Interest provisions under Section 18(3) of Customs Act cannot apply retrospectively to pre-2006 provisional assessments

CESTAT Kolkata held that interest provisions under Section 18(3) of Customs Act, 1962 cannot be applied retrospectively to provisional assessments made before its insertion on 13.07.2006. The tribunal ruled that substantive legislation is prospective unless expressly declared retrospective by the Legislature. Since appellant's provisional assessment occurred prior to the amendment, no interest liability arises on differential duty upon finalization. The assessment order demanding interest was quashed as legally flawed. Appeal allowed.

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Issues Involved:
1. Liability to pay interest upon finalization of provisional assessment prior to insertion of sub-section (3) in Section 18 of the Customs Act, 1962.
2. Whether Section 18(3) of the Customs Act, 1962 has retrospective applicability.

Summary:

Issue 1: Liability to Pay Interest Upon Finalization of Provisional Assessment Prior to Insertion of Sub-section (3) in Section 18 of the Customs Act, 1962

The appellant, M/s. Century Pulp and Paper, Kolkata, contested the liability to pay interest upon finalization of provisional assessment for goods imported under project import regulations in 1997-98. The provisional assessment was finalized in 2011-12, and the appellant paid the differential duty of Rs. 92,83,716/-. The appellant argued that they were not liable to pay interest on the duty amount as the provisional assessment was undertaken prior to the incorporation of sub-section (3) in Section 18 of the Customs Act, 1962, which was inserted with effect from 13.07.2006.

Issue 2: Retrospective Applicability of Section 18(3) of the Customs Act, 1962

The Tribunal examined whether interest is payable on the differential duty calculated at the time of final assessment and if Section 18(3) of the Customs Act, 1962, which deals with interest liability, has retrospective applicability. The Tribunal referred to several judicial precedents, including Binani Industries Ltd. Vs. CCT, CIT (Central), New Delhi Vs. Vatika Township Private Limited, and Commissioner of Customs Vs. Hindalco Industries Ltd., which established that a substantive provision of law cannot be considered retrospective unless specified by the Legislature.

The Tribunal concluded that there were neither "express words" nor "necessary implication" to consider Section 18(3) as retrospective. The provisions of sub-section 3 to Section 18, inserted on 13.07.2006, do not have retrospective applicability. The amendment in law is substantive and applies only to provisional assessments made post the insertion of the provision in the statute book.

Additionally, the Tribunal noted that the Board had clarified in a similar context on the excise side that provisions relating to charging of interest apply only to cases where provisional assessment is resorted to after the date of promulgation. Therefore, the demand for interest on the differential duty in the present case is not in accordance with law.

Conclusion:

The Tribunal held that no interest is leviable in the present matter as the provisional assessment was undertaken prior to the insertion of sub-section (3) in Section 18 of the Customs Act, 1962. The order of the lower authority was quashed, and the appeal filed by the appellant was allowed with consequential relief as per law.

(Pronounced in the open court on 09. 02. 2024)

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