the appeal was allowed based on statutory provisions and relevant precedents, ruling in favor of the appellant.

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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 years

The 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, 1962

The 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.

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