Writ Petition No.1650 of 2013

10th January, 2014

Petitioner Counsel: Mr. H.R. SHETTY
Respondent Counsel: Mr. PRADEEP S. JETLY, Mr. PANKAJ VIJAYAN

Cases Cited:
Essar Steels Ltd. Vs. Union of India, 2007 (210) ELT 644 [Para 3,6]

JUDGMENT

JUDGMENT :- This petition under Article 226 of the Constitution of India, the petitioner challenges the action of the Customs Department in seeking to recover interest amounting to Rs.2,86,877/- from the petitioner in respect of duty payable on goods which were imported in the year 1996. It is the case of the petitioner that at the time of imports, the goods were provisionally assessed under Section 18 of the Customs Act, 1962 (the Act) and the same at the relevant time did not provide for payment of any interest on the duty payable on goods provisionally assessed.

2. Briefly, the facts leading to this petition are:-

(i) Sometime in the year 1996, the petitioner imported the consignment of Mono Sodium Glutamate (the said goods). However, there was dispute regarding levy of countervailing duty of customs on the said goods. Thus, pending further enquiry, bill of entry filed by the petitioner were provisionally assessed under Section 18 of the said Act;

(ii) On 2 May 1997, two demand notices were issued under Section 28 of the Act seeking recovery of Rs.2,08,103/- as duties of Customs on the ground that the petitioner was liable to pay countervailing duty of Customs.

(iii) Thereafter, by an order dated 7 November 1996, the Assistant Commissioner of Customs confirmed the two demand notices dated May 1997 for Rs.2,08,103/-. This also finalized the provisionally assessed bill of entry. The above order dated 7 November 1996 held that the petitioner is not entitled to the benefit of exemption from countervailing duty of Customs. Thus confirming Custom duty of Rs.2,08,103/- from the petitioner as demanded in the demand notice ;

(iv) The petitioner paid aforesaid amount of duty over a period of time beginning from 17 August 2004 to 7 March 2013. In the circumstances, there was interest payable on the delayed payment of duty made post the order dated 7 November 2011;

(v) In view of the above, the revenue demanded interest on the delayed payment of duty aggregating to Rs.2,86,877/- from the petitioner.

3. The grievance of the petitioner before us is that the demand for interest by the revenue is without jurisdiction. This is because the said goods were provisionally assessed at the time of import in the year 1996 under Section 18 of the said Act. At that time, there was no provision in Section 18 of the said Act to charge any interest on the payment of duty determined at the time of finalization of the petitioner's assessment. It was submitted that the Apex Court in Essar Steels Ltd. v/s. Union of India 2007 (210) ELT 644 has held that no occasion to charge interest can arise when the assessment was originally made provisionally. Thus, it is the case of the petitioner that the demand of interest made by the revenue is without jurisdiction as the provision for charging interest in respect of the provisional assessment came into statute book only with effect from 13 July 2006. Consequently, it is submitted that the demand for interest made by the revenue be set aside.

4. As against the above, it is the contention of the revenue that the interest which is demanded from the petitioner is not for the period from the date of provisional assessment to the finalization of the assessment by order dated 7 November 1997. According to the revenue, the demand for interest has been made consequent to the order dated 7 November 1997 by which a demand of customs duty of Rs.2,08,103/- was confirmed. This demand was made not under Section 18 of the said Act but under Section 28AA of the said Act, which inter alia provides for recovery of interest on amounts not paid within three months of the adjudication order. In this case the petitioner had not paid the amount of Rs.2,08,103/- within the period of 3 months but paid the dues only from 17 August 2004 onwards in installments and the last installment being paid on 7 March 2013. The interest has been computed by the revenue on reducing balance. The total interest payable by the petitioner was Rs.2,94,058/- and out of which the petitioner has already paid Rs.7,181/-, leaving the balance of Rs.2,86,877/-.

5. We have considered the submissions. We find that the interest which is being demanded from the petitioner is not for the period 18 March 1996 to 7 November 1997 i.e. the period for which the goods continued to be provisionally assessed. On 7 November 1997, the adjudication order was passed confirming two demand notices dated 2 May 1997, demanding an amount of Rs.2,08,103/-. The petitioner failed to pay the same within the period of 3 months from the date of the order dated 7 November 1997. In terms of Section 28AA of the said Act as existing at the relevant time an importer (petitioner) was liable to pay interest on the confirmed duty demanded, in case, the duty demanded was not paid within 3 months from the date of order confirming the duty demand under Section 28 of the Act.

6. In the decision of the Apex Court in Essar Steel Ltd. (supra) relied upon by the petitioner, the importer therein had imported goods in 1988 and the same was provisionally assessed under the Project Imports Regulations 1986 on payment of further duty of Rs.6.02 Crores. Thereupon importer was allowed to clear goods on provisional assessment on 15/16 December 1988. The Tribunal decided the appeal in favour of the importer by its order dated 13 February 1991 directing a refund of Rs.6.02 Crores to the importer. Aggrieved by the decision, the revenue carried the matter in appeal to the Apex Court which refused to stay the order of refund granted by the Tribunal. However, the importer therein was required to furnish a bank guarantee for the amount of refund so as to obtain the refund on 20 October 1991. Thereafter, the amount of Rs.6.02 Crores was paid back by the importer to the department on 10 July 1997. The final assessment order was passed by the revenue on 16 February 2001. The revenue sought to recover interest on the amount of Rs.6.02 Crores which was refunded for the period between 28 October 1991 to 10 July 1997. The importer contested the demand of interest on the ground that there was no provision for levy of interest on provisional assessment. The interest according to the importer therein can only be levied after the final assessment order was passed and not during the period between 28 October 1991 to 10 July 1997 when the assessment was provisional. In the aforesaid facts, the Apex Court held that charging of interest would not arise. However, the Apex Court did not go into the larger controversy regarding chargeability of interest under the Customs Act 1962 as it stood in 1988. Therefore, the aforesaid decision is not applicable to the present facts. One more feature which must be borne in mind is that the controversy before the Apex Court was whether interest could be demanded by the revenue during the period when the assessment was provisional and not post finalization of the assessment. Therefore, the decision of the Apex Court in Essar Steel Ltd.(supra) is not applicable to the present facts. In the present case, the interest is being demanded by the revenue not for the period when the assessments were provisional but for the period post finalization of the assessment.

7. In the above circumstances, we see no reason to interfere with the demand for interest made by the revenue on the petitioner. Accordingly, the Petition is dismissed with no order as to costs.

Petition dismissed.