TaxTMI 
TaxTMI 
2013 (12) TMI 1247
X X X X Extracts X X X X
X X X X Extracts X X X X
....r decisions of the Supreme Court, to what the respondents contend and believe, are contrary decisions but applicable to the facts of the present case i.e., Kesoram Rayon versus Collector of Customs, Calcutta, (1996) 5 SCC 576(SC) and SBEC Sugar Limited and Another versus Union of India and Others, (2011) 4 SCC 668. 2.1 In order to decide the issue, we would like to refer to the basic and relevant facts. The petitioner, manufacturer of paints, in August, 1994 imported 136 metric tons of the Titanium Dioxide Rutile. On 29th December, 1994 under bill of entry for warehousing, also referred to as the yellow bill of entry, the goods were shifted to the warehouse under bond. The petitioner had stated that instead of paying duty in cash they would furnish duty free licence as per Paragraph 65 of the applicable Import and Export Policy, 1992-97. On 27th January, 1995, the goods were warehoused for a period of one year. On 19th April, 1996, the respondents issued notice under Section 72(1) of the Act to the petitioner to pay customs duty of Rs.87,59,508/- and interest within fifteen days. The petitioner was warned that in case demand was not discharged within fifteen days, the goods would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner were issued in 1996 and, as Notification Nos. 79/1995 and 80/1995, did not provide for subsequent production of Advance Licence for the goods earlier imported, the same were not applicable. 3. In order to appreciate the controversy, we would like to reproduce Sections 62, 68, 71 and 72 of the Act, which read as under:- "62. Control over warehoused goods.-(1) All warehoused goods shall be subject to the control of the proper officer. (2) No person shall enter a warehouse or remove any goods therefrom without the permission of the proper officer. (3) The proper officer may cause any warehouse to be locked with the lock of the Customs Department and no person shall remove or break such lock. (4) The proper officer shall have access to every part of warehouse and power to examine the goods therein. 68. Clearance of warehoused goods for home consumption.-The importer of any warehoused goods may clear them for home consumption, if- (a) a bill of entry for home consumption in respect of such goods has been presented in the prescribed form; (b) the import duty leviable on such goods and all penalties, rent, interest and other charges payable in respect of such goods have been p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... removed from the warehouse at the expiration of the period permitted under Section 61 etc., the owner of the goods shall forthwith pay full amount of duty chargeable on the goods together with penalties, rent, interest and other charges. Thus, by deeming fiction on the happening of events mentioned in sub-clause (a) to (d) in Section 72(1), custom duty becomes immediately chargeable and payable, even when the bill of entry for home consumption has not been filed and the goods have not been actually removed from the bonded warehouse. Under sub-section (2), after giving notice to the owner, the said goods could be sold. The rate of duty payable and which could be levied or charged gets quantified on the dates mentioned and applicable as per sub-section (1) to Section 72. Under the normal provisions, rate of duty applicable was stipulated and calculated as per Section 15 read with Section 47 of the Act. Section 15 (1) clause (b) as applicable stated that the rate of duty and tariff valuation shall be at the rate and valuation in force on the date of removal of goods. 5. Section 61 of the Act stipulates the period for which the goods could remain warehoused and an upper time limit ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issue. (Also see paragraphs 14 to 16 below). 8. The second issue relates to payment of interest under Section 62(2) of the Act. The provision has been quoted above. It stipulates that the importer would be liable to pay interest for the delayed payment of duty and for the period during which the duty was not paid. As the imported goods had remained warehoused beyond the period prescribed, customs duty had become payable. Interest also commenced from the date when the duty became payable. In other words, the petitioner would be liable to pay interest from the date when the warehousing period specified/permitted came to an end i.e., 27th January, 1996 till the date of payment of duty. 9. However, this is not the end of the matter. The petitioner has relied upon General Exemption No. 147, which was relied upon by the Supreme Court in Pratibha Processors (Supra) and reads:- "General Exemption No. 147 Exemption to goods imported against advance licences.-In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 116....
X X X X Extracts X X X X
X X X X Extracts X X X X
....against an advance licence In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts materials imported into India, against an Advance Licence (hereinafter referred to as the said licence), from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, subject to the following conditions, namely:-............" 11. In terms of the aforesaid general exemption and notification quoted above upon production of an advance licence, the importer was entitled to exemption from payment of duty. In other words, no custom duty was payable. 12. Referring to the aforesaid facets and effect of exemption from payment of duty upon production of Advance Licences, the Supreme Court in the case of Pratibha Processors (supra) observed:- "12. On a fair reading of the relevant provisions of the Act and in particular Sections 15, 25, 59, 61 and 68 and the General ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty - which is penal in character. 14. In the above backdrop, let us consider the scope and content of Section 61(2) of the Act as it existed at the relevant time. Section 61(1) prescribes the period during which the goods imported may remain in the warehouse. The normal period in different cases are provided therein. Extension of time in special cases is also provided. If the goods imported remain in warehouse beyond the period provided or extended under Section 61(1), the consequences are specified in Section 61(2) of the Act. As per the provisions of the Act duty is payable (only) when the goods are cleared. If the goods are not cleared within the time granted under Section 61(1) of the Act, and the goods are cleared later, the payment of duty exigible on the goods gets automatically delayed. It is to meet the said contingency Section 61(2) provides that if the goods warehoused are cleared beyond the time specified or granted under Section 61(1) of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany (supra). In the said case, the warehousing period came to an end on 4th January, 1997 and the said date became the relevant date for payment and computing duty and thereafter interest was payable. However, subsequently the importer had applied for clearance under DEEC Scheme and relying upon Pratibha Processors (supra), it was held that no interest under Section 61(2) of the Act was payable. 14. Decision in the case of Kesoram Rayon (supra) is distinguishable as the issue in the said case related to the rate at which custom duty was to be levied as the goods that remained in a bonded warehouse beyond the permitted period. After considering relevant provisions of the Act, it was held that Section 61 prescribes a period for which the goods might be warehoused and Section 72 by deeming fiction specifies the date on which goods should be subjected to charge for payment of duty and consequences upon non-payment. The said Section stipulates that the goods were deemed as improperly removed from the warehouse and once improper removal took place, duty became payable. Rate of duty as applicable then, would be payable. The ratio and the issue in the said case is thus different. For th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s relevant for our purpose, warehousing is permissible for only a stated period; the period is extendible if cause for doing so is shown; and, whether or not the permissible period has been extended, interest on the amount of duty on the warehoused goods is payable for the period subsequent to the permissible period up to their clearance. 12. Section 72 deals with goods improperly removed from a warehouse. Goods are improperly removed from a warehouse under the terms of sub-section (1) if they are removed without clearance under Section 71 [clause (a)]; if they are taken as samples but without payment of duty [clause (c)]; if a warehousing bond has been executed in respect of the goods under Section 59 but they are not satisfactorily accounted for [clause (d)]; and if they have not been removed from the warehouse on the expiration of the permitted period or its permitted extension [clause (b)]. In all such cases the Customs Officer is empowered to demand, and the importer shall pay, the full amount of duty chargeable on the goods and interest, penalties, rent and other charges thereon. If payment as demanded is not made, it is recoverable by sale of other goods of the importer in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eriod or during the permitted extended period. It is trite to say that when the goods are cleared from the warehouse after the expiry of the permitted period or its permitted extension, the goods are deemed to have been improperly removed under Section 72(1)(b) of the Act, with the consequence that the rate of duty has to be computed according to the rate applicable on the date of expiry of the permitted period under Section 61. 25. While it is true that Condition 6 of the licence granted under the EPCG Scheme was valid against goods which had already been shipped but not cleared, but, we have no hesitation in holding that the benefit of exemption granted under the Scheme to the already imported goods would be available only in respect of those goods which are cleared under Section 68 of the Act. In our opinion, any other interpretation of the said clause would render Section 72 of the Act otiose, and would result in the said Scheme operating as an amnesty scheme, granting an unintended and undue advantage to the importer, which is ordinarily to be avoided. [See State of Maharashtra v. Swanstone Multiplex Cinema (P) Ltd. [(2009) 8 SCC 235] ] It is also a cardinal principle of cons....