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2022 (10) TMI 212 - HC - CustomsLeviability of interest and penalty in relation to amounts payable as duty other than basic customs duty - mis-declaration of goods - intent to evade customs duty or not - HELD THAT:- When a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute - Section 28AB of the Customs Act, 1962 is a taxing provision which creates and fastens the liability on a party. The provision has to be strictly construed and will be governed by the language employed in the section. In the present case, it is not disputed that petitioner has paid a sum of Rs.11.84 Crores much prior to the issuance of show cause notice. There is no determination of duty under Section 28(2) of the Customs Act, 1962 and, therefore, Section 28AB of the Customs Act, 1962 is also not applicable. Petitioner has also paid the difference between the admitted duty liability and the amount settled by respondent no.2 - respondent no.2 contention that CVD, SAD and surcharge are being recovered under Section 28 of the Customs Act, 1962, cannot be agreed upon. Consequently Section 28AB of the Customs Act, 1962 also will also not be applicable. In the absence of specific provision relating to levy of interest in the respective legislation, interest cannot be recovered by taking recourse to machinery relating to recovery of duty. The finding of respondent no.2 that it has the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also interest and penalty as well is ex-facie untenable. Reliance by respondent no.2 upon Section 127C of the Customs Act, 1962 to direct payment of interest is totally misplaced in the case at hand. Section 127C of the Customs Act, 1962 itself provides that the order of the Settlement Commission has to be in accordance with the provisions of the Customs Act, 1962. Respondent no.2 certainly cannot pass an order beyond the provisions of the Customs Act, 1962 - Respondent no.2 cannot include interest in the settlement arrived at by it on the ground that petitioner has derived financial benefits by not paying the correct rate of duty when it was due. Deriving financial benefits itself cannot be a ground to order payment of interest in the absence of any statutory provisions for payment of interest. The order of the Commission to the extent of requiring petitioner’s to pay interest at the rate of 10% against the four show cause notices and penalty (Rs.1,00,000/- in the case of first show cause notice, Rs.10,00,000/- in the case of second show cause notice and Rs.5,00,000/- in the case of third show cause notice) is liable to be and are hereby quashed and set aside - Respondents to refund the amount of Rs.16,00,000/- being penalty deposited by petitioner together with interest, if any, within four weeks of receiving an application. The bank guarantee furnished on behalf of petitioner for a sum of Rs.74,67,790/- together with the renewals to be cancelled and returned to petitioner by the Registry of this Court within four weeks of receiving an application. Petition disposed off.
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