Custom, Excise & Service Tax Tribunal
Gateway Terminals India Pvt Ltd vs Cc (Nhava Sheva-Ii ) Mumbai on 24 October, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Customs Appeal No. 86379 of 2015
(Arising out of Order-in-Original No. 01/2015-16 dated 09.04.2015
passed by Commissioner of Central Excise & Customs (Appeals),
Nhava Sheva)
M/s. Gateway Terminals India P. Ltd. Appellant
GTI House, J.N. Port,
Sheva, Taluka: Uran,
Dist.: Raigad,
Navi Mumbai 400 707.
Vs.
Commr. of Cus. (Nhava Sheva-II), Respondent
Mumbai
Jawaharlal Nehru Custom House,
Nhava Sheva,
Dist.: Raigad
Appearance:
Shri Vikram Nankani, Advocate, for the Appellant
Shri R.K. Dwivedy, Authorised Representative for the
Respondent
CORAM:
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
Hon'ble Mr. Sanjiv Srivastava, Member (Technical)
FINAL ORDER NO. A/86896/2019
Date of Hearing: 18.07.2019
Date of Decision: 24.10.2019
PER: SANJIV SRIVASTAVA
This appeal is directed against the order in original
No 01/2015-16 dated 09.04.2015 of the Commissioner
Customs (NS-II), JNCH, Nhava Sheva. By the impugned
order, Commissioner has held as follows:
"33. On the basis of the foregoing, following order is
passed:
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i. The EOU registration of M/s GTIL stands cancelled
ab-initio.
ii. The Customs Bonded Warehousing License No. PN-
1/CUSTOMS-01/2006 issued under Section 58 of the
Customs Act, 1962 stands cancelled ab-initio.
Consequently, the in bond Port Handling Services
permission given to the importer under Section 65 of
the Customs Act, 1962 also stands cancelled ab
initio.
iii. I confirm the demand of duty amounting to Rs
78,81,61,176/- (Rupees Seventy Eight Crores Eighty
One Lakhs Sixty One Thousand One Hundred and
Seventy Six only), Rs 3,59,418/- (Rupees Three
Lakhs Fifty Nine Thousand Four Hundred and
Eighteen only) and Rs 1,28,025 (Rupees One Lakhs
Twenty Eight Thousand and Twenty Five only) under
Section 28 of the Customs Act, 1962 along with the
applicable interest under Section 28AB of the
Customs Act, 1962 (Section 28AA w.e.f. 08.04.2011)
on the importer M/s GTIL in respect of the three
SCN's dated 02.11.2006, 22.012007 and
29.01.2007.
iv. The EPCG license (i) 033000831 dated 31.03.2005,
(ii) 0330009232 dated 21,07.2005, (iii) 0330009814
dated 23.09.2005, (iv) 0330010231 dated
16.11.2005 and (v) 0330010407 dated 05.12.2005
of year 2005 issued to the importer and deemed to
be valid by the EPCG committee and the new EPCG
Licenses to be issued by the Regional Authority can
be used for debiting so much of the duty as is in
excess of the amount calculated at the rate of 5.1 ad
valorem for the capital goods and spares already
cleared under EOU scheme as per the notification No
97/2004-Cus dated 17.09.2004 subject to the goods
being covered under the said licenses and necessary
debits (quantity, value and duty) and fulfilment of
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export obligation as may be fixed/ determined and
accounted by the Regional Authority.
v. The importer is permitted to debit the duty of Rs
67,91,49,875/- (Rupees Sixty Seven Crores Ninety
One Lakhs Forty Nine Thousand Eight Hundred and
Seventy Five only) against EPCG licenses and pay
the remaining amount of duty of Rs 10,94,98,744/-
(Rupees Ten Crores Ninety Four Lakhs Ninety Eight
Thousand Seven Hundred and Forty Four only) in
cash as per the table A annexed to this order. The
request of the importer to debit the duty against the
SFIS licenses is rejected.
vi. The show cause notices vide F Bo S/6-Gen-416/06
Bond JNCH dated 02.11.2006, 22.01.2007 and
29.01.2007 stand disposed of accordingly."
2.1 Appellants were granted license No PN-1/Customs-
01/2006 dated 26.05.2006 as private bonded warehouse
under Section 58 of the Customs Act, 1962 and for in Bond
port handling services under Section 65 of the Customs
Act, 1962. They were also registered as EOU on
09.06.2006 by the EOU Section of JNCH.
2.2 Though appellants were registered as EOU, but on
examination it was noticed that imports made by the
appellants were not exempt under the Notification No
52/2003-Cus dated 31.03.2003, para 11, which read as
follows:
"Nothing contained in this Notification shall apply to the
goods imported by a service sector export oriented
undertaking as specified (a) in the opening paragraph, who
does not directly export services out of India."
2.3 After seeking clarification from Additional Director
General (DGEP), revenue was of the view that EOU
Registration granted by JNCH to Appellants was liable for
consideration and also the permission granted to license
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granted as Private Bonded Warehouse and for in bond Port
handling Services also was liable for cancellation.
2.4 Three Show Cause notices dated 02.11.2006,
22.01.2007 and 29.01.2007 were issued to the Appellant
asking them to show cause as to why-
i. EOU Registration should not be cancelled;
ii. Bonding permission given to their premises should
not be cancelled;
iii. Why duty amount of Rs 78,80,51,953/-, Rs
3,59,418/- and Rs 1,28,025/- along with applicable
interest in respect of the three show cause notices
(total 33 consignments) should not be recovered
from them as per Section 28 of the Customs Act,
1962 read with para 11 of Customs Notification No
52/2003-Cus dated 31.03.2003
2.5 After considering the submissions made by the
Appellants, Commissioner has by the impugned order
adjudicated the three Show Cause Notices. Aggrieved by
the impugned order appellants are in appeal.
3.1 We have heard Shri Vikram Nankani, Advocate for
the Appellant and Shri R K Dwivedy, Additional
Commissioner, Authorized Representative for the revenue.
3.2 Arguing for the Appellants learned Counsel submitted
that-
The issue in respect of the cancellation of EOU
Registration and subsequently permitting to
discharge the duty that is in excess of 5.1% ad-
valorem is settled by the EPCG Committee's decision
dated 19.09.2014. Commissioner has in his order
given effect to the decision of EPCG Committee, by
permitting the debit of duty demanded in respect of
the goods initially imported claiming the benefit of
Notification No 52/2003-Cus against the various
EPCG Licenses issued to them in 2005.
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They are entitled to debit remaining amount of duty
i.e. 5.1% ad-valorem, by utilizing the SFIS Scrips
available with them for the reasons as stated below:
o From 01.01.2009 (under Policy of 2009-14)
the SFIS Scrips have been allowed to be
utilized towards payment of duty under EPCG
scheme;
o The duty @ 5.15% scheme is being paid vide
EPCG Committee order dated 19.09.2014;
o It is settled that duty credit scrip is equivalent
to cash and hence is the alternate mode of
payment of duty.
The next issues raised by them in the appeal are in
respect of the demand of the interest. Since they
have acted bonafidely and the duty payable on the
imported goods have been permitted to be debited
against the EPCG License that were issued to them in
2005, the demand of interest should not be there
because at the relevant time of importing the goods
they could have instead of availing the benefit of
Notification No 52/2003-Cus, applicable to EOU,
debited the duty payable from the EPCG License;
Demand and levy of interest are against the Doctrine
of Promissory Estoppel.
Even if the demand of interest is there then the
same can only be in respect of the duty required to
be paid by them in cash and not on the component
of duty allowed to be debited by them from the EPCG
Licenses.
He would rely upon the decisions as follows in
support of the contentions raised.
o Pratibha Processors [1996 (88) ELT 12 (SC)]
o Jayathi Krishnan & Co [2000 (119) ELT 4 (SC)]
o U K Paint Industries [2014 (306) ELT 284
9Del)]
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o Leave has been granted by the Apex Court in
SLP [2017 (353) ELT A132 (SC)]filed against
the decision of Bombay High Court in case of
Valecha Engineers Ltd [2010 (249) ELT 167
(Bom)]
3.3 arguing for the revenue learned Authorized
Representative while reiterating the findings of
Commissioner submitted that-
Order of Commissioner permitting the debit from the
EPCG licenses issued to the appellant in the year
2005 was in line with the decision of EPCG
Committee. However permitting such debit from the
EPCG License would not imply that appellants had
paid the duty due against the imported goods on the
due date. Since the appellants have not paid the
duty on the due date, by claiming the exemption
which was not admissible to them, the demand of
duty under Section 28 was justified;
Since the demand has been confirmed by the
adjudicating authority under Section 28, the demand
for interest under Section 28, is natural consequence
of the confirmation of demand under Section 28,
hence the impugned order cannot be faulted with;
Further the case law relied upon by the appellant are
in respect of warehousing interest and not in respect
of the duty demanded and confirmed under Section
28, for the duty short paid or not paid on the due
date, these decisions will not apply to the facts of the
present case and are distinguishable. In a series of
the decisions including the decision of Bombay High
Court in case of Valecha Engineers Ltd., it has been
held that demand of interest under Section 28AA of
Customs Act, 1962, is in respect of duty short paid
or not paid and hence cannot be set aside or waived.
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Since during the period of imports the Foreign Trade
Policy as it existed then did not permitted the debits
from the SFIS Scrips/ License against the imports
made under EPCG Scheme, Commissioner was
absolutely justified in denying such permission.
4.1 We have considered the impugned order with the
submissions made in appeal and during the course of
arguments on appeal.
4.2 Commissioner has in para 27 to 31 of the impugned
order recorded as follows:
"27. The contentions being raised by the importer are
examined point-wise as follows:
i. In the instant case as there was a dispute related
to the provisions of foreign trade policy and scope
of the Notification No. 52/2003-Cus dated
31.03.2003 read with para 11 thereof, three
SCN's dated 02.11.2006, 22.01.2007 and
29.01.2007 were issued to the importer. In light
of the BoA order dated 13.11.2007 cancelling the
EOU status ab-initio, interim order of the Hon'ble
Bombay High Court and the EPCG Committee's
decision dated 19.09.204, the said SCN's are now
being taken up for adjudication.
ii. The EPCG Committee's decision dated 19.09.2014
issued with the approval of DGFT under para 2.5
of FTP and providing for relaxation of provision of
FTP: vis-a-vis permitting EPCG benefit for the
clearances made under EOU and waiver of
interest as a special case needs to be given effect
subject to the statutory provisions regarding duty
and interest contained in the Customs Act, 1962.
iii. The EPCG Committee's decision dated 19.09.2014
provides for EPCG benefit to the goods already
cleared under EOU scheme and also holds the
EPCG licences issued to the importer in 2005 as
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valid. However, the issues related to the current
status of warehouse registration needs to be
examined.
iv. Vide para 11 of the Notification No. 52/2003-Cus,
the benefit of EOU scheme itself is being
excluded. Further, the said issue stands finalized
in light of the BoA order dated 13.11.2007
cancelling the EOU status ab-initio and the
amendments brought in the Policy for 2008-2009
and notified on 11.04.2008 wherein Para 6.9(f) of
the FTP itself was omitted.
v. The EPCG Committee's decision dated 19.09.2014
does not specifically call for giving effect to its
decision prior to the initiation of adjudication
proceedings pertaining to the subject SCNs.
vi. The issue stands finalized in light of the BoA order
dated 13.11.2007 cancelling the EOU status ab-
initio.
vii-ix. The Customs Bonded Warehousing Licence no.
PN-1/CUSTOms-01/2006 dated 26.05.2006 was
issued to M/s. GTIL under Section 58 of the Customs
Act, 1962 as per the condition no. 1 of the Letter of
Permission (LOP) issued by the Development
Commissioner, SEEPZ Special Economic Zone,
Mumbai vide letter No. PER:37(2005):
SEEPZ:EOU:82/05-06/2245 dated 29.03.2006 and
the agreement dated 13.04.2006 entered into by
M/s. GTIL with the Development Commissioner,
SEEPZ SEZ, Mumbai for setting up of the 100% EOU.
Thus, it is evident that the customs bonding licence
was issued to M/s. GTIL only for the purpose of
permitting the in-bond port handling services under
EOU scheme and therefore the EOU registration
dated 09.06.2006 and customs bonding licence
dated 26.05.2006 issued to M/s GTIL needs to be
seen as inter-linked for giving effect to the 100%
9 C/86379/2015
EOD scheme. Thus the customs bonding licence
issued to M/s GTIL does not have independent
existence. Consequent to the ab-initio cancellation of
EOD status by the BoA vide order dated 13.11.2007,
the EOD registration dated 09.06.2006 and the
customs bonding licence dated 26.05.2006 issued to
the importer become null and void and stand
cancelled ab-initio. The post facto application dated
15.02.2013 of the importer for renewal of the
customs bonding licence therefore does not merit
consideration. Accordingly, the imported goods are
not eligible for duty exemption
under the notification no. 52/2003-Cus dated
1.03.2003 and the domestically procured goods are
not eligible for the benefit of notification no.
20/2003-C. Ex dated 31.03.2003 and the good cease
to be warehoused goods and are deemed to be have
been cleared for home consumption under Section
47 of Customs Act, 1962 on the date of bonding
itself. Thus, the importer is liable to pay the duty on
the imported goods at the rate applicable on the
date of filing of the warehouse bill of entry and the
same becomes payable on the date of assessment of
the warehouse bill of entry and is recoverable under
Section 28 of the Customs Act, 1962 along with the
applicable interest under Section 28AB of the
Customs Act, 1962 (Section 28 AA w.e.f
08.04.2011). In respect of the duty free
procurement effected against the CT 3/ Procurement
Certificate no. 01/2006 dated 22.09.2006 issued by
the EOD Section, JNCR, the importer is liable to pay
the duty of Rs 1,28,025/- which was forgone on
account of CVD and Education Cess at the time of
bonding and the same is recoverable under Section
28 of the Customs Act, 1962 along with the
applicable interest under Section 28AB of the
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Customs Act 1962 (Section 28AA w.e.f 08.04.2011).
Thus the SCNs issued under Section 28 are not
premature.
x. The EPCG Committee's decision dated 19.09.2014
issued with the approval of DGFT under para 2.5 of
the Foreign Trade Policy and providing for relaxation
of provision of FTP vis-a-vis permitting EPCG benefit
for the clearances made under EO does not render
the SCN redundant and irrelevant inasmuch as the
issues of interest related to the chargeability of
customs duty and the date on which the duty
becomes due are to be determined as per the
statutory provisions contained in the Customs Act,
1962. The BoA order revoking the EOD status ab-
initio and the EPCG Committee's decision dated
19.09.2014 does not call for fresh assessment under
the EPCG licence but recommends leniency in
respect of fine penalty and interest. In light of the
EPCG Committee's decision dated 19.09.2014, the
duty liability can be adjusted against the 2005 year
EPCG licences and the new EPCG licences. As the
instant case pertains to the imports effected during
the period 2006-2007, the same are to be governed
as per the FTP 2004-2009 in respect of availing the
benefit of EPCG scheme. Therefore, it appears that
the importer is not eligible for the Zero Duty EPCG
scheme as the said scheme was introduced only vide
para 5.1 of the FTP 2009-14.
xi. The instant case does not warrant any
academic discussion about the differentiation
between levy and assessment. The liability to pay
the duty and applicable interest stands finalized as
already discussed in the para vii-ix above.
xii. Though the customs bonded warehousing
licence was valid for 3 years but the EOU ceased to
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exist ab-initio and consequently the imported goods
and the duty free domestically procured goods
become liable to interest as already discussed in the
para vii-ix above.
xiii. Though the EPCG Committee vide the minutes
of the meeting dated 19.09.2014 had recommended
for waiver of interest as a special case, the same was
contested by the CBEC vide letter F. No.
605/53/2014-DBK dated 05.11.2014 stating that the
same had been done without tile concurrence from
the Department of Revenue and it was requested
that the same be expunged from the minutes of the
meeting dated 19.09.2014 as it would not be proper
to decide on the issue of interest beforehand under
the para 2.5 of the FTP as the issues of interest
related to the chargeability of customs duty and the
date on which the duty becomes due were to be
decided by the jurisdictional Customs Authority.
Further, as per the provisions of Section 61 of the
Customs Act, 1962 waiver of interest can only be
ordered by the CBEC if the same serves the public
interest. The provisions of Section 28AA(3) and
Section 151 A of the Customs Act, 1962 are not
applicable in the instant case as the duty has
become payable consequent to the order of BoA and
not that of CBEC.
xiv. As the instant case pertains to the imports
effected during the period 2006-2007, the same are
to be governed as per the FTP 2004-2009. The para
4.29 of HBP Vol. I of FTP 2004-2009 does not
provide for payment of customs duty component
through the valid duty credit scrips issued under
Chapter 3 of FTP and the said provision was
introduced only vide the FTP 2009-14. Thus, the
request of the importer to allow the duty debit
12 C/86379/2015
through SFIS licences appears to legally untenable
and the same is rejected.
28. As regards the case law Bharat Warehousing
Corporation and Others vs. Collector of Customs, Calcutta
[1988 (34) ELT 423 (Cal.)] relied upon by the importer,
the same is not applicable as the instant case involves ab-
initio rejection of the EOU status by BoA and therefore
merits ab-initio cancellation of the EOU registration and
the customs bonding licence which was issued as per the
LOP issued by the Development Commissioner, SEEPZ
Special Economic Zone, Mumbai.
29. As regards the case law Pratibha Processors Versus
Union of India [1996 (88) ELT 12 (SC)] relied upon by the
importer, the same is not applicable as the goods are liable
to payment of duty and the goods cease to be warehoused
goods.
30. As regards the case law Assistant Collector of Central
Excise, Calcutta vs. National Tobacco Co. of India Ltd.
[1978 (2) ELT (J 416) (SC)] relied upon by the importer,
the same is not applicable as the instant case does not
warrant any differentiation between levy and assessment.
31. As regards the case laws viz. Commissioner of
Customs vs. Acalmar Oils & Fats Ltd. [2009 (240) ELT 440
(Tri.-Bang.)], Dinesh Oils Ltd. vs. Commissioner of
Customs [2007 (220) ELT 246 (Tri.-Ahmd.)], Govind Ram
Agarwal vs. Collector of Customs [2002 (149) ELT 1209
(Tri.-Kolkata)], Krishna Filaments Ltd. vs. Commissioner of
C. Ex. [2002 (143) ELT 100 (Tri.-Mumbai)] and Essar Oil
Ltd. vs. Commissioner of Customs [2006 (197) ELT 450
(Tri.-Mumbai)] relied upon by the importer, the same are
not applicable as the instant case merits ab-initio
cancellation of the EOU registration and the customs
bonding licence which was issued as per the LOP issued by
the Development Commissioner, SEEPZ Special Economic
Zone, Mumbai which renders the goods as deemed cleared
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for home consumption under Section 47 of the Customs
Act, 1962 on the date of bonding itself."
4.3 It is admitted fact that Appellants had imported the
goods covered by thirty three Bill of entries as detailed
below, claiming the benefit of exemption under Notification
No 52/2003-Cus. Subsequently it was determined that the
appellants were not eligible to benefit of exemption under
the said notification accordingly the proceedings to
demand the duty short/ not paid by the Appellants were
initiated under Section 28 of the Customs Act, 1962. The
demands in respect of the duty short/ not paid by the
appellant have been confirmed by the Commissioner along
with the interest in respect of the duty short/ not paid.
4.4 The contentions raised by the Appellant in respect of
the demand made under Section 28 and interest under
Section 28AA have been considered by the Hon'ble
Bombay High Court in case of Valecha Engineering Ltd
[2010 (249) ELT 167 (Bom)], and following has been held:
"22. Normally in a case when import or export of goods is
covered by an import free license or notification, the goods
are released against a bond for the amount of duty
otherwise payable so that the party complies with the
conditions of the notification failing which the duty as set
out in the bond becomes payable and can be recovered
under Section 143 and 143A of the Act. The Notification
itself normally provide that in the event of failure to use
the goods for the purpose covered by the notification such
importer shall pay an amount equal to the difference
between the levy on the said imported goods but for the
exemption under the Notification and the duty the party
paid at the time of importation. In so far as the bond is
concerned it could be enforced under Section 142(2) of the
Act.
23. As submitted on behalf of the Petitioners that by itself
does not mean that Section 28 is not attracted. In all cases
14 C/86379/2015
of non-payment of duty or short levy or erroneous refund
where investigation is to be done, Section 28 would be
attracted in the absence of any machinery under Section
125 for deciding whether there is any breach. In a case of
an import where duty is exempted by a notification, if
there be breach duty becomes leviable and that would fall
in the expression of nonpayment or short payment of duty.
Once any duty becomes due interest would be payable if
provided in the Bond. The two views in M.J. Exports
(supra), Security & Finance (P) Ltd., on the one hand and
Jagdish Cancer & Research Centre (supra) and C.T. Scan
Research Centre (supra) can be reconciled. The view in
Jagdish Cancer & Research Centre (supra) and C.T. Scan
Research Centre (supra) would apply when there is no
dispute on there being a breach about the quantum of
duty. As rightly pointed out on behalf of the Petitioners for
a party disputing its liability Section 28 is the only
provision. There is no machinery for adjudication under
Section 125(2). Notice to satisfy the principles of natural
justice will be no answer in the absence of an adjudicating
machinery.
24. Considering the interpretation of the provisions of Sea
Customs Act as it then stood, the Objects and Reasons
clause as earlier noted and the judgment in M.J. Exports
(supra) though the judgment in Jagdish Cancer & Research
Centre is of a Bench of three Judges vis-a-vis the
Judgment in Union of India v. Security & Finance (P) Ltd.,
(supra) and M.J. Exports Ltd. (supra), in our opinion, in
addition it would be open under Section 28 for the
Competent Authority, to issue a show cause notice.
Section 28 is the provision under the Act, if there has been
nonpayment or short payment and the like, to adjudicate
the dispute to decide whether there has been a breach
and/or the like and consequently recovery of duty which
has not been paid or short paid. Such an exercise would
not be without jurisdiction. Once duty is payable the
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importer would be liable for interest on the unpaid duty
under Section 28AB, as by operation of law, when duty is
not paid or short paid on ascertainment of such non-
payment and ascertainment of interest under Section 28AB
becomes payable. If interest is payable under a bond or
notification the interest would be payable pursuant to the
bond or notification. In such cases there can be no further
interest under Section 28AB.
25. The judgment in Rexnord Electronics & Controls Ltd.
v. Union of India, 2008 (224) E.L.T. 184 (S.C.) may now
be considered. The Supreme Court in that case held that
the interest was payable pursuant to a bond given and it
will be contractual and the Settlement Commission would
have no jurisdiction to waive the interest. The Court there
was considering the provisions of Section 28AA of the
Customs Act. Under that provision on duty being
ascertained, if not paid, within three months, interest is
payable. On the facts of that case though the goods were
dutiable in terms of the Notification they were exempt
from duty subject to terms and conditions. The goods were
released pursuant to a bond and undertaking. The exporter
i.e. The Appellant before the Supreme Court did not
comply with the conditions of re-export and accordingly a
demand was made. The notices were the subject matter
before the Settlement Commission and in that context the
observations were made. The law, therefore, would be that
the Settlement Commission had the power to waive
interest only if it is statutory and payable under the Act.
26. Under Section 28AB of the Customs Act, interest
becomes payable on duty becoming payable in the set of
cases as set out under the said Section, which duty has
not been levied or paid or has been short levied or short-
paid or erroneously refunded by reasons of collusion or any
wilful misstatement or suppression of facts. In Nirlon Ltd.
v. Union of India, 2007 (209) E.L.T. 12 (Bom.) the issue
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was charging interest under the provisions of the Central
Excise Act. This Court there held that it was requirement of
law including natural justice that notice will be issued to
the Petitioner or party aggrieved as to why interest
amount should not be claimed from it and after affording a
hearing that liability ought to be decided. Under the
Customs Act if there is short levy of duty or non-payment
thereof the requirement of serving a notice under Section
28 arises. The decision, therefore, would be as held by us
in M/s. Kamat Printers Pvt. Ltd. (supra) that once duty is
ascertained then by operation of law, such person in
addition shall be liable to pay interest at such rate as fixed
by the Board. The Proper Officer, therefore, in the ordinary
course would be bound once the duty is held to be liable to
call on the party to pay interest as fixed by the Board.
27. We may at this stage only note that various
Notifications under the Customs Act have been brought to
our attention. These are notifications issued under Section
25(1) of the Customs Act. Under the Notifications in
exempting the goods from the whole of duty of customs
the importer has to execute a bond binding to pay an
amount equal to the duty together with interest as set out
in the Notification. The interest varies from time to time
depending on the nature of the Notification. There are
Rules also framed called Customs (Import of Goods at
Concessional Rate of Duty for Manufacture of Excisable
Goods) Rules, 1996. In terms of these Rules for failure to
comply with the conditions of imports power is conferred
to recover the difference of duty and interest fixed by the
Notification under Section 28AB of the Customs Act.
Though ultimately as can be seen considering the
Notification issued under the Rules the interest is secured
by a bond notwithstanding the interest is payable pursuant
to an exercise in subordinate legislation. Therefore, in our
opinion, what emerges is that interest payable is
compensatory for failure to pay the duty. It is not penal in
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character in that context. The Supreme Court under the
provisions of the Additional Duties of Excise (Goods of
Special Importance) Act, 1957 in Collector of C.Ex.,
Ahmedabad v. Orient Fabrics Pvt. Ltd. - 2003 (158) E.L.T.
545 (S.C.) was pleased to observe that when the breach of
the provision of the Act is penal in nature or a penalty is
imposed by way of additional tax, the constitutional
mandate requires a clear authority of law for imposition for
the same. There the Court noted that the Act created
liability for additional duty for excise, but created no
liability for any penalty. The Supreme Court noted the
judgment of the Federal Court in Chatturam v. C.I.T.
Bihar, 1947 (15) ITR 302 which observed that liability does
not depend on assessment. There must be a charging
section to create liability. There must be first a liability
created by the Act. Second, the Act must provide for
assessment. Third, the Act must provide for enforcement
of the taxing provisions. The mere fact that there is
machinery for assessment, collection and enforcement of
tax and penalty in the State Act does not mean that the
provision for penalty in the State Act is created as penalty
under the Central Act. The meaning of penalty under the
Central Act cannot be enlarged by the provisions of
machinery of the State Act incorporated for working out of
the Central Act. The law on the issue of charge of interest,
in our opinion, stands concluded and is no longer res
integra. We may only gainfully refer to the judgment in
India Carbon Ltd. v. State of Assam, (1997) 6 SCC 479.
The Court there observed as under :-
"This proposition may be derived from the above: interest
can be levied and charged on delayed payment of tax only
if the statute that levies and charges the tax makes a
substantive provision in this behalf."
Therefore, once it is held that duty is due, interest on the
unpaid amount of duty becomes payable by operation of
18 C/86379/2015
law under Section 28AB. Secondly, when there is a dispute
as to whether there is a breach of the notification, then
Section 28 can be resorted to Section 125(2) in addition
can be resorted to when there is no dispute.
.......
30. It is sought to be contended that it is only after 18th April, 2006 that the Customs Tariff Act, 1975 provides for interest. It is in this context that this Court would have to consider the true import of the meaning of the expression that that provisions of the Customs Act, Rules and Regulations made thereunder as far as may be, apply to the duty charged under this Act. It is no doubt true that the provisions of Customs Tariff Act themselves do not provide for interest. However, we may gainfully refer to the expression "duty" under Section 2(15) of the Customs Act, which reads as under :-
""duty" means a duty of customs leviable under this Act."
A reading thereof would indicate that the provisions of the Customs Act pertaining to duty would also apply duty payable under the Customs Tariff Act.
The law as now settled is that the charging Section for Customs Duty is Section 12 whereas the charging Section in so far as the Customs Tariff Act is Section 3. However, relevant for our discussion would be the Sections 3, 3A and their relevant sub-sections. Would a construction of these provisions, result in holding that interest be treated as having been incorporated under the provisions of the Customs Tariff Act, 1975. The provision for interest as now settled is a part of the machinery provisions. It by itself is not penal in character, but is compensatory in nature. In other words it recompensates the State on failure to pay duty at the rate of interest as determined by the Board. Two constructions flow. One the rule of strict construction it being a taxing statute and the other not a strict construction if it be part of the machinery provisions.
19 C/86379/2015 We may now refer to Section 28AA. Under Section 28AA interest becomes automatically payable on failure by the assesee to pay duty as assessed within the time as set out therein. Similarly, under Section 28AB on duty being ascertained as under Section 28 interest is payable by operation of law. In a case, therefore, where duty has been ascertained as due under the Customs Tariff Act, 1975 by the machinery under the provisions of the Customs Act if the provisions of Sections 3 and 3A are read in their proper context, then Section 28 would first be attracted. No interest will be payable under Section 28AB if the predicates of Section 28 are not satisfied. Therefore, in a case of non-payment of duty of the payment or erroneous refund even under the provisions of the Customs Tariff Act, 1975, Section 28 would be attracted and once duty is ascertained under Section 28 interest becomes payable under Section 28AB as the machinery provisions of the Customs Act are incorporated into the Customs Tariff Act and the provision for interest is part of the machinery provisions though at the same time Section 28AB is a substantive provision for payment for interest under the Customs Act. The rule of strict construction must be rejected. Interest is compensatory for failure to pay duty on the date due and payable. Therefore, once duty is determined considering the expression, the provisions of the Customs Act shall as far as may apply Section 28AB would be applicable. The amendment of the 18th April, 2006 only clarifies the position.
31. In the case of Orient Fabrics Pvt. Ltd. (supra) the Court was specifically dealing with the issue of penal provisions like penalty and confiscation. It did not deal with the issue of interest. Interest in that context has not been held to be penal in character.
32. In Writ Petition No. 2540 of 2008 the Commission held that interest could not have been charged and 20 C/86379/2015 accordingly directed that interest be refunded. The petitioner there had already paid the interest. The Commission, therefore, suo motto could not have ordered refund of interest in the application the petitioner had not sought for refund of interest paid or for waiver of interest. Apart from that as we have now held, interest was payable. If interest was not payable under the Act the question of the Commission exercising jurisdiction, directing the refund would also not arise. This is irrespective of the fact that any issue pertaining to refund of interest would be subject to the provisions of unjust enrichment. In our opinion Rule in this Petition will have to be made absolute both on the count that interest was payable and alternatively on the ground that the Commission had no jurisdiction to direct refund of interest."
4.5 Appellants have sought to contest the demand of interest by invoking the provisions of promissory estoppel. It was there submission that once they had been allowed registration as EOU, and clearance of the goods by allowing the exemption under Notification No 52/2003- Cus, the demand made under Section 28 and demand of interest under Section28AA/ 28AB will be hit by the principles of promissory estoppel. Hon'ble Supreme Court has constantly held that there is no estoppel against the operation of law:
Elson Machines Pvt Ltd [1988 (38) ELT 571(SC)]
8. The next submission on behalf of the appellant is that the Classification Lists had been approved earlier and the Excise authority was estopped from taking a different view.
Plainly there can be no estoppel against the law. The claim raised before us is a claim based on the legal effect of a provision of law and, therefore, this contention must be rejected.
21 C/86379/2015 Plasmac Machine Mfg Co Pvt Ltd [1991 (51) ELT 361 (SC)]
6. The appellants contention that the department having earlier approved the classification of Tie Bar Nuts under Tariff Item 68 has no justification for its revision is, to our mind, not tenable inasmuch as there could be no estoppel against a statute. If according to law Tie Bar Nuts fall within Tariff Item 52 the fact that the department earlier approved their classification under Tariff Item 68 will not estop it from revising that classification to one under Tariff Item 52. See M/s. Elson Machines Pvt. Ltd. v. Collector of Central Excise - 1988 (38) E.L.T. 571 (SC) = 1989 Suppl. (1) SCC 671, Para 10 at 675.
Indian Rayon and Industries [208 (229) ELT 3 (SC)]
13. We do not find any substance in this submission advanced on behalf of the assessee. The only notification which was available to the assessee at the time of import which granted the assessee the right to import duty free goods was Notification No. 158/95-Cus. Having availed of the benefit of notification, the assessee has necessarily to comply with the conditions of the notification. It goes without saying that the assessee cannot approbate and reprobate. In Tractors and Farm Equipment Ltd. v. Collector of Customs, Madras, 1997 (91) E.L.T. 254 (S.C.) = 1998 (9) SCC 665, it was pointed out by this Court that once the assessee's case was that what it had imported do not constitute internal combustion piston engines but only certain components, the importer cannot turn around and say that what was imported constitutes piston engines. Of course, there is no estoppel against the law but having sought for and taken the benefit of the notification to import goods without payment of duty, it is not open to the assessee to contend that the conditions in the said notification need not be fulfilled, be it on the ground that 22 C/86379/2015 the benefit under another notification is available to him or otherwise."
4.6 In view of the specific provisions Section 28 of Customs Act, 1962, providing for the demand of duty short/ not paid at the time when the same was due, we are not in agreement with the submissions made by the appellant by invoking the principle of promissory estoppel. It is also settled law that in case of exemption, it is responsibility of the person claiming the exemption to satisfy that the said exemption is available to him. Hon'ble Supreme Court has in case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)] held as follows:
"52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted strictly;
the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) ......."
4.7 In view of the discussions as above we are not inclined to agree with the submissions made by the appellant's respect of the interest. We are also not inclined to agree that demand of interest should be limited to the amounts demanded in cash and not in respect of the amounts allowed to be debited from the EPCG licenses. In our view when short/ nonpayment is adjudged under Section 28, Section 28AA mandates the interest t appropriate rate on the quantum of short/ nonpayment adjudged independent of the fact that how the said amount is paid.
4.8 Now coming to the issue of permitting the debit of the duty demanded in cash from SFIS Scrips. It is not in 23 C/86379/2015 dispute that during the relevant period when the imports were made such debits from the SFIS Script was not permitted. Had the appellants claimed the duty exemption against the EPCG Licenses issued to them in 2005, at the time of import, they would have paid duty @ 5.1% in cash. Now when the benefit of inadmissible exemption has been denied to them, and as special measure benefit of debit against EPCG license has been allowed by the EPCG Committee against the licenses issued in 2005, appellants could not be placed in better position then what they would have been in if they had cleared these goods against these license. Hence we do not find any infirmity in the order of Commissioner denying the debit from SFIS Scrip/ License specifically for the reason that no one should be allowed to take benefit of his own wrongs.
5.1 In view of discussions as above we do not find any merits in the appeal and dismiss the same.
(Order pronounced in the open court on 24.10.2019) (S.K. Mohanty) Member (Judicial) (Sanjiv Srivastava) Member (Technical) tvu