TaxTMI 
TaxTMI 
2022 (12) TMI 624
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....er sought to set up a project in Goa to manufacture Tips for Ball Point Pens. Petitioner applied for a secured license under the Export Promotion Capital Goods Scheme which permitted import on payment of customs duty at a concessional rate, subject to the condition of export obligation to be fulfilled over a specific period. The export obligation was determinable in relation to the CIF value of imports and the period for fulfillment of the export obligation was relatable to the percentage of concessional rate of duty. 3. Petitioner secured a license under the Scheme. The concessional rate was of 15% duty which carried an export obligation of four times the CIF value of the Capital Goods intended to be imported. The same was required to be fulfilled over five years from the date of issue of the license. The Petitioner was granted a license on 18 October 1995. In terms of the conditions of the Notification dated 5 June 1995, the Petitioner had executed a bond that Petitioner will duly undertake to pay duty along with interest in the event of failure to fulfill the post-import conditions. The Petitioner received a show cause notice dated 28 July 2000 issued by the Deputy Commissioner....
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....d. The Department also filed written submissions. Petitioner contended that the Settlement Commission would have the power to deal with the issue of interest if it flows from statutory obligation and interest is payable on unpaid duty by operation of law. The Petitioner also contended that economic crisis prevailed in the East Asian countries during the period in which Petitioner had to fulfill the obligation under the license and therefore Petitioner was unable to do so. The Department opposed the application of the Petitioner. 7. The Settlement Commission held against the Petitioner on both counts. The Settlement Commission held, following decision of this Court in Valecha Engineering Limited and of the Hon'ble Supreme Court in Rexnord Electronics and Controls Ltd v Union of India 2008(224) E.L.T.184 (S.C), that since the interest payable pursuant to the bond given by the Petitioner is contractual, the Settlement Commission would not have the power to grant immunity or jurisdiction to waive the interest. As regards the ground of economic crisis in the East Asian Countries, the Settlement Commission held that it was not of such nature that difficulties posed by the financial cris....
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....the Division Bench of this court in the case of Union of India v Cus & C.Ex. Settl. Commission, Kolkata 2010 (254) E.L.T. 647 (Bom.), submitted that in this case, the Division Bench had applied the principle under Section 56 of the Contract Act in identical circumstances. It was submitted that the Settlement Commission has drawn an artificial distinction under Section 56 of the Contract Act between natural disasters and man-made calamities. Learned Counsel submits that on both aspects. The Commission being in error, the impugned order will be set aside, a waiver of interest needs to be granted, and an order of refund should follow. 10. Mr Pradeep Jetly, Learned Senior Advocate for the Respondent, supported the order passed by the Settlement Commissioner and submitted as follows. Under the Notification dated 5 June 1995, the rate of interest was specified @ 24%, which was with effect from 19 September 1995, by virtue of Section 127(1) of Finance Act, 2003 and therefore, Petitioner had given bond on 4 November 1995 and consequently the reference to interest applicable as per law in the bond is @ 24% under the Notification of 5 June 1995 and thus it becomes a part of the bond. Theref....
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.... the case of Rexnord Electronics and the decision of the Calcutta High Court in the case of Commissioner of Customs(Port) v Settlement Commission, Cus & C. Ex, stating that in those cases, the importers therein had specifically bound itself to the specific rate of interest and in that context, it was treated as contract, and therefore the Settlement Commission was held to have no power to waive interest and grant immunity. 14. We do not find merit in the above submission. The bond was an agreement which is between the Petitioner and the Commissioner of Customs representing the Excellency of President of India. Therefore merely because the said agreement refers to the payment of interest is applicable as per law, it does not mean that the payment of interest ceased to be under the agreement. Though the bond furnished by the Petitioner uses the phrase 'interest as applicable as per law', specifying the interest rate was superfluous in this case. Section 28AA of the Act, states that the interest should be at a such rate below 10% and not extending 36% per annum as per Central Government may by notification in the official gazette. By Notification dated 5 June 1995, amended wi....