IMPORTANT POINT
Under Section 59(1) of the Customs Act, the liability of an importer to pay interest arises only after the expiry of the period prescribed in the notice of demand.

Headnote:Customs Act, 1962-Sections 58 and 59-Import of goods-Warehousing goods in 1982 without paying duty-Notice issued on March 7, 1985 calling upon respondent to clear goods on paying appropriate duty-Goods cleared on 9-9-1988- Respondent paid duty at the rate of ninety percent-Interest collected on amount of duty for period commencing from 11-11-1982 to 9-9-1988 - Challenged-Whether appellant s claim of interest from November 1982 was sustainable in law ?-(No)- Interest is chargeable only for period March 22, 1985 (on expiry of 15 days from date of notice) to September 9, 1988-Interest to be calculated taking rate of duty in force from time to time during the said period -Judgment of High Court affirmed.
Held : The liability to pay interest arises only after the expiry of the period prescribed in the notice of demand. It has been held by the High Court that the present matter is not governed by Section 61(2), as it stood at the relevant time, but by Section 59(1) alone. Indeed, it is submitted that when the respondent applied for extension of time of warehousing under Section 61(2), the Government told it that the said provision had no application and hence, time cannot be extended thereunder. Once that is so, we must go by what Section 59(1) says. According to it, the duty became due on issuing 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 interest must be paid taking the rate of the duty at ninety percent 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, 1985 to September 9, 1988. It was varying. The High Court s direction, therefore, to take the actual rate in force time to time is a reasonable one. (Para 8)

JUDGMENT

B.P. Jeevan Reddy, J.- Leave granted in Special Leave Petitions.

2. The respondent - M/s. Bangalore Wire Rod Mill imported a high reversible mill in the year 1982. On November 11, 1982, he warehoused the said goods without paying duty as contemplated by Sections 58 and 59 of the Customs Act, 1962 [the Act]. On March 7, 1985, the authorities issued a notice to the respondent to clear the goods from the warehouse within fifteen days of the said notice after paying duty due thereon. The respondent, however, did not clear the goods until September 9, 1988 on which day he paid a duty of Rs. 1.40 crores and interest of Rs. 81.49 lakhs as demanded by the authorities. Having cleared the goods, the respondent filed a writ petition in the Karnataka High Court contending that levy of interest from November 11, 1983 upto the date of clearance of the goods from the warehouse and that too treating the rate of duty as ninety percent is contrary to law and unsustainable. It asked for refund of excess amount of interest collected from it. Its case was that the initial warehousing period was for three years and, therefore, the interest, if at all, should be charged only for the period after the expiry of the said three years period. The writ petition was heard and disposed of by a learned Single Judge against whose decision both the respondent and the Union of India filed writ appeals. The Division Bench of the Karnataka High Court disposed of the writ appeals with the following directions :

"(a) The respondents are directed to recompute the amount of interest payable by the petitioner at the prescribed rate with effect from 22.3.1985 upto 9.9.1988 on the basis of the amount of customs duty which the petitioner would have been liable to pay to the Central Government at the rate, which was prevailing during the different periods between 22.3.1985 to 9.9.1988;

(b) After computing the total amount of interest payable for the entire period as directed above, the respondents shall refund the balance of the amount of interest collected from the petitioner.

3. The judgment of the Division Bench is being questioned both by the Union of India and by the importer in these appeals.

4. For a proper appreciation of the questions arising herein, it is necessary to state a few more facts; on the date of warehousing the goods, the rate of customs duty chargeable on the imported goods was forty percent ad valorem. The rate of duty was being raised from time to time and on September 9, 1988, the date on which the goods were cleared from the warehouse, the rate of duty was ninety percent. The Act, as in force at the relevant time, permitted an importer either to clear the goods immediately on their import or to warehouse 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 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.

5. A reading of Section 59(1) shows that an importer who seeks to have the importe

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1996 Supreme(SC) 623

IMPORTANT POINT Under Section 59(1) of the Customs Act, the liability of an importer to pay interest arises only after the expiry of the period prescribed in the notice of demand.

IMPORTANT POINT
Under Section 59(1) of the Customs Act, the liability of an importer to pay interest arises only after the expiry of the period prescribed in the notice of demand.