2005 (3) TMI 718 - Commission - Customs

Summary

Issues involved:
1. Liability for payment of interest on differential duty amount under EPCG Scheme.
2. Interpretation of exemption notifications and legal undertakings in customs law.
3. Immunity from interest on duty saved under specific conditions.
4. Application of statutory provisions and legal precedents in determining interest liability.

Analysis:

1. Liability for payment of interest on differential duty amount under EPCG Scheme:
The case involved a dispute regarding the liability of an importer to pay interest on a differential duty amount under the Export Promotion Capital Goods (EPCG) Scheme. The applicant imported goods under an EPCG license but failed to meet the export obligation, leading to a demand for payment of differential duty amount along with interest at 24% per annum. The applicant argued for immunity from interest, citing provisions of the EPCG Scheme and past legal decisions. The revenue contended that interest was chargeable as per the scheme's provisions, including the enforcement of bank guarantees and payment of interest on duty saved in case of export obligation failure.

2. Interpretation of exemption notifications and legal undertakings in customs law:
The advocate for the applicant argued that the exemption notification under which the duty was saved did not provide for the payment of interest by the importer. Reference was made to a decision by the CEGAT Mumbai, emphasizing that the Customs Act did not justify demanding interest in such cases. However, the revenue highlighted the legal undertaking required under the EPCG Scheme, which mandated the payment of interest on duty saved in case of non-compliance with the export obligation. The Bench analyzed the provisions of the notification, the Customs Act, and the legal undertakings to determine the applicability of interest in the present case.

3. Immunity from interest on duty saved under specific conditions:
The applicant sought immunity from interest, arguing that the duty had already been paid, and the company faced restrictions on further import/export activities due to non-payment of interest. The Bench considered past legal judgments, including one by the Madras High Court, which held that interest was chargeable as per the provisions of the EXIM Policy and legal undertakings furnished by importers. However, the Bench acknowledged the reduction in the interest rate from 24% to 15% as per the Handbook of Procedure, granting immunity from interest in excess of 15% simple interest per annum, subject to certain conditions.

4. Application of statutory provisions and legal precedents in determining interest liability:
The Settlement Commission analyzed the statutory provisions, legal undertakings, and past judgments to determine the liability for interest on the duty saved under the EPCG Scheme. The Commission referred to the provisions of the Customs Act, the EXIM Policy, and the Handbook of Procedures to establish the basis for charging interest in cases of non-compliance with export obligations. Ultimately, the Commission settled the application under specific terms, granting immunity from interest in excess of 15% simple interest per annum, while emphasizing the consequences of obtaining the settlement through fraud or misrepresentation of facts.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by the parties, legal interpretations, and the final decision of the Settlement Commission regarding the liability for interest on the duty saved under the EPCG Scheme.