1992 (3) TMI 230 - AT - Customs

Tribunal clarifies Customs Act: Refund illegal interest, exempts DEEC goods. Duty at removal, interest on clearance.

The Tribunal clarified that interest collected illegally under Section 27 of the Customs Act must be refunded, emphasizing the distinction between duty ... Refund Issues:1. Interpretation of Section 27 of the Customs Act regarding refund of interest.2. Exemption under DEEC Scheme and its impact on liability to pay interest.3. Liability to pay duty on warehoused goods and the calculation of interest.Analysis:Issue 1: Interpretation of Section 27 of the Customs Act regarding refund of interestThe judgment addressed the question of whether interest is refundable under Section 27 of the Customs Act. The Tribunal clarified that while Section 27 pertains to the refund of duty, interest collected illegally must also be refunded under normal law provisions. The Tribunal emphasized that interest is distinct from duty and any illegally collected amounts, including interest, must be refunded. The Tribunal highlighted that even in cases of redemption fines or other miscellaneous dues, the Department cannot refuse a refund based on the absence of specific provisions in Section 27. The judgment underscored the necessity to refund any amounts collected unlawfully, subject to relevant conditions and time limits.Issue 2: Exemption under DEEC Scheme and its impact on liability to pay interestThe judgment delved into the issue of whether goods exempted under the Duty Entitlement Pass Book (DEEC) Scheme are absolved from the liability to pay interest. The Tribunal elucidated that any exemption, including under the DEEC Scheme, results in a nil rate of duty upon clearance of goods from the warehouse. It emphasized that fulfillment of conditions under the DEEC Scheme is crucial, and failure to meet these conditions may lead to the recovery of duty and interest as per the importers' undertaking. The Tribunal clarified that when goods are released duty-free due to an exemption notification, no principal amount is payable unless conditions are breached, in which case the importers are liable for the outstanding amount as per the undertaking.Issue 3: Liability to pay duty on warehoused goods and the calculation of interestThe judgment analyzed the liability to pay duty on warehoused goods and the subsequent calculation of interest. It referenced the Customs Act, highlighting that the duty rate applicable to warehoused goods is determined at the time of their removal from the warehouse. The Tribunal explained that as long as goods are in the warehouse, no duty payment is required. The judgment emphasized that interest is calculated based on the principal amount when goods are cleared from the warehouse. It reiterated the principle that when the principal duty amount is nil, the interest amount also becomes zero. The Tribunal cited a Kerala High Court decision supporting this interpretation, affirming that no interest is payable when the principal duty amount is exempted.In conclusion, the Tribunal dismissed the Reference Applications, finding no merit in the arguments presented and upholding the decisions based on the interpretation of relevant legal provisions and precedents.