TMI Blog2010 (5) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... granted – importer’s petition dismissed - 2986 OF 2005 - - - Dated:- 7-5-2010 - CORAM: V.C.DAGA AND K.K.TATED, JJ. For the Petitioner : Rajiv Datta, senior counsel with Ms.Shikha Raniwala i/b. Nanu Hormasjee Co. For the Respondent : A.S.Rao 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 on the bills of entry filed by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; (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 subsection (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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........ 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. (2) If any owner fails to pay any amount demanded under Subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powered 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Suresh Chand v. Union of India ors.); wherein the 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reexportation 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 exbond Bill of Entry for home consumption; got the said bill of entry assessed by the proper officer, including the endorsement regarding the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 19 th November, 1992. This Judgment has also referred to the judgment of Karnataka High Court in Bangalore Wire Rod Mills (supra) which was delivered on 10 th 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 19 th March, 1996. Thus, law to be applied is as reported in Union of India v. Bangalore wire Rod mills reported in (1996) 3 SCC 558. The Judgment in Krishna Petro Yarn, therefore, will have to take a bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine 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 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; wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which subsection (1) of Section 61 as it stood after its amendment gets attracted. It is not even the case of the respondents that subsection (1) of Section 61 as amended with effect from 1351983 applies to cases where goods were deposited in a warehouse when the unamended subsection (1) of Section 61 was in force. In our opinion, when even according to the respondents subsection (1) of Section 61 as amended has no application to the present case. Correct view to take as to the scope of subsection (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 subsection (2) in Section 61. Therefore, we find no merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not call for any interference. The appeals are accordingly dismissed. No costs. (Emphasis supplied) 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 subsection (2) of section 61 was inserted in the Act by virtue of amendment by Act 11 of 1983 with effect from 13 th 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 subsection (2) of section 61 of the Act since the said subsection 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 subsecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pratibha Processors (supra), may be in a little different fact situation but the relevant observations made in para14 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 payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 17 th February, 1989, 22 nd February, 1989, 24 th February, 1989, 2 nd March, 1989, 20 th March, 1989, 27 th 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 awar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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