Court rules interest demand unjustified under Customs Act, orders refund. Rejects respondent's argument on alternative remedies.

The Court ruled in favor of the petitioner, finding that the demand for interest under the Customs Act was not legally justified since no customs duty was payable. The petitioner was entitled to a refund of the interest amount deposited, and a writ of mandamus was issued for the respondents to refund the amount within six months. The Court rejected the respondents' argument regarding alternative remedies and upheld the binding nature of the Central Customs Board's order. The petition was allowed, and the impugned order was set aside.

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Issues Involved:
1. Legality of the demand for interest under the Customs Act.
2. Refund of the interest amount deposited by the petitioner.
3. Applicability of alternative remedies and the maintainability of the writ petition.
4. Binding nature of the Central Customs Board's order on Customs Authorities.
5. Liability to pay interest when no duty is payable.

Issue-wise Detailed Analysis:

1. Legality of the demand for interest under the Customs Act:
The petitioner sought a refund of Rs. 22,85,790/- deposited towards a purported demand of interest under the Customs Act. The petitioner argued that since they were allowed to clear the goods without payment of customs duty by the Central Customs Board's order dated 22-3-1990, they should not be liable to pay interest. The petitioner contended that the liability to pay interest is linked with the payment of duty, and since no duty was payable, no interest should be charged. The Court accepted this argument, referencing the Supreme Court's decision in Pratibha Processors v. Union of India, which held that interest is compensatory and linked to the duty payable. If no duty is payable, no interest can be charged.

2. Refund of the interest amount deposited by the petitioner:
The petitioner deposited the interest amount as a condition precedent to clear the goods from the warehouse. The Court ruled that the petitioner was entitled to a refund of the interest amount since the demand for interest was not legally justified. The Court issued a writ of mandamus directing the respondents to refund the amount within six months from the date of the order.

3. Applicability of alternative remedies and the maintainability of the writ petition:
The respondents argued that the petitioner had an alternative remedy of an appeal and that the writ petition should be dismissed on this ground. However, the Court referred to the Supreme Court's decision in Hirdeya Narayan v. Income Tax Officer, which held that once a writ is admitted for final hearing, it should not be dismissed on the ground of availability of an alternative remedy. The Court found no ground to dismiss the writ after seven years of its admission and rejected the preliminary objection raised by the respondents.

4. Binding nature of the Central Customs Board's order on Customs Authorities:
The petitioner argued that the Central Customs Board's order dated 22-3-1990, which allowed them to clear the goods without payment of customs duty, was binding on the Customs Authorities. The Court agreed, stating that the order held the field throughout and was binding on the customs authorities. The mere reference in the order to pay interest did not amount to a legal binding unless it satisfied the requirements of the Customs Act.

5. Liability to pay interest when no duty is payable:
The Court relied on the Supreme Court's decision in Pratibha Processors v. Union of India, which held that interest is compensatory and linked to the duty payable. If the principal amount of duty is nil due to exemption, the interest payable is also nil. The Court concluded that since the petitioner was not liable to pay customs duty, they could not be made to pay interest. The Court rejected the respondents' reliance on the Calcutta High Court's decision, stating that it was overruled by the Supreme Court's decision in Pratibha Processors.

Conclusion:
The petition was allowed, and the impugned order by the Assistant Collector was set aside. The Court issued a writ of mandamus directing the respondents to refund the interest amount deposited by the petitioner within six months. The Court also held that the claim for interest on the refunded amount was not acceptable as the provision to pay interest was brought into the statute book only in 1995.

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