Bombay High Court
M/S.Suresh Chand & Sons vs Union Of India on 7 May, 2010
Author: Vijay Daga
Bench: V.C.Daga, K.K.Tated
This Order is modified/corrected by Speaking to Minutes Order
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELATE JURISDICTION
WRIT PETITION NO. 2986 OF 2005
1. M/s.Suresh Chand & Sons,
2. Rekha Bansal,
3. Naveen Kumar Bansal,
4. M/s.Shadi Ram & Son,
5. M/s.Shadi Ram Anokhi Ram,
6. M/s.Naveen Exporters,
7. M/s.Ghanshyam Dass & Co.
8. Kamal Kumar Bansal,
9. M/s.Anokhi Ram & Sons,
10. M/s.Gopi Ram & Company,
11. M/s.Naveen International,
12. M/s.Gopi Ram Suresh Chand,
13. M/s.Gopi Ram & Sons,
14. M/s.Anokhi Ram Gopi Ram. ... Petitioners.
V/s.
1. Union of India.
2. Commissioner of Customs, Bombay.
3. Assistant Commissioner of Customs.
4. The Chairman,
Central Board of Excise & Customs. ... Respondents.
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Rajiv Datta, senior counsel with Ms.Shikha
Raniwala i/b. Nanu Hormasjee & Co.
for the petitioners.
A.S.Rao for the respondents.
CORAM : V.C.DAGA AND K.K.TATED, JJ.
DATED : 7th May 2010.
JUDGMENT :(Per Vijay Daga, J.) Heard.
Perused petition.
2. The petitioners, who are the proprietary firms carrying on trade and business activities of import and export of spices etc., have jointly filed this petition under Article 226 of the Constitution of India seeking to claim refund of the amount of interest alleged to have been illegally imposed upon and recovered from them without issuing notice as contemplated under section 59(1) of the Customs Act, 1962 ("Act" for short).
The Facts :
3. The factual backdrop leading to the petition is that when the goods were imported by the petitioners, the customs authorities, respondent Nos.2 and 3 herein did not permit the clearance of the goods since some investigation was necessary. The petitioners, therefore, had to file bills of entry for bonding the goods in a warehouse. The respondents made endorsements ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 3 on the bills of entry filed by the petitioners for bonding of the goods that ex-bond 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 18th February, 1991. However, it appears that in spite of said order of the Delhi High Court, no notice under section 59 were issued in spite of specific demand made in this behalf. In fact, legal notices were also served on the Principal Collector of Customs, Bombay calling upon him to issue demand notices under section 59 of the Act as was ordered by the High Court of Delhi.
5. It appears that the petitioners were in need of goods. Consequently, they approached the customs authorities (i.e. respondent Nos.2 and 3) and requested them to release the goods. The petitioners were permitted to release the goods subject to payment of ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 4 interest which the petitioners have paid under protest to the respondents and, simultaneously, applied for refund of interest amount, which, according to the petitioners, had been imposed upon and recovered from them illegally. Since the request of the petitioners for refund of interest paid under protest was not decided by the respondents, the petitioners again invoked writ jurisdiction of the Delhi High Court through Writ Petition No.13184-97/2004, which came up for hearing on 28th April, 2004, inter alia; praying for identical relief prayed in the present petition. However, the Delhi High Court was pleased to dismiss the same for want territorial jurisdiction reserving liberty in favour of the petitioners to approach this Court.
The petitioners left with no other alternative have invoked writ jurisdiction of this Court to claim relief as mentioned in the opening para of the judgment to seek directions against the customs authorities to refund the interest amount with interest thereon at the rate of 18% per annum from the date of payment till the repayment thereof in full and final.
6. On the above factual backdrop, this petition was heard finally. Mr.Rajiv Datta, learned senior counsel appeared along with Ms.Shikha Raniwala for the petitioners , whereas Mr.A.S.Rao, learned counsel appeared for the Revenue. Both were heard.
Relevant Statutory Provisions :
7. In order to appreciate rival contentions, it would be necessary to refer to relevant provisions under the Customs Act. Section 2(14) of the Act defines ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 5 "dutiable goods" to mean any goods which are chargeable to duty and which has not been paid. Section 2(15) defines "duty" to mean a duty of customs leviable under the Act. Section 12 is a charging section and it reads thus :
"12. Dutiable goods. - (1) Except as otherwise provided in this Act, 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 inwards of the vessel by which the goods are ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 6 imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.
(2) The provisions of this section shall not apply to baggage and goods imported by post."
Section 17 deals with assessment of duty and it prescribes procedure thereof. Section 25 gives powers to the Central Government to grant exemption from the duty if it is satisfied that it is necessary in the public interest to do so. Since there is no challenge to the Exemption Notification, it is not necessary to set out the said provision. Section 46 deals with entry of goods on importation and permit the importers of any goods, subject to exception therein to make entry thereof by presenting to the proper officer a Bill of Entry for home consumption or warehousing in the prescribed form. Section 48 prescribes procedure in case of goods, not cleared, warehoused or transshipped within two months after unloading. Section 49 permits storage of imported goods in warehouse pending clearance.
8. Now, we come to the relevant provisions dealing with warehousing. Sections 59, 61, 69 and 72 are contained in Chapter IX of the Act. Section 59 reads thus :-
"59. Warehousing bond. - The importer of any dutiable goods which have been entered for warehousing and assessed to duty under section 17 or section 18 shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods -
(a) to observe all the provisions of this Act and the rules and regulations in respect of such goods;::: Downloaded on - 09/06/2013 15:56:13 :::
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(b) to pay on or before a date specified in a notice of demand all duties, rent and charges claimable on account of such goods under this Act, together with interest on the same from the date so specified at the rate of six per cent per annum or such other rate as is for the time being fixed by the Board; and
(c) to discharge all penalties incurred for violation of the provisions of this Act and the rules and regulations in respect of such goods.
(2) for the purposes of sub-section (1), the Assistant Collector of Customs may permit an importer to enter into a general bond in such amount as the Assistant Collector of Customs may approve in respect of the warehousing of goods to be imported by him within a specified period.
(3) A bond executed under this section by an importer in respect of any goods shall continue 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 :::: Downloaded on - 09/06/2013 15:56:13 :::
This Order is modified/corrected by Speaking to Minutes Order 8 "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 non-consumable 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 order under section 60 permitting the deposit of the goods in a warehouse.
Provided that
(i) ....................
(ii) in the case of any goods which are not likely to deteriorate, the aforesaid period (one year or three months) as the case may be, may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding ("six months") and by the Board for such further period as it may deem fit :
Provided further ........
(2) Where any warehoused goods remain in a warehouse beyond the period of one year or three months specified in Clause (a) of Clause (b) of sub-section (1) by reason of the extension of the aforesaid period or otherwise, interest at such rate, not exceeding eighteen per cent, per 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 may be, three months, till the date of the clearance of the goods from the warehouse."::: Downloaded on - 09/06/2013 15:56:13 :::
This Order is modified/corrected by Speaking to Minutes Order 9 Section 68 reads thus :
"68. Clearance of goods for home consumption. - The importer of any warehoused goods may clear them for home consumption if -
(a) ....................
(b) the import duty leviable on such goods and all penalties, rent, interest and other charges payable in respect of such goods have been paid; and
(c) ..................."
Section 72 reads thus :
"72. Goods improperly removed from warehouse, etc. - (1) in any of the following cases, that is to say, -
(a) where any warehoused goods are removed from a warehouse in contravention of Section 71;
(b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under Section 61 to remain in a warehouse;
(c) where any warehoused goods have been taken under Section 64 as samples without payment of duty;
(d) where any goods in respect of which a bond has been executed under Section 59 and which have not been cleared for home consumption or exportation are not duty accounted for to the satisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods.::: Downloaded on - 09/06/2013 15:56:13 :::
This Order is modified/corrected by Speaking to Minutes Order 10 (2) If any owner fails to pay any amount demanded under Sub-section (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 Sub-section (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 Sub-section (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 Customs can do so for as long as it deems fit. By reason of Sub-
section (2), interest is payable on the amount of duty on the warehoused goods for the period from the expiry of the permitted periods till the date of their clearance from the warehouse, regardless of whether the goods have remained in the warehouse beyond the permitted periods by reason of extension of such periods or otherwise.
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10. Put briefly, so far as it is 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.
11. 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 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 is liable to 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 kept in the warehouse.
12. Goods which are not removed within permissible time frame from the warehouse are treated as goods improperly removed from the warehouse. In other words, such improper removal takes place when the goods remain in the warehouse beyond the permitted period or its permitted extension. The importer of the goods, then may be called upon to pay Customs duty and, necessarily, it ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 12 would be payable at the rate applicable on the date of their deemed removal from the warehouse, i.e. the date on which the permitted period or its permitted extension came to an end.
13. Section 15(1)(b) applies to the case of goods cleared under Section 68 from a warehouse upon presentation of a bill of entry for home consumption; payment of duty, interest penalty, 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 ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 13 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 challenged contending it to be illegal. The Delhi High Court disposed of those petitions recording the statement made on behalf of the Revenue that notices of demand under section 59 of the Act were in contemplation of the department. In the circumstances, Delhi High Court in its order observed that the respondents are expected to issue notice of demand, under which they would quantify the amount of duty, rent and charges claimable on account of such warehoused goods. The writ petitions in the light of the circumstances mentioned herein were disposed of.
15. According to Mr.Datta, it was obligatory on the part of the Revenue to issue notices of demand in accordance with the provision of section 59(1) of the Act as stated by them before the Delhi High Court, but no such notices of demand were ever issued by the Revenue to any of the petitioners. He, thus, submits that in absence of compliance with the statement made before the Delhi High Court and in absence of notices of demand in accordance with the provision of section 59(1) of the Act, the recovery of interest from the petitioners was illegal and hence the petitioners are entitled to get back the said amount illegally recovered from them.
16. Mr.Datta further pressed into service another order of the Delhi High Court dated 14th August, 2003 passed in Writ Petition No.1648/1991 (M/s.Ghanshyamdas Suresh Chand v. Union of India & ors.); wherein the ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 14 Delhi High was pleased to analyze section 59(1)(b) of the Act relying on the judgment of the Apex Court in the case of Union of India v. Bangalore Wire Rod Mills, (1996) 3 SCC 588 to hold that the interest became payable by the importer/petitioner in that petition only from the date of notice of demand, and not for the period anterior to the date of such a notice. In the case of Ghanshyamdas before Delhi high Court, the customs authorities had issued a demand notice under section 59(1)(b) by which they had erroneously computed the interest for the period prior to the date of notice. The Delhi High Court, thus, concluded that no interest could be charged for a period prior to the date of issuance of the notice of demand. In that petition, the Delhi High Court was pleased to direct the department to quantify the amount of interest afresh after the date of notice and directed refund of the excess amount of interest which the Revenue was required to deposit along 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 sub-section (2) of section 61 has ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 15 been brought on the statute book by way of amendment on 13th 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 conclusion, Mr.Datta submits that once the goods are warehoused under section 59(1) of the Act, they will remain in warehouse for a fixed period as provided in section 61(1) of the Act after which notice of demand will have to be issued under section 59(1)(b) and interest will be payable on or after the date specified in the said notice of demand. In his submission, section 61(2) will only apply to the goods which are kept in warehouse beyond the period specified in section 61(1) of the Act and interest will be charged on the amount of duty on the warehoused goods for the period they are kept warehoused beyond the prescribed period. He, thus, submits that the petitioners are entitled to refund of interest paid under protest.
Per Contra :
18. Mr.Rao, learned counsel appearing for the Revenue submits that the petitioners' submissions mainly revolves around the contention regarding necessity of notice under section 59(1)(b) of the Act and that without issuance of such notice interest cannot be demanded. The said submission, according to Mr.Rao, is misplaced. Relying upon the scheme of Chapter IX and various sections falling within that chapter, Mr.Rao ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 16 submits that from a comprehensive reading of the scheme of the Act, in totality, synchronizing the provisions of each section with the other, in particular dealing with the warehousing, it is absolutely clear that Section 59 only deals with the conditions and contents of the bond and the obligations of the bond executer, who seeks to warehouse goods. The goods can be warehoused for the free period mentioned under section 61(2) and if the goods are kept in the warehouse beyond that period, the same carries liability of interest. The goods can be removed from the warehouse only by way of clearance for home consumption or for re-exportation after filing bill of entry and after paying all the dues and after getting an order or by transferring the goods from one warehouse to another warehouse. Mr.Rao submits that the scheme of the Act also provides for improper removal of the goods and an embargo not to remove the goods except as provided in the Act, i.e. as per sections 67, 68 and 69.
19. Mr.Rao submits that the petitioners had furnished bond under Section 59, including the undertaking that they shall observe all the provisions of the Act and rules and regulations, at the time of warehousing goods, and that they on their own filed ex- bond 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 ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 17 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 of the bill of entry and arriving at the actual duty, rent, interest, penalty and other charges payable, itself would be a demand as contemplated section 59(1)(b) of the Act.
21. Mr.Rao submits that, as a matter of fact, the goods of the petitioners remained in the warehouse beyond the period of 90 days as prescribed under section 61(2) of the Act, as such removal of subject goods were within the sweep of improper removal of goods from the warehouse. He submits that the period involved in the case of Bangalore Wire Rod Mills (supra) was related to goods warehoused on 11th November, 1983. The free period for keeping the subject goods in the warehouse as per section 61(1) was one year. Sub-section (2) of section 61 was not on the statute book, which, for the first time, was inserted by an amendment effective from 13th May, 1983. He, thus, submits that section 61(2) was not ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 18 available when Bangalore Wire Rod Mills (supra) was decided as such reliance was placed on section 59 of the Act. He submits that the said judgment is not at all applicable to the facts of the present case.
22. Mr.Rao further urged that the Delhi High Court judgment in Writ Petition No.4638/1993 decided on 21rd August, 1993 cannot be relied upon since its finality is placed in jeopardy in view of pendency of the appeal in the Apex Court arising out of SLP Nos.1012/2004;
10127/2004 and 10131/2004. He relied upon the judgment in Shri Krishna Petro Yarns Ltd. v. Union of India, 1995 (75) ELT 753 (Bom.); Pratibha Processors v. Union of India, 1996 (88) ELT 12 (SC); Vijay Narain Products Pvt Ltd. v. Union of India, 1998 (102) ELT 264 (Mad.); Kesoram Rayon v. Collector of Customs, Calcutta, 1996 (86) ELT 464 (SC); and SBEC Sugar Limited v. Union of India, 2006 (204) ELT 546 (Bom.) in support of his submissions.
Rejoinder :
23. Mr.Datta, while reiterating his earlier submissions, tried to distinguish the judgments cited by Mr.Rao. He submits that the judgment in Shri Krishna Petro Yarn (supra) has been delivered by High Court of Bombay on 19th November, 1992. This Judgment has also referred to the judgment of Karnataka High Court in Bangalore Wire Rod Mills (supra) which was delivered on 10th April, 1992. But the issue relating to section 59 (1) (b) of the Act was finally decided by Supreme Court in the Bangalore wire Rod mills case on 19th March, 1996. Thus, law to be applied is as reported in Union of India ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 19 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 principal. In his submission, this decision has no direct relevance to the facts of the present case. So far as judgment in Kesoram Rayon (supra), Mr.Datta submits that this case also has no relevance to the facts of the present case because it only deals with date on which the extended period comes to an end.
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26. So far as judgment in the case of SBEC Sugar Limited (supra) is concerned, Mr.Datta submits that this decision only declares that interest on warehousing goods is merely an accessory to the principal and if principal is not payable interest also is not payable. Thus, according to him, the respondents have failed to give any answer to the law declared by the Supreme Court in the case of Bangalore Wire Rod Mills case. He submits that the petitioners are entitled to refund of the interest illegally demanded and recovered from them along with interest thereon @ 18% p.a. since the department has used the said money for a very long period without the same legally belonging to it. He, thus prayed that the writ petition be allowed and rule be made absolute with costs.
Consideration :
27. Having heard rival parties, the entire foundation to the claims for refund of interest paid by the petitioners on the duty are based on the judgment of the Apex Court in the case of Bangalore Wire Rod Mills (supra). It is, therefore, necessary to examine the factual matrix appearing therein in the light of the statutory provisions holding the field at the relevant time.
28. At the outset, it must be stated that the appeal before the Supreme Court in Bangalore Wire Rod Mills case arose out of the Division Bench judgment of the Karnataka High Court; wherein the judgment of the learned single Judge of the same High Court was a ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 21 subject matter of challenge. The controversy involved related to the validity of demand notice issued under section 59(1)(b) of the Act. The learned single Judge of the Karnataka High Court had allowed the writ petition partly holding part of the notice of demand bad and illegal.
29. Aggrieved by the said judgment and order the petitioners/importers therein as well as the Union of India filed appeals and they were heard together by the Division Bench of Karnataka High. The Division Bench of the Karnataka High Court, while construing section 59(1)(b) of the Act, extensively dealt with the scope and interpretation thereof and affirmed the judgment 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 7th 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 ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 22 of duty in force on the date of demand. In para-14, 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 sub-section (2) of section 61 of the Act, Court observed as under:
"Sub-section (2) of section 61 which was inserted to fix the date from which the liability to pay interest would automatically start, expressly refers to provisions of Section 61(1) of the Act. The opening words of sub-section (2) of section 61 are very significant for answering the point arising for our consideration. The opening words of sub-
section (2) of section 61 are : "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 sub-section (1) by reason of the extension of the aforesaid period or otherwise." From these words it is clear, sub-section (2) expressly refers to sub-
section (1) of section 61 as amended by Act 11/83. If the intention of the legislature was that the provisions relating to computation of interest immediately after the expiry of the period specified in sub-section (1) of Section 61 as it stood prior to the amendment of that sub-section, sub-section (2) would have simply referred to the period referred to in sub-section (1) of Section 61. Instead, the opening words of sub-section (2) expressly refer to the period of one year and three months in sub-section (1) or Section 61 i.e. as it stood after its amendment. Therefore, in our opinion, there can be no doubt that sub-section (2) of Section 61 gets attracted only to cases to which sub-section (1) of Section 61 as it stood after its amendment gets attracted. It is not even the case of the respondents that sub-section (1) of Section 61 as amended with effect from 13-5-1983 applies to cases where goods were deposited in a warehouse when the ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 23 unamended sub-section (1) of Section 61 was in force. In our opinion, when even according to the respondents sub-section (1) of Section 61 as amended has no application to the present case. Correct view to take as to the scope of sub-
section (2) of Section 61 is it does not apply to the case of the petitioner. The resultant position is that the liability of the petitioner to pay interest arises under Section 59 of the Act i.e. from the date specified in the demand notice. In fact, it is because of this, the legislature inserted Section 61(2) which created the liability to pay interest from the date of expiry of the period specified in section 61(1) .
If even according to Section 59, the liability to pay interest arises from the date of expiry of the prescribed period of warehousing as specified in Section 61(1), it was unnecessary for the legislature to insert sub-section (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 para-8 of the said judgment observed as under:
::: Downloaded on - 09/06/2013 15:56:13 :::This Order is modified/corrected by Speaking to Minutes Order 24 "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 (b) in full hereinbefore. The liability to pay interest arises only after the expiry of the period prescribed in the notice of demand. It has been held by the High Court that the present matter is not governed by Section 61(2) , as it stood at the relevant time but by Section 59(1) alone . Indeed, it is submitted that when their respondent applied for extension of time of warehousing under Section 61(2), the government told it that the said provision had no application and hence, time cannot be extended thereunder. Once that is so, we must go by what Section 59(1) says. According to it, the duty became due on issuing the notice of demand. The notice prescribed fifteen days for Payment. Interest is chargeable only thereafter as held by the High Court, which, in our opinion, is a reasonable way of understanding the provision. Secondly, we see no justification or legal basis for the appellants' plea that the interest must be paid taking the rate of the duty at ninety percent for the said entire period. As a matter of fact, the rate of duty on the said goods was not ninety percent throughout the period March 22, 1985 to September 9, 1988. It was varying. The High Court's direction, therefore, to take the actual rate in force from time to time is a reasonable one. We are, therefore, of the opinion that the judgment of the High Court does not call for any interference. The appeals are accordingly dismissed. No costs."
(Emphasis supplied) ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 25
32. The reading of the aforesaid para in general and emphasized portion thereof in particular would go to show that the Apex Court categorically held that the matter in question was not governed by section 61(2) but section 61(1) alone as it stood at the relevant time.
The sub-section (2) of section 61 was inserted in the Act by virtue of amendment by Act 11 of 1983 with effect from 13th May, 1983 i.e. after the petitioners/ importers in Bangalore Wire Rod Mills case (supra) had imported good and kept them in the warehouse. It is, therefore, clear that the case of Bangalore Wire Rod Mills was not within the sweep of sub-section (2) of section 61 of the Act since the said sub-section was not on the statue book at the relevant time. The case in hand is well within the sweep of section 61(2) of the Act as such reliance placed on the judgment in the case of Bangalore Wire Rod Mills is misplaced.
33. The Division Bench of 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 sub-sections (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 ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 26 warehouse. Periods are prescribed in section 61(1)(b) of the Act. Then follows sub-section (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 sub-section (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 may be, three months, till the date of the clearance of the goods from the warehouse."
(Emphasis supplied)
34. The key words are "beyond the period". The liability to pay interest arises after expiry of one year or three months as the case may be and continues till the date of clearance of the goods from the warehouse. The Division Bench of this Court in Shri Krishna Petro Yarns Ltd. (supra) on fair reading of this provision observed that till the date of clearance of goods from the warehouse, whatever amount of duty on the basis of rate then prevailing under the Customs Tariff Act, is required to be paid with interest thereon till the date of clearance. While carving out different operations of the fields of section 59(1)(b) and section 61(2) of the Act it was observed as under:
"..... After reading these provisions we are of the opinion that under Section 59(1)
(b) of the Act, duty and interest are linked up and, therefore, notice of demand has to be for all duties, rent charges, etc. together with interest, whereas under ::: Downloaded on - 09/06/2013 15:56:13 :::
This Order is modified/corrected by Speaking to Minutes Order 27 Section 61(2) of the Act, interest is delinked from the principal amount i.e. duty amount and interest thereon is recoverable at the time of clearance of goods from the warehouse.
35. The Apex Court also had an occasion to consider the scope of sub-sections (1) and (2) of section 61 of the Act in the case of Pratibha Processors (supra), may be in a little different fact situation but the relevant observations made in para-14 thereof and extracted hereinbelow are very much applicable to the case in hand.
"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, 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 ::: Downloaded on - 09/06/2013 15:56:13 ::: This Order is modified/corrected by Speaking to Minutes Order 28 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 were removed from a warehouse on expiration of the period during which such goods were permitted under Section 61 to remain in a warehouse, the proper officer may demand the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods.
The period for which goods may be
warehoused is prescribed in Section 61.
By virtue of sub-section (2) of Section 61, interest is payable on the amount of duty on the warehoused goods for the period from the expiry of the permitted period till the date of their clearance from the warehouse, regardless of whether the goods have remained in the warehouse beyond the permitted periods by reason of extension of such periods or otherwise. The interest on the amount of duty on the warehoused goods is payable for the period subsequent ::: Downloaded on - 09/06/2013 15:56:14 ::: This Order is modified/corrected by Speaking to Minutes Order 29 to the permissible period up to their clearance. The goods are improperly removed from the warehouse under the terms of sub-
section (1) of Section 72 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.
37. In the backdrop of the aforesaid settled legal position, let us turn to the facts of the case in hand, it is not in dispute that the bills of entry were filed on various dates such as 17th February, 1989, 22nd February, 1989, 24th February, 1989, 2nd March, 1989, 20th March, 1989, 27th March, 1989 and in all cases, the goods remained in warehouse beyond the permissible period provided under section 61(1) of the Act. On expiry of the bond period, as mentioned, subject goods were liable to be treated as improperly removed from the warehouse in view of section 72. That improper removal takes place when the goods remain in the warehouse beyond the permitted period. Thus, at the time when the bills of entry were filed by the petitioners, the proper officer was 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 ::: Downloaded on - 09/06/2013 15:56:14 ::: This Order is modified/corrected by Speaking to Minutes Order 30 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 re-
exportation or re-exportation after filing bills of entry and after paying all the dues and after getting an order or by transferring the goods from one warehouse to another.
39. In the case in hand, the subject goods were imported in the year 1988-89. The free period of keeping the goods in the warehouse without interest was curtailed to three months after amendment from 13th May, 1983. In the present case, department had allowed 90 days free period and beyond 90 days, interest was levied as per amended provision of section 61(2). The Legislature inserted sub-section (2) in section 61 by Act 11 of 1983 which contemplates that where any ::: Downloaded on - 09/06/2013 15:56:14 ::: This Order is modified/corrected by Speaking to Minutes Order 31 warehoused goods remain in a warehouse beyond the period of three months, interest @ 18% is payable on the duty on warehoused goods. The facts appearing in Bangalore Wire Rod Mills case (supra) unequivocally go to show that at the relevant time sub-section (2) of section 61 was not on the statute book. In the circumstances, reliance placed on the said judgment by the petitioners as stated is misplaced.
40. In the aforesaid view of the matter, petition is devoid of any merits. Accordingly, petition is dismissed. Rule stands discharged with no order as to costs.
(K.K.TATED, J.) (V.C.DAGA J.)
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