2024 (1) TMI 902 - AT - Customs

Section 28AA interest applies to delayed CVD/Additional Duty payments under Section 3(1) Tariff Act

M/s. Texmaco Rail Engineering Limited Versus Commissioner of Customs (Port), Kolkata

CESTAT Kolkata ruled that interest under Section 28AA of the Customs Act is payable on delayed payment of CVD/Additional Duty levied under Section 3(1) of ... Non-payment of interest on the short levied CVD/Additional Duty of Customs leviable under Section 3(1) of the Tariff Act - Section 28AA of the Customs Act - price-escalation clause - effective rate of Central Excise Duty on goods falling under CTH 8607 was revised to 12% ad valorem vide Notification 18/2012 CE dated 17.03.2012. HELD THAT:- Going, by the principle of liberal construction as applicable to cases of no ambiguity and especially so in taxation matters, not an iota of doubt would remain about the applicability of the provisions of the Customs Act, Rules and Regulations, to that of Section 3 of the Tariff Act. That being the stated position, interest for delayed payment of duty under Section 28AA of Customs Act is certainly payable in the facts and circumstances of the present appeal. It may be relevant to point out to a well settled rule of construction, that to ascertain the legislative intent, all the constituent part of the legal provisions are “to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself.” It is abundantly clear from the title and scope of Section 28AA of the Act, that interest is applicable on duty levied under Section 3 of the Tariff Act, as it is held to be a duty of customs within the meaning of Section 2(15) of the Act and further reinforced by the non-obstante opening of the sub-section, that reemphasised that interest is unquestionably leviable for the delayed payment of duty. Section 3 of the Tariff Act (including its subsection 8) interpreted on its own language or along with Section 28AA of Act are not ambiguous. The mischief, if any ought to be suppressed with the aid of internal tools like the non-obstante phraseology or the text and the head note of the sections, besides giving the words used in law their ordinary meaning. The apex court in the case of Doypack Systems (Pvt.) Ltd. Vs. UOI, [1988 (2) TMI 61 - SUPREME COURT] observed that words used in the statute must prima facie, be given their ordinary meaning and where the grammatical construct is clear and manifest, without a doubt the said construction ought to prevail, but for strong and obvious reasons to the contrary. It can safely be concluded that interest provisions for short paid duty in terms of Section 28AA of the Customs Act, shall equally apply to a case of determination of duty under Section 28 of the Customs Act, be it duty levied under Section 12 of Customs Act or Section 3(3) of the Tariff Act or any other provision thereof or any other law for the time being in force. It is not that the payment of interest has been ordered by judicial and/or quasi judicial bodies only with respect to cases of refund of Special Additional Duty leviable under Section 3 of the Tariff Act. Examples of payment of interest even in exclusive cases of demand of duty leviable under Section 3 of the Tariff Act do galore, besides the fact that in a very large number of cases (nearly all) wherever interest on refund or demand of duty was held payable, there has invariably been a component of CVD (additional duty) in addition to the basic duty of customs. Penalty in common parlance can be understood to mean a legal punishment- be it in the form of a forfeiture, imprisonment or imposition of a monetary cost or charge and its meaning can be derived from the gathering wherein the word is actually put to use, whereas interest can be considered as a compensation fixed by the authority of law for use or detention of money, or for the loss of money by one entitled for its usage. As for interest, as it is not held and understood to be in the nature of additional tax, therefore it cannot be stated to be strictly falling into the ambit of Article 265 of the Constitution for enforcing its levy and collection, though it is undisputed that interest has its bearings with duty not paid and hence a dependent variable of such circumstances. The legislature having consciously incorporated the interest provision (Section 28AA) in the Customs Act, and as rendered applicable to the Tariff Act, the appellants are not justifiable in seeking to derive support from the judgments cited by them, as the rulings pronounced by the superior courts in the said cases would not be apposite for consideration of the question of interest which arises in the present case. This is so as the said judgments were delivered essentially in the context of penal provisions or with reference to issues concerned with settlement of case a variation/deviation from the applicability of routine structural legal process. Thus, those decisions would be irrelevant for deciding the issue in the present matter concerned with the liability to pay interest in terms of the statutory provision of the Customs Act as rendered applicable to the Tariff Act (Section 3). In view of Section 3 of the Tariff Act read with Section 12 of the Customs Act, the special additional duty is to be construed as Customs Duty and therefore in view of the provisions of the law, all the provisions of the Customs Act and Rules/Regulations made thereunder are squarely applicable to the issue at hand. Further, it is common knowledge that taxation does not concern principles of equity. If the appellants have failed in discharge of their statutory obligations or have been deficient thereto, consequences, advantages and disadvantages thereof shall follow. It is not open for the appellants to have the best of both ends. There are no infirmity in the order of the lower authority under challenge, as the same is in accordance with law - The appeal filed by the appellants is therefore liable to be dismissed - appeal dismissed. Issues Involved:1. Short levy of Additional Duty of Customs (CVD) and its recovery.2. Leviability of interest on the short-paid Additional Duty of Customs (CVD) under Section 28AA of the Customs Act.Summary:Issue 1: Short Levy of Additional Duty of Customs (CVD) and Its RecoveryThe appellant, a manufacturer-importer, imported goods classified under CTH 86073090 and CTH 86079990, paying Additional Duty of Customs (CVD) at 6% ad valorem instead of the statutorily leviable 12% ad valorem during the period 7.06.2012 to 26.11.2012. The short-paid duty amounting to Rs. 3,86,63,232/- was sought to be recovered by the Department under Section 28(1) of the Customs Act, 1962, along with interest under Section 28AA of the Customs Act. The Department's case was that the self-assessed duty was not in accordance with the law and did not conform to the applicable rate under Section 3(1) of the Customs Tariff Act, 1975.Issue 2: Leviability of Interest on the Short-Paid Additional Duty of Customs (CVD) Under Section 28AA of the Customs ActThe appellant initially contested both the demand for duty and the interest but later conceded to the differential duty and only contested the leviability of interest. The appellant argued that the charging section for CVD was not Section 12 of the Customs Act but the appropriate sections of the Tariff Act and that the provisions of the Customs Act relating to interest were not borrowed under Section 3 of the Tariff Act. The appellant relied on several judicial precedents, including the Supreme Court's decision in Hyderabad Industries Limited Vs. Union of India, which held that additional duty (CVD) levied under Section 3(1) of the Tariff Act is independent of the Customs duty levied under Section 12 of the Customs Act.The Tribunal, however, found that the provisions of the Customs Act, including those relating to interest, are applicable to the duty chargeable under Section 3 of the Tariff Act by virtue of Section 3(8) of the Tariff Act. The Tribunal noted that Section 28AA of the Customs Act, which mandates the payment of interest on short-paid duty, is applicable to cases where duty is determined under Section 28 of the Customs Act. The Tribunal also emphasized that interest is compensatory in nature and not penal, and its levy is automatic upon the determination of duty under Section 28.Conclusion:The Tribunal upheld the order of the lower authority, confirming the demand for interest on the short-paid Additional Duty of Customs (CVD) under Section 28AA of the Customs Act. The appeal filed by the appellant was dismissed.