BANGALORE WIRE ROD MILLS Vs. UNION OF INDIA

JUDGEMENT

(1.) in these two writ appeals presented against the judgment of the learned judge partly allowing the writ petition presented by M/s. Bangalore wire rod mills, one by the petitioner and the other by union of india, the following two questions of law arise for consideration. 1. Whether the petitioner is liable to pay interest on the amount of customs duty claimable in respect of the goods left in the warehouse on 11-11-1982 for the period in excess of the period during which it was permitted to be left in the warehouse under Section 61(1) of the act (as it stood prior to its amendment by act 11 of 1983) or from the date specified in the demand notice served on the petitioner in terms of Section 59 of the Act, or in terms of Section 61(2) of the act inserted with effect from 13-5-1983, by amending act 11 of 1983.

(2.) whet her the interest should be calculated on the basis of the amount of duty payable computed in accordance with the rate of duly which prevailed as on the date of deposit of goods in the warehouse or on the basis of the higher rate of duty which prevailed on the date from which the petitioner became liable to pay interest or on the basis of still higher rate of duty, which was prevailing as on the date of clearing the goods from the warehouse? 2. In order to bring forth the precise dispute between the parties, in the first instance it is necessary to make a brief survey of the relevant Provisions of the Customs Act under which the liability of the petitioner to pay interest to the respondent arose and the circumstances in which the liability arose. (i) the Customs Act, 1962, (for short 'the act') is an act to consolidate and amend the law relating to customs, enacted by the parliament. Section 12 is the charging section. The said Section provides that the duties of customs shall be levied at such rates as may be specified under the customs tariff Act, 1975 or any other law for the time being in force, on goods imported into or exported from india. In this case, we are concerned with the levy of customs duty on imported goods. Section 15 of the act prescribes the date for determination of rate of duty and tariff valuation of imported goods. It reads: "15. Date of determination of rate of duty and tariff valuation of imported goods: (1) the rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force (a) in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section; (b) in the case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse; (c) in the case of any other goods, on the date of payment of duty: provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards". Section 17 provides for assessment of duty. Section 47 provides that importer of any goods, other than goods intended for transit or transhipment, shall make entry there of by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form. Section 49 provides for storage of imported goods in a warehouse pending clearance, in cases in which the goods cannot be cleared within a reasonable time. Section 59 of the act provides that an importer of any dutiable goods which have been entered for warehousing and assessed to duty under Section 17 or subject to the provisional assessment under Section 18, shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods, to observe the Provisions of the act and the rules and regulations in respect of such goods. Section 59(l)(b) makes it obligatory to the importer who has left his goods in a warehouse, to pay the amount of customs duty before a date specified in the demand notice and also to pay interest on the customs duty claimable on the goods from the date specified in the demand notice at the rate of 6 per cent per annum or at such rate as prescribed. Section 61 of the act prescribes the period during which goods may remain in a warehouse. Section 72 of the act provides for demand and collection of customs duty together with interest and other charges in cases where the importer fails to clear the goods from the warehouse within the time allowed. (ii) in the present case, the writ petitioner M/s. Bangalore wire rod mills, imported goods on which customs duty is leviable under the act and left them in a warehouse in terms of Section 46 of the act on 11-11-1982 and cleared the goods from the warehouse on 9-9-1988. According to the writ petitioner, the demand notice calling upon the writ petitioner to pay customs duty was issued on 7-3-1985 and 15 days' time was given for making payment of customs duty and on failure to pay the customs duty to pay interest on the said amount in terms of Section 59 of the act it so happened that the rate of customs duty as on the date on which the goods were kept in the warehouse was 40%, whereas on 9-9-1988, on which date the goods were cleared from the warehouse, the rate of customs duty had been increased to 90 per cent. The increase to 90% was with effect from 1-3-1988. Even so, the respondents demanded interest on the amount of customs duty computed at 90% of the value of the goods from 11-11-1983 to 9-8-1988 for nearly five years and compelled the writ petitioner to pay the said amount, which the petitioner had paid. According to the petitioner, the interest could have been collected only with effect from 22-3-1985, tie date specified in the notice issued under Section 59 and on the amount of customs duty payable at the rate which was prevailing on the said date, in view of Section 59 of the Act, whereas according to the respondents the interest became payable with effect from 11-11-1983, the date on which the period of one year from the date of depositing the goods in the warehouse expired and that the writ petitioner was also liable to pay interest on the amount of duty computed at 90% of the value of the goods which was the rate prevailing on the date on which the goods were cleared from the warehouse, for the entire period i.e., even for the period during which rate of excise duty was lower.

(3.) we shall now wet out the relevant facts, which are necessary for deciding the controversy between the parties. They are: the appellant in w.a. No. 1275 of 1991 M/s. Bangalore wire rod mills is a unit of transport corporation of india. It is engaged in the business of rolling of iron and steel. For the purpose of its business, the petitioner had secured licence from the controller of imports and exports for importing one 2 high reversible rolling mill for manufacture of m.s.bars, angles, channels etc., at their factory as 'project import' for which import duty was lower, that is, 40% of the value of the goods plus 10%. Licence was granted by the controller of imports and exports on 20-2-1982. Pursuant to the said licence, the goods were imported by the petitioner. On 7-9-1982 the petitioner requested the assistant collector of customs and excise to bond the imported equipments in their own premises. On 25-10-1982 the petitioner executed the necessary bond for Rs. 1,58,730-00 as required, for warehousing the goods. On 2-12-1982 the customs bonded warehouse licence 10/82 was issued to the petitioner by the assistant collector of customs. The value of the goods imported was assessed in terms of Section 14 of the act at Rs. 1,55,69,773-00 and the customs duty payable at the rate prevailing on the said date, was computed at rs.77,32,886-00. Warehousing bond as required under Section 59 of the Act, was executed by the petitioner binding itself in a sum equal to twice the amount of duty assessed on the goods and for observing all the Provisions of the Act, rules and the regulations in respect of the goods. On 13-5-1983 government of India issued notification prescribing that the rate of interest payable in respect of the goods kept in a warehouse was 12% per annum on the amount of duties of customs claimable by the union of india. According to the Provisions of Section 61(1) of the Act, as it stood at the relevant point of time, the maximum period during which the imported goods could be kept in the warehouse was three years in the case of non-consumable stores and one year in respect of other goods. The petitioner failed to pay the duties of customs and clear the goods from the warehouse within or at the end of the prescribed period. Section 61(b)(ii) of the Act, both before and after its amendment, empowered the collector and the board to extend the period of bonding in respect of any goods which are not likely to deteriorate for a limited period and by the board for such further period, as it may deem fit. No maximum period beyond which the bonding period could not be extended by the board was prescribed. It appears that on account of certain practical difficulties, in particular the shortage of electric power in other states, the petitioner was unable to get the goods cleared and therefore had been making application for extension of bonding period from time to time. The latest application made was on 7-1-1988. The relevant portion of that letter reads: