Compensatory interest on warehoused goods upheld despite duty exemption at clearance, reinforcing timely removal from warehouse.

Interest under Section 61(2) of the Customs Act was treated as compensatory, aimed at ensuring prompt clearance of warehoused goods and discouraging overstay in the warehouse. The Tribunal held that liability to pay interest was not excluded merely because the goods were ultimately exempt from duty at the time of clearance. On that basis, the demand for interest on delayed clearance was sustained and the challenge to the order failed.

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Issues: Whether interest was payable under Section 61(2) of the Customs Act, 1962 on goods cleared from the warehouse after the warehousing period had expired, even though the goods were exempt from duty at the time of clearance.

Analysis: The Tribunal accepted the view that the levy of interest was compensatory and was intended to ensure prompt removal of warehoused goods and prevent overstay in the warehouse. It held that the interest liability was not negated merely because no duty was ultimately payable on the goods. The contrary Kerala High Court ruling was held distinguishable in light of the later Madras High Court decision, which treated interest as compensation for delayed clearance.

Conclusion: Interest was held payable, and the appeal failed.

Final Conclusion: The demand for interest on delayed clearance of warehoused goods was sustained, and the challenge to the order was rejected.

Ratio Decidendi: Interest on warehoused goods is compensatory in nature and may be levied for delayed clearance irrespective of whether duty is ultimately payable on the goods.

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