ORDER
V.P. Gulati, Member (T)
1. This reference application arises out of the order of the Tribunal bearing No. 522/1994, dated 13-7-1994. The Tribunal in the order has held that the appellants are liable to pay interest under Section 61(2) of the Customs Act, 1962 even when the goods cleared from the warehouse were exempted from payment of duty after overstaying in the warehouse. The appellants had cited the ratio of the ruling of the Kerala High Court in the case of Tungabhadra Fibres Ltd. v. Union of India reported in 1990 (2) KLT 492. The learned Departmental Representative pressed into service the ruling of the Divisional Bench of Madras High Court in the case of Collector of Customs, Madras v. Tungabhadra Fibres Ltd. reported in 1994 (71) E.L.T. 655, and the Tribunal chose to follow the ruling of the Divisional Bench of the Madras High Court on the observations of the High Court as under:
“10. Regarding the levy of interest, forming the subject matter of W.A. No. 917 of 1992, it is seen that the company has been successful in periodically securing extension of time during which the goods were warehoused. The interest sought to be levied is not under Section 61 of the Act, as amended, but only under Section 59 and the reason, for charging interest is only to see to it that warehoused goods do not stay longer than absolutely necessary and there is quick and prompt clearance of goods from the warehouse; in order that facility may be availed of by other importer as well. The interest is thus a payment to be made for a failure to clear the warehoused goods within a reasonable time or even within the extended time and in this case, though part of the duty had been paid on 28-4-1983, the duty paid goods and that part of the goods on which such duty had not been paid had not been cleared, and the clearance of the goods from the warehouse was only on 28-11-1983. Interest claimed by the customs authorities is nothing but compensation for delayed clearance and the rate of interest is nothing but a standard measure of computing the compensation for delayed removal of overstay of the consignment in the warehouse.”
In the Reference Application, the following question of law has been urged for reference:
“Whether in the facts and circumstances of the case the Tribunal is right in law in its finding that the Applicant is liable to pay interest under the provisions of Section 61(2) of the Customs Act, 1962 with respect to warehoused goods cleared after overstaying in the warehouse free of customs duty.”
2. The learned Advocate for the appellants reiterated the pleas made in the Reference Application. We observe that the learned Departmental Representative prayed there is no question of law arises inasmuch as the Tribunal has followed the Divisional Bench decision of the Madras High Court. We observe that after the case had been decided, a similar matter in the case of Coimbatore Pioneer Mills Ltd. v. Collector of Customs, Cochin, 1991 (56) E.L.T. 858 (Tri.) came up before the Tribunal and it was brought to our notice that in a similar matter the Supreme Court while granting leave in dealing with the issue relating to payment of interest under similar circumstances passed the following order :
“Leave granted.
The appellants are directed to pay 25% of the interest on the amount of duty calculated @15% and give Bank Guarantee for 50% of the interest amount and property security for the remaining 25%. They will be subjected to the final disposal of the appeals and this order will not prejudice any of the parties in raising their contentions regarding the disputed interest at the time of hearing the appeals. The payment of the 25% of the amount shall be made within four weeks. In case the appellants succeed in the case, the amount will be refunded. The appellants will have to comply with this order within a period of four weeks from today. Expedite the hearing.”
The present petition raises the following questions :
(a) Whether the respondents are entitled to claim interest on the warehoused goods cleared by the petitioners under the Duty Exemption Scheme under which on clearances no duties are payable by the petitioners or collectable by the respondents?
(b) Whether on harmonious reading of the provision contained in Sections 59(1)(b), 61(2), 68(b) read with Section 15(1 )(b) of the Customs Act, 1962, the respondents are entitled under Public Notice issued by Assistant Collector of Customs, as a clarification to claim interest, when no duties are payable at the time of clearance of the goods from the warehouse?
(c) Whether the liability to pay interest can be delinked or divorced from the principal when both are conjunctive and must go together particularly in view of the words “together with interest” in Section 59(1 )(b) of the Customs Act, 1962, and when particularly the liability of the importer to pay duties occurs at the time of the actual clearance of the goods from the warehouse in view of the provisions of Section 15(1)(b) of the said Act.
(d) Whether the notional accrual of liability to duties entitles the respondents to claim interest on duties alleged to be withheld when such accrued duties are not payable at the time of the clearance of the goods and therefore can the chargeabtlity to duties be equated to payment of duties on actual clearance of the goods under the Customs Act, 1962?
(e) Whether the Public Notice issued by the Assistant Collector of Customs has the effect of law to charge interest on duties which are admittedly not payable to the respondents?
By its impugned order, the High Court while interpreting and considering the effect of Sections 59(1)(b), 61(2) & 68(b) read with Section 15(1)(b) of the Customs Act, 1962 have delinked the interest from duties and have held that the respondents are justified in their claim of interest even if no duties are payable by the importers.”
It was pleaded that the Kerala High Court in the case of Tungabhadra Fibres Ltd. v. Union of India reported in 1991 (52) E.L.T. 357 (Ker.) and the ruling of the Madras. High Court in the case of Katnath Packaging Ltd. v. Union of India and Ors. in Writ Petition No. 670/91, have held that where there is no duty liability at the time of clearance of the goods from the warehouse, there is no question of interest would arise. In that case also reference was made to the ruling of the Bombay High Court reported in 1993 (66) E.L.T. 606 in the case of Siganporia Brothers v. Union of India, wherein the Divisional Bench of the Bombay High Court has taken a view that under Section 61(2), mere modalities are provided to calculate the compensatory amount payable by the importer and while determining such amount the Legislature could not ignore that there must be some nexus between the compensation claimed and the import of the goods and that the amount of duty payable on the import of goods in respect of which exemption was sought should be taken as a base. A reference was also made to the Karnataka High Court judgment reported in 1992 (61) E.L.T. 37 in the case of Bangalore Wire Rod Mills v. Union of India.
3. After hearing both the sides, we took the view that there is an apparent conflict in the view taken by various High Courts in regard to the scope and interpretation of Section 59 of the Customs Act, 1962 with reference to the liability of the interest charges on various goods when the goods did not suffer duty at the time of clearance for the reason of an exemption notification. In view of that we are of the view that in the interest of justice, the matter will have to be resolved by the Hon’ble Supreme Court. In that view, it was found expedient that the Reference should be made direct to the Supreme Court through the Hon’ble President of the Tribunal under provision 130A of the Customs Act, 1962. In view of the Tribunal’s Order No. 620/1994 referred to supra in the case of Coimbatore Pioneer Mills Ltd. we hold that a question of law does arise for reference as pleaded by the learned Advocate. We, therefore, refer the following question of law for reference to the Hon’ble Supreme Court accordingly:
“Whether in the facts and circumstances of the case the Tribunal is right in law in its finding that the Appellant is liable to pay interest under the provisions of Section 61(2) of the Customs Act, 1962 with respect to warehoused goods cleared after overstaying in the warehouse free of customs duty.”
In view of the nature of the issue involved and the conflicting views of the different High Courts and also the fact that the SLP has been admitted by the Hon’ble Supreme Court involving the same issue and following the ratio of the ruling of the Supreme Court, we direct the applicants to pay 25% of the interest amount at the rate calculated by the Department and to give a Bank guarantee for 50% of the interest amount and a property surety for the remaining 25% pending disposal of the reference.