2024 (10) TMI 845 - HC - Customs

Revenue loses appeal on interest charges for pre-2006 provisional assessments under Section 130 Customs Act

The Principal Commissioner Of Customs Bengaluru Versus M/s. Cisco Systems Pvt Ltd.,

Karnataka HC dismissed revenue's appeal regarding interest charges on provisional assessments finalized before 2006 under Section 130 of Customs Act, ... Charge of interest on finalization of provisional assessments initiated before 2006 - Section 130 of the Customs Act, 1962 - HELD THAT:- The present appeal is not a fit case for admission and since no substantial question of law would arise for consideration. The contentions and the question of law raised by the appellant – revenue is answered in favour of the assessee by the Gujarat High Court in the case of COMMISSIONER OF CUSTOM VERSUS GOYAL TRADERS [2011 (8) TMI 720 - GUJARAT HIGH COURT] where it was held that 'In absence of any indication in the statute itself either specifically or by necessary implication giving retrospective effect to such a statutory provision, we are of the opinion that the same cannot be applied to cases of provisional assessment which took place prior to the said date. Any such application would in our view amount to retrospective operation of the law.' Further, in the case of RELIANCE INDUSTRIES LIMITED VERSUS UNION OF INDIA [2015 (11) TMI 138 - GUJARAT HIGH COURT], it is specifically held that Section 28 of the Customs Act only provides procedural aspects for recovery of duty and is not a substantive provision for levy of duty under the Act. The show cause notice also, accordingly, reveals that the interest on the differential amount is sought to be recovered under Section 18 (3) of the Act. That the provisions of Section 28 are resorted to only for the purpose of making such recovery. Therefore, the charge is under sub-section (3) of Section 18 of the Act and not under Section 28 of the Act. There are no merit in the appeal - appeal dismissed. Issues:1. Appeal under Section 130 of the Customs Act, 1962 challenging the legality of interest charges on finalization of provisional assessments initiated before 2006.Analysis:1. The appeal before the Karnataka High Court involved questioning the legality of an order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru (CESTAT) regarding the charging of interest on finalization of provisional assessments initiated prior to 2006 under Section 130 of the Customs Act, 1962. The respondent, engaged in import and export activities, had paid differential higher duty following final assessments made between 2013 and 2016. The dispute arose when interest on the differential duty was demanded under Section 18(3) of the Act, post an amendment on 13.07.2006. The Commissioner of Customs (Appeals) upheld the demand, leading the respondent to appeal before the CESTAT, which ruled that no interest could be charged on assessments initiated before 2006. The revenue appealed to the High Court challenging this decision.2. The appellant's counsel argued that despite the import and provisional assessment predating the 2006 amendment, the final assessment and payment of differential duty occurred post-amendment, justifying the imposition of interest. Referring to Section 28AA of the Act, the appellant contended that interest should be levied for delayed duty payment. On the contrary, the respondent's counsel supported the CESTAT's decision, asserting that the 2006 amendment was prospective. They argued that Section 18(3) of the Act, not Section 28AA, governed interest on differential duty. The counsel highlighted judgments from Gujarat and Madras High Courts, cited by the Tribunal, supporting their stance.3. The High Court, after hearing both counsels and reviewing the case, concluded that the appeal lacked merit and did not raise any substantial legal questions. Citing the Gujarat High Court's decision in Commissioner of Customs Vs. Goyal Traders, the Court emphasized that the amendment introducing interest liability from 2006 did not apply retrospectively to provisional assessments made prior to the amendment. Additionally, the Court referenced the case of Reliance Industries Ltd. Vs. Union of India, affirming that interest on differential duty fell under Section 18(3) of the Act, not Section 28. The Court rejected the revenue's appeal based on these legal principles and findings.4. In summary, the High Court dismissed the revenue's appeal, upholding the CESTAT's ruling that no interest could be charged on finalization of provisional assessments initiated before 2006. The Court relied on legal precedents and statutory provisions to support its decision, emphasizing the prospective nature of the amendment and the specific provisions governing interest on differential duty.