Factory attachment upheld for unpaid customs duty as Section 28AA interest accrues automatically on default

Bombay HC held that petitioner's factory attachment was valid for non-payment of customs duty and interest. Court ruled that Section 28AA of Customs Act does not require interest demand in original assessment order, as interest accrues automatically upon default in duty payment within specified time. Petitioner's argument that interest demand came 10 years after original order was rejected, since interest demand was raised within three months of duty demand notice. Court confirmed interest liability arises automatically on payment default, not requiring separate demand in assessment order.

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Issues Involved:

1. Whether the respondents violated the Supreme Court's order dated 18 March 2013 by not de-sealing the petitioner's factory premises.
2. Whether the demand for interest by the respondents was justified and lawful.
3. Whether the sealing and attachment of the petitioner's factory premises were lawful.
4. Whether the petitioner's claims and contentions were barred due to delay and previous proceedings.

Issue-wise Detailed Analysis:

1. Violation of the Supreme Court's Order:

The petitioner argued that despite complying with the Supreme Court's order dated 18 March 2013, which allowed payment of dues in instalments, the respondents refused to de-seal the factory premises. The petitioner claimed to have discharged the entire liability as per the CESTAT's order by 22 August 2013. However, the respondents contended that the petitioner failed to clear the entire liability, including interest, by the stipulated date. The court found that the petitioner paid only Rs. 17.7 Crores out of the Rs. 24.63 Crores due by 22 August 2013, indicating non-compliance with the Supreme Court's order. Therefore, the petitioner was not entitled to the release of the factory premises.

2. Demand for Interest:

The respondents demanded interest under Section 28AA of the Customs Act, which the petitioner contested as unfair and untimely. The court held that the interest demand was statutory and arises automatically by operation of law, as per Sections 18(3) and 28AA of the Customs Act. The court distinguished the case from Kanhai Ram Thekedar, noting that the Customs Act provisions differ from those under the Uttar Pradesh Sales Tax Act. The court emphasized that the liability to pay interest does not require a separate demand notice, and the demand made on 18 January 2013 was within a reasonable period after the initial demand notice dated 18 October 2012.

3. Legality of Sealing and Attachment:

The petitioner argued that the respondents lacked the power to seal or attach the factory premises, rendering the action void ab initio. The court noted that this argument was not raised before the Supreme Court in previous proceedings. The court held that the sealing and attachment were lawful, as the petitioner failed to comply with the payment terms outlined by the Supreme Court, which allowed the respondents to recover outstanding dues, including through the auction of the factory premises.

4. Delay and Previous Proceedings:

The court observed that the petitioner had previously raised similar allegations in an Interim Application and a Writ Petition before the Supreme Court, both of which were withdrawn without liberty to re-agitate the issues. The court found no explanation for the delay in filing the present petition, which was initiated almost four years after the last Supreme Court proceeding. The court concluded that the petitioner could not re-litigate the same issues before the High Court after having taken its chances before the Supreme Court.

Conclusion:

The court dismissed the petition, finding no merit in the petitioner's claims. The court held that the petitioner failed to comply with the Supreme Court's order regarding payment of dues, and the demand for interest was justified and lawful. The sealing and attachment of the factory premises were deemed lawful, and the petitioner's claims were barred by delay and previous proceedings. The Rule was discharged, and any interim orders were vacated.

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