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

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 the Tariff Act. The tribunal held that Section 3 duty constitutes customs duty within the meaning of Section 2(15) of the Customs Act, making all customs provisions applicable. Applying liberal construction principles, the court found no ambiguity in the statutory language requiring interest payment. The appellant's challenge was dismissed, confirming the lower authority's order imposing interest liability for short-paid duty.

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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 Recovery
The 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 Act
The 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.

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