Re-export default under a duty-free gold scheme can trigger customs duty reimbursement liability and related interest and costs.

Failure to re-export duty-free gold within the stipulated 120-day period under the scheme triggered customs duty liability, because the goods became dutiable on default and the customs demand followed. The commentary notes that where the buyer undertakes compliance with the scheme conditions but causes the default, contractual and scheme-based responsibility for the resulting duty and related charges rests on that party. It also records that the plaintiff's bank guarantee was invoked and the duty amount was recovered from the plaintiff, supporting a claim for reimbursement together with interest and costs.

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Issues: Whether the defendant was liable to reimburse the customs duty and related charges paid by the plaintiff after failure to re-export the gold within the stipulated period, and whether interest and costs were payable.

Analysis: The plaintiff had supplied duty-free gold under a Government scheme governed by customs notifications requiring conversion into jewellery and re-export within 120 days. The defendant undertook to comply with the scheme conditions but defaulted in re-exporting the finished goods within the stipulated period. On that default, the gold became dutiable, the customs authorities raised the demand, and the plaintiff's bank guarantee was invoked and encashed. The evidence showed that the customs duty amount had been recovered from the plaintiff, and the contractual and scheme-based liability rested on the defendant who caused the default.

Conclusion: The defendant was held liable to pay the customs duty amount of Rs. 26,48,406/- with interest at 24% per annum from 10-02-1999 until realisation, together with costs.

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