TaxTMI 
TaxTMI 
2010 (5) TMI 124
X X X X Extracts X X X X
X X X X Extracts X X X X
....sary. The petitioners, therefore, had to file bills of entry for bonding the goods in a warehouse. The respondents made endorsements on the bills of entry filed by the petitioners for bonding of the goods that exbond clearance of the goods will not be permitted until the investigation with regard to import of the goods i.e. Import Trade Control Angle involved in the goods is not cleared by the SIIB. In the process, the customs authorities assessed the goods provisionally as per section 18 of the Act. 4. According to the petitioners since the auction notices were issued to auction goods, they were required to invoke writ jurisdiction of the Delhi High Court under Article 226 of the Constitution of India challenging auction notices issued and the demand of interest on the customs duty made by respondent Nos.2 and 3 contending that the interest demanded by them was bad, illegal and not recoverable from them since the imports were under Open General Licence (OGL). The Delhi High Court directed the customs authorities to issue notice of demand prescribed under section 59 of the Act vide its order dated 18^th February, 1991. However, it appears that in spite of said order of the De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, or any other law for the time being in force, duties of customs, shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or exported from India. (2) ............" Section 14 deals with valuation of goods for the purposes of assessment. Section 15 deals with determination of rate of tariff valuation of imported goods and since we are concerned in this petition with this aspect, we may reproduce the same: "15. Date for determination of rate of duty and tariff valuation of imported goods. (1) The rate of duty and tariff valuation if any, applicable to any imported goods, shall be the rate and valuation in force: (a) in case of goods entered for home consumption under Section 46, on the date on which a Bill of Entry in respect of such goods is presented under this section; (b) in case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse; (c) in case of any other goods, on the date of payment of duty : Provided that if a Bill of Entry has been presented before the date of entry inw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontinue in force, notwithstanding the transfer of goods to any other person or the removal of the goods to another warehouse: Provided that where the whole of the goods or any part thereof are transferred to another person, the proper officer may accept a fresh bond from the transferee in a sum equal to the twice the amount of duty assessed on the goods transferred and thereon the bond executed by the transfer or shall be enforceable only for a sum mentioned therein less the amount for which a fresh bond is accepted from the transferee." Section 60 comes into operation when provisions of section 59 have been complied with in respect of goods so imported. Thereupon the proper officer may make an order permitting the deposit of the goods in warehouse without payment of duty. Section 61 reads thus: "61. Period for which goods may remain warehoused. (1) Any warehoused goods may be left in the warehouse in which they are deposited or in any warehouse to which they may be removed (a) in the case of nonconsumable stores, till the expiry of three years; and (b) in the case of any other goods, till the expiry of one year; after the date on which the proper officer made an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount demanded under Subsection (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select. 9. If one breaks the limbs of the above statutory provisions, one would find that section 61 prescribes the period for which goods may be warehoused. They may be left in the warehouse in which they are deposited for the period of one year if they are such goods as are referred to in Clause (a) of Subsection (1), and for the period of three months counted from the date of the order permitting warehousing if they are not such goods. The first proviso to Subsection (1) contemplates the reduction of the periods aforementioned, of one year and three months respectively (now referred to as "the permitted periods"), if the goods are likely to deteriorate. It also permits, if the goods are not likely to deteriorate, an extension of the permitted periods on sufficient cause being shown; the Collector of Customs can extend the permitted periods by six months and the Central Board of Excise and C....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., rent and other charges; and an order for home clearance. The provisions of Section 68 and, consequently, of Section 15(1)(b) apply only when goods have been cleared from the warehouse within the permitted period or its permitted extension and not when, by reason of their remaining in the warehouse beyond the permitted period or its permitted extension, the goods have been deemed to have been improperly removed from the warehouse under Section 72. Rival Submissions: 14. Mr.Rajiv Datta, learned senior counsel appearing for the petitioners urged that the petitioners are, inter alia, seeking refund of interest illegally collected from them without the respondents complying with the provisions of section 59 of the Act. Reading of the provision of section 59, he submits that liability to pay interest arises only after expiry of period specified in the notice of demand. He placed heavy reliance on the order of the Delhi High Court; wherein similar imports made during the same period and several parties including the petitioners had approached the Delhi High Court vide Writ Petition No.725/1990 and Writ Petition No.1116/1990; wherein, inter alia; the demand for interest had been ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with interest thereon at the rate of 15% per annum. 17. According to Mr.Datta, in spite of repeated requests no notices of demand was issued to the petitioners, hence, they were required to approach this Court. Mr.Datta reiterated his reliance on the judgment of the Apex Court in the case of Bangalore Wire Rod Mills (supra) in support of his submission and tried to analyze the provision of sections 59 and 61 of the Act. According to him, section 59 relates to the warehousing bond and further to pay on or before the date specified in the notice of demand. According to him section 61 only specifies period for which the goods may remain in the warehouse. Turning to section 61(2) of the Act, he submits that the said subsection (2) of section 61 has been brought on the statute book by way of amendment on 13^th May, 1983 which deals with the situation when the goods have been kept in warehouse beyond the period prescribed in section 61(1) of the Act by reason of extension and those goods will be liable to pay interest as specified therein. But, according to him, nowhere the said provision takes away the necessity of issuing notice of demand under section 59(1)(b) of the Act. In the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t they on their own filed exbond Bill of Entry for home consumption; got the said bill of entry assessed by the proper officer, including the endorsement regarding the payment of duty, interest and penalty etc.; and obtained the order of clearance from the proper officer; and cleared the goods, ultimately, by themselves on payment of duty and interest. He, thus, submits that when all the actions of the petitioners as stated above are placed in juxtaposition with the total scheme of warehousing under Customs law, as provided in Chapter IX, there is no valid reason and ground available with the petitioners to contend that a formal notice of demand was mandatory and that since no such demand notice was formally given to them, as such they were not obliged to pay interest and, therefore, the amount paid by them under the head of interest is liable to be refunded. The said submission, according to Mr.Rao, is untenable. 20. From the readings of the above provisions, it is the submission of Mr.Rao that no notice is contemplated under section 59(1)(b) of the Act as contended by the petitioners. According to him, from reading of the said provision, it is further clear that the assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is as reported in Union of India v. Bangalore wire Rod mills reported in (1996) 3 SCC 558. The Judgment in Krishna Petro Yarn, therefore, will have to take a back seat. Now whether any appeal was preferred against said Judgment is not known. 24. So far as judgment in the case of Pratibha Processors (supra), Mr.Datta submits that basically the case lays down that interest on warehoused goods are merely an accessory of the principal and if the principal is not recoverable/ payable so is the interest on it. Thus, interest under section 61(2) of the Act has no independent or separate existence. According to him, the Supreme Court in this case did not rely upon its judgment in the case of Union of India v. Bangalore Wire Rods case as Supreme Court was of the opinion that both cases are based on a separate set of facts, however, law declared in Bangalore Wire Rods case by the supreme court stood as it is. 25. So far as judgment in the case of Vijay Narain Products (Pvt.) Ltd. (supra), Mr.Datta submits that in this case claim of interest was made under this provision of section 61(2) of the Act and the Court has held that payment of interest is linked with the payment of the princi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the learned single Judge. Not satisfied with the judgment of the Division Bench, the Union of India invoked appellate jurisdiction of the Apex Court; wherein the judgment of the Division Bench was affirmed. 30. The facts taken from the reported decision of the Division Bench of the Karnataka High Court [1992 (61) ELT 37 (Kar.)] show that importers therein had imported goods and kept them in the warehouse under section 59(1) of the Act. Demand notice was issued on 7^th March, 1985 in respect of amount of duty and interest thereon calling upon them to pay duty at the rate of 90% within two weeks. The said demand notice was challenged. It appears that there was variation in the rate of customs duty during the period the goods were warehoused. The Assistant Collector called upon the importer to pay interest on the amount of duty under section 59 of the Act taking highest rate of 90% prescribed under the Customs Tariff Act being the rate of duty in force on the date of demand. In para14, controversy between the parties has been set out. After analyzing scheme of section 59(1)(b) and unamended provisions of section 61(1) and amended subsection (2) of section 61 of the Act, Court o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of warehousing as specified in Section 61(1), it was unnecessary for the legislature to insert subsection (2) in Section 61. Therefore, we find no merit in the stand taken by the learned Central Government Standing Counsel contrary to the stand taken by the respondents in the statement of objections." (Emphasis supplied) 31. Following the above principles, the Karnataka High Court at page 39 of the report worked out the amount of duty recoverable from the petitioners importers from time to time and thereafter directed recovery of the amount of duty not at the rate of 90%, but the rate then prevailing with interest thereon from the date the demand notice was issued. This view of the Karnataka High Court was affirmed by the Apex Court in the appeal referred to hereinabove. The Apex Court in para8 of the said judgment observed as under: "8. We do not think that the claim of the appellant is sustainable in law. The language of Section 59(1)(b), as it stood at the relevant time, is clear and unambiguous. It says that the importer shall have to execute a bond undertaking inter alia to pay interest from the date specified in the notice of demand. We have already extracted Clause ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this Court in the case of Shri Krishna Petro Yarns Ltd. (supra) had an occasion to consider the field of operation within which section 59(1)(b) and subsections (1) and (2) of section 61 operate. According to the said judgment, under section 59(1)(b) question of clearing warehoused goods does not arise. section 59 applies prior to the date of clearance of warehoused goods and not after expiry of free statutory period provided under section 61(1) and also where the importer has not paid duty, rent and charges, claimable under the Act for such period whereas section 61(1) deals with period for which goods could remain in warehouse. Periods are prescribed in section 61(1)(b) of the Act. Then follows subsection (2), which reads thus: "Where any warehoused goods remain in a warehouse beyond the period of one year or three months specified in clause (a) or clause (b) of subsection (1) by reason of extension of the aforesaid period or otherwise, interest at such rate, not exceeding eighteen per cent annum, as is for the time being fixed by the Board, shall be payable on the amount of duty on the warehoused goods for the period from the expiry of the period of one year, or, as the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t if the goods warehoused are cleared beyond the time specified or granted under Section 61(1) of the Act, interest not exceeding 18% per annum shall be payable on the amount of duty on the warehoused goods. It is implicit from the language of Section 61(2) of the Act that the interest shall be payable on the amount of duty "payable or due" on the warehoused goods for the period from the expiry of period specified or granted till the date of clearance of the goods from the warehouse....." (Emphasis supplied) 36. The Division Bench of this Court in the case of SEBC Sugar Limited (supra) also had an occasion to consider the demand raised under section 72 of the Act requiring to pay amount of duty chargeable on account of the goods lying in bonded warehouse after expiry of bonded period. Learned Division Bench of this Court relying upon the above observations made by the Apex Court in the case of Pratibha Processors (supra) held that while computing duty from date of expiry of bond period, interest becomes payable thereon, the Revenue was justified in claiming interest. The learned Division Bench held as under: "Inter alia Section 72 provides that where any warehoused goods w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s justified in computing duty from the date of expiry of the free bond period and interest payable thereon. As a matter of fact, the petitioners were aware that the duty was calculated by the concerned officer along with interest on the reverse of the bills of entry. The edifice has been built on erroneous premise that no interest could be levied or demanded in absence of the demand notice being received by the importer. 38. Having noticed the facts above, we have no hesitation in holding that the judgment relied upon by the petitioners in the case of Bangalore Wire Rod Mills case (supra) is not at all applicable to the facts of the case in hand. It is needless to mention that section 59 only deals with the conditions and contents of the bond and the obligations of the bonder who seeks to warehouse goods. The goods can be warehoused for the period mentioned under section 61(1) and, if the goods are kept in the warehouse beyond that period, the same are liable to attract liability of interest irrespective of the notice of demand demanding interest. The goods can be removed from the warehouse by way of clearance amongst others for home consumption or for reexportation or reexporta....