2011 (2) TMI 227 - SC - Customs

Demand - Consignments under Bond - EPCG license - Concessional duty at the rate of 10% - the importer executed a bond and furnished a bank guarantee for 100% of the duty saved as required under Notification No. 29/97 dated 1st April 1997 - the provisions of Section 68 and consequently of Section 15(1)(b) have no application since the goods were not cleared from the warehouse within the bond period - the goods shall be deemed to have been improperly removed from the warehouse under Section 72 and the Proper Officer was justified in calling upon the company to pay the customs duty on them as may be payable at the rate applicable at the rate on the date on which the bond period expired it is manifest that warehousing is permissible for a limited period as contemplated under sub-sections (1)(a) and (1)(b) of Section 61; and such period is extendable on showing sufficient cause for the same - It is plain that Section 15(1)(b) would be applicable only when the goods are cleared from the warehouse under Section 68 of the Act i.e. within the initially permitted period or during the permitted extended period - It is also a cardinal principle of construction that the provisions of a notification have to be harmoniously construed as to prevent any conflict with the provisions of the Statute It was asserted that reliance on the decision of this Court in Kesoram Rayon v. Collector of Customs (1996 -TMI - 44311 - SUPREME COURT OF INDIA) by the High Court was clearly misplaced because unlike in the present case the goods in that case had been removed on the basis of the order under Section 72 of the Act - Accordingly the appeals are dismissed

Summary

Issues Involved:
1. Extension of bond period for warehoused goods.
2. Applicability of interest on customs duty for goods remaining in the warehouse beyond the permitted period.
3. Applicability of the Export Promotion Capital Goods (EPCG) Scheme and its impact on customs duty and interest.
4. Interpretation and applicability of Sections 61, 68, and 72 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Extension of Bond Period for Warehoused Goods:
The importer applied for an extension of the bond period by six months on 19th December 1996, which was rejected by the Assistant Commissioner of Customs on 13th January 1997. The rejection was based on non-compliance with mandatory terms and conditions stipulated in Public Notice No. 102/96, including the late submission of the application and the absence of an examination certificate by the Customs Officer. Despite the rejection, the importer continued to make representations requesting reconsideration.

2. Applicability of Interest on Customs Duty for Goods Remaining in the Warehouse Beyond the Permitted Period:
The High Court observed that the bond period expired on 25th December 1996 for two bonds and on 1st January 1997 for the third bond. The demand for payment of customs duty and interest was raised under Section 72 of the Customs Act on 26th June 1997. The High Court held that the goods remaining in the warehouse beyond the permitted period were deemed to have been improperly removed under Section 72, justifying the computation of duty and interest from the date of expiry of the bond period.

3. Applicability of the EPCG Scheme and its Impact on Customs Duty and Interest:
The EPCG Scheme, extended to agro-based industries by Notification No. 29/97 dated 1st April 1997, exempted capital goods used in the manufacture of agro-products from customs duty. The importer obtained an EPCG licence on 22nd August 1997, later rectified to "zero duty." The High Court ruled that the benefit of the EPCG Scheme was not available since the goods were deemed improperly removed under Section 72, not cleared under Section 68. The Court emphasized that the exemption applied only to goods cleared within the permitted period under Section 68.

4. Interpretation and Applicability of Sections 61, 68, and 72 of the Customs Act, 1962:
- Section 61: Prescribes the period for which goods may remain warehoused, with interest payable on customs duty for goods remaining beyond the permitted period.
- Section 68: Allows clearance of warehoused goods for home consumption upon payment of duty, interest, and other charges, applicable only if goods are cleared within the permitted period.
- Section 72: Deals with the consequences of improper removal of goods from the warehouse, requiring payment of full customs duty and other charges for goods remaining beyond the permitted period.

The Supreme Court upheld the High Court's decision, concurring with the interpretation that Section 15(1)(b) applies only to goods cleared under Section 68 within the permitted period. Goods remaining beyond this period are deemed improperly removed under Section 72, with duty computed as of the expiry date of the bond period. The Court distinguished the case from Pratibha Processors, where goods were cleared under Section 68, and emphasized the applicability of Kesoram Rayon, which aligned with the facts of the present case.

Conclusion:
The appeals were dismissed, with the Supreme Court affirming the High Court's judgment. The importer was held liable for customs duty and interest as per Section 72 of the Customs Act, with the EPCG Scheme's benefits not applicable due to the goods being deemed improperly removed. The decision reinforced the statutory interpretation of warehousing provisions and the conditions for availing duty exemptions.