Supreme Court clarifies customs duty interest payment rules based on Union of India v. Bangalore Wire Rod Mills case

The Supreme Court, relying on the Union of India v. Bangalore Wire Rod Mills case, clarified that interest on customs duty is payable only after the expiry of the period specified in the notice of demand. In this case, interest on the customs duty became payable from the date of the notice of demand, 5-7-1991. The Court quashed the demand for interest for any period before the notice was issued and directed the petitioner to pay the interest due for the period 5-7-1991 to 13-7-1991. The writ petition was allowed with no order as to costs, resolving the issue of interest payable on the import duty for the goods imported by the petitioner.

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Issues:
Interest payable on import duty in respect of goods imported by the petitioner.

Analysis:
1. The main issue in this writ petition is the determination of interest payable on the import duty for goods imported by the petitioner. The dispute revolves around the date from which the interest on the custom duty becomes payable, with the petitioner arguing for a later date than contended by the revenue authorities.

2. The Supreme Court decision in Union of India v. Bangalore Wire Rod Mills is crucial in resolving the issue at hand. The Court interpreted Sections 59(1) and 61(2) of the Customs Act, 1962, emphasizing that the liability to pay interest arises only after the expiry of the period specified in the notice of demand. In the absence of a specified period in the notice of demand, the amount becomes payable immediately on the date of the notice, as in this case, 5-7-1991.

3. The judgment clarifies that interest on customs duty cannot be charged for any period prior to the date of the notice of demand, which in this case is 5-7-1991. The notice of demand issued on that date is significant as it triggers the obligation to pay interest on the customs duty. Therefore, any demand for interest before this date is deemed invalid and must be set aside.

4. Furthermore, the date of clearance from the warehouse, 13-7-1991, is identified as the relevant date for computing customs duty under Section 15 of the Customs Act, 1962. Since there was no change in the duty rate between 5-7-1991 and 13-7-1991, the duty computed in the notice of demand on 5-7-1991 remains applicable. Consequently, interest on the customs duty becomes payable from 5-7-1991 onwards.

5. The judgment concludes by quashing the notice of demand dated 5-7-1991 to the extent that it demands interest for the period before the notice was issued. The petitioner is directed to pay the interest amount due for the period 5-7-1991 to 13-7-1991 within a week, after which the bank guarantees will be discharged. The writ petition is allowed with no order as to costs, settling the matter of interest payable on the import duty for the goods imported by the petitioner.

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