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The Commissioner of Customs & Central Excise Versus M/s. Lakshmi Machine Works Limited

2018 (1) TMI 530 - MADRAS HIGH COURT

Interest liability for overstay of goods beyond warehousing period - time limitation - Refund of interest - consequences of reduction of warehousing period from one year to six months on existing goods - Section 27 of the Customs Act, 1962 - Held that: - A reading of Section 59 (1) shows that an importer who seeks to have the imported goods warehoused has to first have the goods assessed under Section 17 or Section 18, as the case may be, and then execute a bond binding himself to pay double the .....

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that in so far as Section 61(2) is concerned, it refers only to the interest that becomes payable under Section 47. As a matter of fact, the present Sub-Section (2) of Section 61, was amended only by Act 27 of 1999. The amendment, on which, strong reliance is placed by the department, to Section 27(1), came in 1991. Yet, Section 61(2) does not refer to Section 27. - Appeal dismissed - decided against Revenue. - Civil Miscellaneous Appeal Nos. 3453 to 3455 of 2017 - Dated:- 8-12-2017 - S. Man .....

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Customs Bonded Warehouse in their premises, where imported goods are stored without payment of Customs Duties and cleared on payment of appropriate customs duty through P.D.account. The goods so cleared were used captively by the assessee in the manufacture of final products. Under Section 61 (1) of the Customs Act, the imported goods could be warehoused by the importer without having to pay interest on duty for a specified period. On expiry, the goods shall ordinarily be removed on payment of d .....

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e above amendments were brought to Section 61 of the Act. Dispute arose between the Department and respondent. According to department, the reduced warehousing period of 30 days would be applicable to goods which continued to be warehoused as on 1/6/2001. According to the importer, the law as it stood on the date of warehousing of the goods would continue to govern the warehousing period. Despite this dispute, in two cases of warehousing, the importer paid the interest in terms of the department .....

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9;s order is under challenge in Appeal No.C/233/04. After hearing both sides, CESTAT, Chennai, allowed Appeal No.C/233/04 3. Out of three cases, two cases relate to refund of interest already paid by the assessee and the other is, against the very demand of interest. CESTAT, Madras, by common Final Order Nos.757 to 759 of 2008, dated 23/7/2008, disposed of the appeals against the order made in Appeal Nos.C/233/04, C/118/03 & C/243/04, in favour of the respondent. 4. Aggrieved against the ord .....

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mendment Act, 1991 , came into existence which has brought interest into the purview of Section 27 of the Customs Act, 1962 also along with duty? 2. Whether the Tribunal was right in deciding an appeal in favour of the party without ever discussing the question of unjust enrichment on which the refund claims were rightly rejected by the lower fora? 3. Whether the Tribunal was right in deciding the appeal in favour of the party by relying on Apex Court judgment in the case of M/s. Bangalore Wire .....

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pex Court by virtue of the above cited case law when in fact the Court has not made any observation nor came to any conclusion about the interest free warehousing period 5. We have heard Mr.A.P.Srinivas, learned counsel for the Commissioner of Customs & Central Excise, Coimbatore and perused the materials available on record. 6. In Union of India Vs. Bangalore Wire Rod Mill {1996 (83) ELT 251 (SC)}, the Hon'ble Apex Court held as follows:- "3. For a proper appreciation of the questi .....

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e them without paying the duty. The warehousing of the goods without paying the duty was, however, subject to certain conditions specified in Section 59. Sub-section (1) of Section 59, which alone is relevant for our purposes, read thus at the relevant time. "59. Warehousing bond - (1). The importer of any dutiable goods which have been entered for warehousing and assessed to duty under Section 17 or Section 18 shall execute a bond binding himself in a sum equal to twice the amount of the d .....

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he provisions of this Act and the rules and regulations in respect of such goods. A reading of Section 59 (1) shows that an importer who seeks to have the imported goods warehoused has to first have the goods assessed under Section 17 or Section 18, as the case may be, and then execute a bond binding himself to pay double the amount of duty assessed on the said goods and undertaking to pay on or before a date specified in a notice of demand all duties, rent and charges claimable on account of su .....

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rehoused. On May 14 1983, however, this clause was amended and the period of three years was reduced to one year. Sub-section (2) of Section 61 [as inserted by Act 11 of 1983] reads as follows:- (2) Where any warehoused goods remain in a warehouse beyond the period of one year or three months specified in clause (a) or clause (b) of sub-section (1) by reason of the aforesaid period or otherwise, interest at such rate, not exceeding eighteen per cent per annum as is for the time being fixed by th .....

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arehoused goods. We have referred to sub-section (2) of Section 61 for the reason that it was relied upon by the appellant before us, though, in our opinion, it is not really relevant herein as we shall point out presently. 4. In this case, the respondent did execute a bond as contemplated by Section 59 (1) while warehousing the goods on November 11, 1982. Though the period of three years prescribed in Section 61 (1) (a) was reduced to one year by an Amendment Act with effect from May 13, 1983, .....

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did not clear the goods immediately but cleared them only on September 9, 1988. He paid the duty at the rate of ninety percent and that aspect is no longer in issue herein. While clearing the goods, the authorities demanded and collected interest on the said amount of duty for the period commencing from November 11, 1982 to September 9, 1988. It is this aspect which alone is in dispute between the parties in these appeals. The Division Bench of the High Court has held that the interest is charge .....

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11, 1982 to September 9, 1988. 5. We do not think that the claim of the appellant is sustainable in law. The language of Section 59 (1) (b), as it stood at the relevant time, is clear and unambiguous. It says that the importer shall have to execute a bond undertaking inter alia to pay interest from the date specified in the notice of demand. We have already extracted clause (b) in full hereinbefore. The liability to pay interest arises only after the expiry of the period prescribed in the notic .....

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g the notice of demand. The notice prescribed fifteen days for payment. Interest is chargeable only thereafter as held by the High Court, which, in our opinion, is a reasonable way of understanding the provision. Secondly, we see no justification or legal basis for the appellants plea that the interst must be paid taking the rate of the duty at ninety per cent for the said entire period. As a matter of fact, the rate of duty on the said goods was not ninety percent throughout the period March 22 .....

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10, observed as hereunder:- "8. But, we do not think that the learned Senior Panel Counsel is correct. The correct expression used in Section 27 (1) is 'interest, if any, paid on such duty'. The Circular dated 8/8/1990, reads as follows: "F.No.475/39/90-Cus.VII, dated 8/8/1990 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject: Warehousing Interest - Section 27 of Customs Act inapplicable **** It has been adv .....

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e on such duty. If the contention of the learned Senior Panel Counsel is accepted, we may have to read 'interest' into the word 'duty'. The amended Section 27 (1) reads as follows: "27. Claim for refund of duty - (1) Any person claiming refund of any duty and interest, if any, paid on such duty - (i). paid by him in pursuance of an order of assessment or (ii). borne by him, may make an application for refund of such duty and interest, if any, paid on such duty, to the Assist .....

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other evidence (including the documents referred to in Section 28 C) as the applicant may furnish to establish that the amount of duty and interest, if any, paid on such duty, in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty and interest, if any, paid on such duty, had not been passed on by him to any other person: Provided that where an application for refund has been made before the commencement of the Central Excise and Customs Laws .....

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