2024 (11) TMI 755 - HC - Customs

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 ... Demand of interest in the assessment order - refusal to de-seal and release the petitioner's factory on the ground the petitioner is liable to pay an additional amount towards interest liability - inordinate delay in resisting the demand for interest - HELD THAT:- Based on a reading of Section 28AA (1) and 28 (10) of the Customs Act, there is no requirement of any demand being made in the original assessment order for interest u/s 28AA. Suppose the demand raised u/s 28 is not paid within the specified time. In that case, interest starts running against the assesses on the expiry of the said date, and, therefore, the question of raising any demand of interest in the assessment order would not arise. The liability of the interest would arise only on default of payment of duty within the time specified under Section 28. There cannot be any question of interest being demanded in the Order-in-Original. We cannot accept the learned senior counsel's submission that the petitioner is not liable to pay interest u/s 28AA when there is a default or delay in payment of duty. The learned senior counsel also fairly accepts that the interest is automatic, but only the contention that there must be a demand in the order, which, in our opinion, is not correct. Respondents raised the demand calling upon the petitioner to pay for the demand so raised. However, since the payment was not made within the time specified in the said demand notice, an order of attachment dated 18th January 2013 was passed for failure to make the payment demanded on 18th October 2012 and interest payable under Section 28AA for the period commencing after that date, i.e. after 18th October 2012 was demanded. In our view, the demand for interest was raised on 18th January 2013 for non-payment of demand made on 18th October 2012, which is within three months of raising the demand. Therefore, the petitioner's contention that the demand of interest has been made after more than 10 years from the date of Order-in-Original is misconceived. 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.