Customs duty interest on warehoused imports denied where exemption notification applied and de-bonding delay was relevant.

Interest on customs duty for warehoused capital goods, spares and raw materials imported under the exemption notification was stated to be not leviable where Chapter IX of the Customs Act and the relevant notification covered such interest. The note indicates that the authorities overlooked the statutory exemption, so confirmation of interest was not justified. It also records that delay in granting permission to de-bond the unit from the EOU scheme was relevant, and on those facts the interest demand was found unsustainable and the confirmed demand was set aside in favour of the assessee.

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Issues: Whether interest was leviable on customs duty in respect of warehoused capital goods, spares and raw materials imported under the exemption notification, and whether delay in de-bonding the unit from the EOU scheme affected the liability to pay interest.

Analysis: The exemption notification applicable to warehoused goods under Chapter IX of the Customs Act was held to cover interest accrued on the customs duty payable. Since the authorities overlooked this statutory exemption, confirmation of interest was not justified. The delay in granting permission to withdraw from the EOU scheme was also taken into account, and in the circumstances of the case the demand for interest was found unsustainable.

Conclusion: Interest was held not leviable, and the demand confirmed in the impugned order was set aside, in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee obtained relief against the interest demand on the imported warehoused goods.

Ratio Decidendi: Where the governing exemption notification excludes interest on duty payable for warehoused goods, interest cannot be confirmed merely because customs duty becomes payable, particularly when departmental delay in de-bonding also contributes to the dispute.

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