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TMI Blog2006 (2) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respondents for payment of interest at the rate of 24% p.a. on the said differential amount for the period 2nd June, 1994, i.e., the date of import of the first consignment to 17th August, 1999, the date of deposit by the petitioner of the differential duty. The total amount so claimed by the respondents towards interest has been calculated to be Rs. 1,20,00,250/- in the letter of the Assistant Commissioner of Customs dated 8th September, 1999. The claim was subsequently reduced to 15% differential duty amount instead of 24% as is evident from the demand notice dated 12th November, 2003, issued by the Deputy Commissioner of Customs, Mumbai. According to the petitioner, the demand for payment of the amount aforementioned is legally untenable inasmuch as there was no constitutional or statutory sanction for such a demand. It is contended that service of a show cause notice upon the petitioner in terms of the mandatory requirement under Section 28 of the Customs Act, 1962 (for short "the Act") was a condition precedent for any demand on account of interest or otherwise against the petitioner. No such notice having been served on the petitioner, the demand raised by the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production levels and exploiting the potential of customers outside the country. It has, all the same, deposited with respondent No. 3 the differential amount of duty saved on the imports, amounting to Rs. 81,60,200/- under a challan dated 17th August, 1999. Shortly thereafter a demand for payment of interest on the said amount at the rate of 24% p.a. was raised against the petitioner which, as noticed earlier, was reduced to 15% in the demand notice dated 12th November, 2003. 3. The petitioner claims to have made representations to various authorities, seeking waiver of the interest primarily, on the ground that its failure to meet the export obligation was for reasons beyond its control. These representations did not evoke any response. On the contrary, the petitioner was placed on what is known as the "Denied Entity List", suspending its IEC number and thereby disabled it from conducting any import or export whatsoever under the EXIM Policy with effect from 9th May, 2002. It was only later on that the said suspension letter was withdrawn though only for a period of six months. Around the same time, the petitioner also received a response to its representation, stating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th April, 1995 under the Export Promotion Capital Goods (EPCG) Scheme, in terms of the Export and Import Policy (hereinafter referred to as the Policy) and the said licence is produced for debt at the time of clearance. (ii) the importer, at the time of clearance, shall produce to the Assistant Commissioner of Customs or Deputy Commissioner of Customs a certificate from the licensing authority for having executed a bond under paragraph 45 of the Policy; and (iii) the importer at the time of clearance of the said capital goods shall make a declaration before the Assistant Commissioner of Customs or Deputy Commissioner of Customs. In such form as he may specify, binding himself to pay on demand an amount equal to the duty leviable on such capital goods but for the exemption contained herein in respect of which the conditions specified in column (2) of the Table have not been complied with. TABLE S. No. Description of importer Rate of duty (1) (2) (3) 1 Importer undertaking an export obligation equivalent to three times the CIF value of the said capital goods over a period of four years under paragraph 38 of the Policy 25% ad valorem 2 Importer undertaking an export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of import of the first consignment till the date of payment." 10. The petitioner had irrevocably undertaken that in the event of its default in meeting the export obligation, it shall pay the amount equal to 24% interest per annum on the amount of custom duty saved from the date of import of the first consignment till the date of payment. Para (x) of the agreement which contains the said undertaking reads thus : "(x). That the party irrevocably undertakes that in the event of his default in meeting the aforesaid export obligations/conditions, they shall pay an amount equal to 24% interest per annum on the amount of customs duties saved from the date of import of the first consignment till the date of payment." 11. The petitioner had, apart from the undertaking given in terms of the provisions of the policy, the license and the Handbook of procedure, also to furnish bank guarantees in terms whereof the amount guaranteed by the bank concerned was payable to the Government in case the conditions contained in the license including the export obligations mentioned therein was violated. 12. Two questions in the above background arise for our consideration. These are : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Assistant Commissioner of Customs EPCG Section, Mumbai to direct the Assistant Commissioner of Central Excise, Sangrur to verify the existence of the unit and to send a report. There is in the light of these facts no gainsaying that the petitioner had been given an opportunity of being heard in the matter and that a demand was raised only after it failed to respond to or avail of that opportunity. There has thus been no violation of either the provisions of Section 28 or the requirement of principles of natural justice on which the said provision is based. Regarding Question No. 2: 15. There are two facets of this question that call for an examination. The first aspect that needs to be examined is whether this court ought to interfere at the instance of a party who has unequivocally and unconditionally undertaken to pay the duty amount saved on the import of equipment together with interest at the agreed rate in the event of its failure to discharge the export obligations. The second aspect relates to the chargeability of interest on duty which was payable but was not paid in view of an exemption granted subject to fulfilment of the conditions prescribed for such exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich deals with interest on delayed payment of duty and inter alia provides that where a person chargeable with duty determined under sub-section (2) of Section 28, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest at such rate not below 10% and not exceeding 36% per annum from the date immediately after the expiry of period of three months till the date of payment of such duty. Section 28AB deals with interest on delayed payment of duty in special cases and inter alia provides that where any duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 28, shall, in addition to the duty, be liable to pay interest at such rate not below 10% and not exceeding 36% per annum, as is fixed by the Central Government by notification. It is, thus, evident that duty determined as payable would earn interest in the event of a delay in the payment of the same. But for the exemption from payment of duty under the EPCG scheme, the petitioner would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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