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Collector Of Customs, Madras vs Tungabhadra Fibres Ltd. on 18 January, 1994

Madras High Court
Collector Of Customs, Madras vs Tungabhadra Fibres Ltd. on 18 January, 1994
Equivalent citations: 1994 (46) ECC 65, 1994 (71) ELT 655 Mad
Author: Ratnam
Bench: Ratnam, Somasundaram


JUDGMENT

Ratnam, J.

1. These appeals have been preferred by the Collector of Customs and two others and M/s. Thungabhadra Fibres Ltd., Bangalore (hereinafter referred to as’ the company’), against the order in WP No. 10035 of 1983, in relation to that part of the order adverse to the appellants in these appeals. In W.P. No. 10035 of 1983, filed by the company, it prayed for the issue of a writ of mandamus directing the appellants in W.A. No. 1470 of 1991, to allow the company to clear the goods covered by the Bills of Entry for warehousing Nos. 1506 and 1507 dated 15-6-1981, on payment of forty per cent as the duty leviable without enhancement of twenty per cent as provided in the Finance Act of 1983 (earlier Finance Bill of 1983) and without any claim for interest.

2. Shortly stated, the circumstances leading to the filing of the writ petition by the company, as could be gathered from the affidavit and counter affidavit filed in the writ petition, are as under. The company; pursuant to import licences granted to it on 1-9-1979 and 3-9-1979, imported two consignments of Spinnerettes and the consignments so imported and valued at Indian currency at Rs. 41,91,408 and Rs. 41,35,629 respectively, were airlifted and received on 27-5-1981. On the landing of the said consignments, the clearing agents of the company filed two Bills of Entry, Nos. 1506 and 1507 dated 15-6-1981 for warehousing the consignments under Sec. 60 of the Customs Act (hereinafter referred to as ‘the Act’). The Bills of Entry so filed were assessed to duty under chapter Heading 84.66 of the Customs Tariff Act, 1975, at the standard rate of 40% basic duty plus 5% auxiliary duty under the Finance Act, 1981, which were the rates prevailing on the date and the assessment was done at Rs. 18,86,133.80 and Rs. 18,61,055.05 respectively for the purpose of determining the amount of duty for execution of warehouse Bond as per Sec. 59 of the Act. On the execution of the Bonds (Nos. 4467 and 4468 of 1981, dated 14-9-1991) by the company, the goods imported were bonded in the warehouse on 14-9-1991, without payment of duty and the imported goods were allowed to remain in the warehouse on 14-9-1981 to 13-9-1982. On 4-9-1982, the Customs House agent of the company sought an extension of time for the consignments to remain in the warehouse for a further period of six months from the date of expiry of the two bonds from 13-9-1982 and by letter dated 22-10-1982, time was extended by a further period of six months, i.e., upto 13-3-1983. Thereafter, a notice was sent to the company informing that if the goods were not cleared before 13-3-1983, recourse to Sec. 72 of the Act will be had without further reference to the company. By a telegram dated 16-3-1983 and letter dated 17-3-1983, the clearing agent of the company asked for further extension of time by three months and on 21-3-1983, the Collector of Customs directed the company to clear on payment of duty, the goods involving a duty of Rs. 15/- lakhs stating that the remaining goods will be allowed to be bonded for three months, and this was also communicated to the company by letter dated 23-3-1983. On 8-4-1983, the clearing agent of the company filed an Ex-bond clearance Bill of Entry, No. 922/8-4-1983, for clearance of the part of the goods valued at Rs. 24,96,725/- for home consumption under Sec. 68 of the Act. On that, the Bill of Entry was assessed to 40% basic duty and auxiliary duty at 20% on the basis of the provisions of the Finance Act of 1983, read with Notification No. 61/83 dated 1-3-1983 and the company paid a sum of Rs. 14,98,000.80 towards duty on 28-4-1983, but did not clear that part of the consignment. The company on 30-3-1983, informed the Assistant Collector of Customs that though the duty towards part of the consignments had been paid, it was not able to seggregate the spares in respect of which the amount had been paid as duty and take delivery and requested that the company may be permitted to clear that and also the balance of the consignments on payment of the balance of duty, which had remained unpaid and requested for extension of Bonding period by three months. By letter dated 16-6-1983, the company was informed that it should clear the whole consignments on payment of duty and also with interest including that part of the consignments for which approximately Rs. 15/- lakhs had been paid as duty and that the balance of the goods would be allowed to remain in the warehouse; till 14-6-1983, but not the goods on which duty had been paid. Again, on 31-7-1983, the company sought extension of bonding facilities for a further period of three months from 14-6-1983 to 14-9-1983 and that was granted by the Assistant Collector by his letter dated 29-8-1983. However, the company did not choose to clear the goods before 14-9-1983 and though the company informed that on 6-10-1983 the goods will be cleared, that was not done, which led to a communication from the Assistant Collector of customs dated 9-11-1983 to the effect that action under Sec. 72 of the Act would be taken. It was at this stage, the company approached this court under Art. 226 of the Constitution praying for the relief mentioned earlier.

3. In the affidavit filed in support of the writ petition, the company put forward the plea that the auxiliary duty at 20% (there being no dispute regarding the basic duty of 40%) cannot be imposed, as the duty as per the value assessed at the time of the Bills of Entry for warehousing, should alone be recovered and the provisions of the Finance Act of 1983, could not be called in aid to impose 20% auxiliary duty. In addition, the company also claimed that no interest can be levied for the period prior to 14-9-1983 and interest on a sum of Rs. 14,99,033.80 paid by the company on 23-4-1983, could not be levied.

4. In the counter-affidavit filed, it was pointed out that at the time when the warehousing Bills of Entry were filed, the assessment to duty under Chapter Heading 84.66 of the Customs Tariff Act, 1975 at the standard rate of 40% Basic duty plus 5% auxiliary duty under the provisions of the Finance Act, 1981, was made for the purpose of determining the amount of duty for execution of warehousing bonds under Sec. 59 of the Act for entry into the warehouse and on the execution of the double-duty bonds, the consignments were also deposited in the bonded warehouse without payment of duty and as the goods were later sought to be cleared from the warehouse by filing a Bill of Entry for home consumption, under Sec. 68 of the Act, the relevant date for determination of the rate of duty under Sec. 15(1)(b) of the Act, was the date for determination of the rate of duty under Sec. 15(1)(b) of the Act, was the date on which the goods were actually removed from the warehouse and not the date on which the Bill of Entry was originally filed for the purpose of warehousing the goods. It was also further pointed out that as the goods were removed only on 28-11-1983 from the warehouse, the rate of duty as on 28-11-1983 alone will be applicable in terms of Sec. 15(1)(b) of the Act, such rate being 40% ad valorem (basic) plus 20% ad valorem (auxiliary). In regard to interest, it was stated that though a part of the duty had been paid on 28-11-1983 and therefore, the company was liable to pay interest from 15-9-1983 (when the time given earlier upto 14-9-1983 expired) to 28-11-1983 at 6% on the duty, under Sec. 59 of the Act.

5. Considering the stand thus taken by the company and ‘the customs’ authorities, the learned Judge took the view that when the goods landed, a Bill of Entry for deposit in the bonded warehouse, was filed on 15-6-1981 and the duty was also fixed and the goods had been entered for home consumption by presenting the Bills of Entry, the duty as could be levied on that the date alone, was payable as the import must be taken to have ended under Sec. 15(1)(a) of the Act and thereafter, there is no right or jurisdiction to claim any enhanced duty taking advantage of the enhanced rate of auxiliary duty on account of the provisions of the Finance Act, 1983. In so far as the levy of interest at 6% from 14-9-1983 to 28-11-1983 on the entire amount of duty, without deducting Rs. 14,98,033.80 paid by the company on 23-4-1983, is concerned, the learned judge held that the interest charged was more for purposes of the overstay of the goods in the warehouse and as the company had not removed the goods, though a part payment of the duty had been made that would not enable the company to claim that it was not liable to pay interest on the total duty payable. In that view, it was also further held that under Sec. 59 of the Act, the liability to pay interest is co-extensive with the liability to pay bond-rent with the exception that the calculation and demand of interest could only be for the period of the delay in clearance. Holding that there was no justification whatever, for the refusal of the company to pay interest the learned Judge allowed the writ petition in part, in so far as the enhanced auxiliary duty was concerned and rejected the prayer in the writ petition for regarding interest. Aggrieved by this the Collector of Customs, and two others have preferred W.A. No. 1470 of 1991, in so far as it was held that enhanced auxiliary duty cannot be levied and collected, while the company has come forward with W.A. No. 917 of 1992, in so far as its contention regarding payment of interest was not accepted.

6. The main question that arises for consideration in Writ Appeal No. 1470 of 1991 is as regards the levy and collection of enhanced auxiliary duty, as there is no dispute regarding the basic duty. Even in paragraph 3 of the affidavit filed in support of the writ petition, the company had accepted that on 15-6-1981, its clearing agents filed two Bills of Entry for warehousing and for deposit in the bonded warehouse and that the goods were entered for warehousing for, the period upto 13-9-1992. Again, in paragraph 12, the company had accepted that the endorsement in the original had accepted that the endorsement in the original Bills of Entry was for warehousing. Obviously, therefore, at the time when the Bills of Entry for warehousing were filed for proposes of execution of Bonds, an assessment had been done on the basis of 40% basis duty and 5% auxiliary duty, as it then stood, under the Finance Act, 1981. This assessment had been done only for the purpose of determining the amount of duty for execution of warehousing bonds, as per Sec. 59 of the Act for entering the goods into the warehouse. It is also not in dispute that warehousing bonds had been executed by the company on this footing and only thereafter, the company had been permitted to deposit the goods in the bonded warehouse. When the purpose of the assessment on the filing of a Bill of Entry for warehouse is only to secure the duty payable by the importer, on the clearance of the goods later, it cannot be accepted that such a valuation made for the purpose of execution of a warehousing bond is conclusive. That at best can be regarded only as a tentative estimate of the liability to pay the duty, which is secured under the terms of the warehousing bond. Therefore, the stand of the company that the assessment to duty had already been made, cannot be accepted. It is also not in dispute that the company had not paid any duty as the goods were warehoused. The very idea of warehousing the consignment is to defer payment of the duty till actual clearance for home consumption. Admittedly, the company had not paid the duty and it had resorted to warehousing of the consignments and for the purpose of ascertaining the amount of duty and also to secure the same by the execution of bonds, the assessment had been made and not for any other purpose. In view of this, the claim of the company that even at the time when the Bills of Entry for warehousing had been filed, an assessment had been made and that cannot be gone back upon, cannot be accepted. When, even according to the company, the goods had been entered for warehousing, the proper provision applicable would only be Sec. 15(1)(b) of the Act read with S. 68 thereof and not Sec. 15(1)(a). The learned judge, while accepting that Bills of Entry for deposit in the bonded warehouse were filed on 15-6-1981, fell into an error in holding that the goods had been entered for home consumption on arrival by presenting the Bills of Entry and therefore, the duty as leviable on that date alone, was payable. When it is not disputed by the company that the Bills of Entry filed on 15-6-1981 was for deposit of the goods in the bonded warehouse and not for clearance for home consumption, it is difficult to bring the case under Sec. 15(1)(a) of the Act.

7. It may also be pointed out that warehoused goods can be cleared for home consumption and a Bill of Entry for clearance for home consumption can also be presented and in this case, after the goods imported were warehoused, a Bill of Entry for clearance for home consumption had been filed but that had not been properly appreciated by the learned Judge.

8. Section 68 of the Act provides for clearance of warehouse goods for home consumption and states that the importer of any warehoused goods may clear them for home consumption in the circumstances mentioned therein under clauses (a) to (c). Clause (a) provides for the presentation of a bill of entry for home consumption in respect of warehoused goods. Clause (b) states that on payment of import duty leviable on such goods and all penalties, rent, interest on such goods and all penalties, interest and other charges payable in respect of such goods, the importer of any warehoused goods, may clear them for home consumption. With reference to the duty leviable under Sec. 68(b) it is seen from Sec. 15(1)(b) of the Act, that in the case of goods cleared from a warehouse under Sec. 68, the rate of duty and tariff valuation, if any, applicable to the imported goods shall be, the rate and valuation in force, on the date on which the goods were actually removed from the warehouse. These provisions sometimes result in an advantage to the importer, if there is a reduction in the rate if duty prevailing on the date when the goods are cleared. Likewise, this may also result in a liability for payment of additional duty, as in this case, owing to the prevalence of higher rate of duty, as on the date, when the goods are cleared. In the light of the provisions of the Act, referred to earlier and the admitted warehousing of the goods, imported by the company, in this case, Sec. 15(1)(b) of the Act alone will stand attracted and as the auxiliary duty of 20% was in force on the date on which the company cleared the goods on 28-11-1983, the import of 20% auxiliary duty on the consignments in question, was quite in order. This view gains support from the decision of the Supreme Court reported in Prakash Cotton Mills (P) Ltd. v. B. Sen, . In that case also, the goods were stored in the warehouse and the warehouse question arose whether the customs authorities were justified in applying the rate of duty to the imported goods in question, according to the rate, which prevailed on the date of their removal from the warehouse. Referring to Ss. 14 and 15 of the Act; the Supreme Court pointed out that the goods had been removed from the warehouse after the Customs (Amendment) Ordinance, 1966, had come into force, and the customs authorities as well as the Central Government were right in taking the view that the rate of duty applicable to the imported goods had to be determined according to the law, which was prevailing on the date when they were removed from the warehouse and that, there was no force in the argument that Sec. 15 should be ignored simply because the goods were imported before it came into force. In view of this decision it follows, that whatever might have been the rate of auxiliary duty on the date when the goods landed, and a Bill of Entry for warehousing had been presented, the rate of duty applicable would only be the rate of duty, which prevailed on the date when the goods were actually cleared from the warehouse.

9. It is also difficult to accept the view taken by the learned Judge that the case falls under Sec. 15(1)(b) of the Act and that the course of import must be taken to have ended on the date specified in Sec. 15(1)(a). Sec. 68 of the Act, as noticed earlier, provides for clearance of warehoused goods for home consumption and when it is not in dispute that the goods imported in this case were warehoused and later sought to be cleared, the duty leviable would only be that under Sec. 15(1)(b) and not any other. The view to the contra, taken by the learned Judge in paragraph 6 of the order, cannot, therefore, be accepted as correct.

10. Regarding the levy of interest, forming the subject matter of W.A. No. 917 of 1992, it is seen that the company had 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 Sec. 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 or overstay of the consignment in the warehouse. In this case, there is no dispute regarding the period and as the company had, without any justifiable reason, not removed the warehoused goods, within a reasonable time, despite numerous opportunities given to it to do so, the levy of interest cannot be taken exception to. Consequently, Writ Appeal No. 1470 of 1991 is allowed with costs and W.P.No. 10035 of 1983 will stand dismissed with costs. In view of this W.A. No. 917 of 1992 is dismissed. No costs, counsel fee Rupees Five hundred.

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