Case Note & Summary
The petitioners, M/s SBEC Sugar Limited and its shareholder S.S. Agarwal, filed a writ petition under Article 226 of the Constitution of India challenging the demand for interest on three consignments of imported machinery kept in a bonded warehouse. The company had imported machinery for a sugar plant and stored them in a bonded warehouse under bonds dated 26th December 1995 and 2nd January 1996, with expiry dates in December 1996 and January 1997. The company applied for extension of the bond period on 19th December 1996, but the application was rejected on 13th January 1997 under clause 2(i)(iii) of Public Notice No.102/96 dated 5th June 1996. The company cleared the goods on 17th January 1997 but was subsequently served with a demand for interest under Section 61(2) of the Customs Act, 1962 for the period the goods remained in the warehouse beyond the permitted period. The company sought waiver of interest, which was rejected by letter dated 17th March 1998. The legal issue was whether the interest under Section 61(2) is mandatory and whether it can be waived. The petitioners argued that interest is compensatory and not penal, and since the delay was caused by the customs authorities in rejecting the extension application, no interest should be levied. The respondents contended that Section 61(2) imposes a mandatory obligation to pay interest and no waiver is permissible. The court analyzed the language of Section 61(2) and held that it is clear and unambiguous, making payment of interest mandatory for goods warehoused beyond the permitted period. The court noted that the public notice relied upon by the petitioners only deals with extension of bond period and does not provide for waiver of interest. The court further held that even if there was delay on the part of the customs authorities, the statutory liability to pay interest continues. The court dismissed the writ petition, upholding the demand for interest and the rejection of the waiver request.
Headnote
A) Customs Law - Interest on Bonded Goods - Section 61(2) Customs Act, 1962 - Mandatory Interest - The court considered whether interest under Section 61(2) is mandatory or discretionary. Held that the language of Section 61(2) is clear and unambiguous, making payment of interest mandatory for goods warehoused beyond the permitted period. The court rejected the argument that interest is compensatory and can be waived if delay is caused by customs authorities. (Paras 4-6) B) Customs Law - Waiver of Interest - Public Notice No.102/96 - The court examined whether Public Notice No.102/96 dated 5th June, 1996 provides for waiver of interest. Held that the public notice only deals with extension of bond period and does not empower the authorities to waive interest. The rejection of extension was under clause 2(i)(iii) of the notice, which does not relate to interest. (Paras 3, 7) C) Customs Law - Delay by Customs Authorities - Liability for Interest - The court considered whether delay caused by customs authorities in processing extension applications can absolve the importer from liability to pay interest. Held that even if there is delay on the part of customs authorities, the statutory liability to pay interest under Section 61(2) continues, as the provision is mandatory and does not provide for any exception. (Paras 5-6)
Issue of Consideration
Whether the demand for interest under Section 61(2) of the Customs Act, 1962 on goods kept in a bonded warehouse beyond the permitted period is valid and whether such interest can be waived.
Final Decision
The writ petition is dismissed. The demand for interest and the rejection of the waiver request are upheld.
Law Points
- Interest under Section 61(2) of the Customs Act
- 1962 is mandatory and not discretionary
- No waiver of interest is permissible under the Act or Public Notice No.102/96
- Delay in clearance due to customs authorities does not absolve liability for interest
- Public Notice No.102/96 does not provide for waiver of interest but only extension of bond period
