Case Note & Summary
The petitioner, M/s. M.J. Exports Pvt. Ltd., imported 53 Haemodialysis Machines and accessories under an Open General License and claimed exemption under Notification No.208/81-Cus. The machines were exported to the erstwhile USSR. The Customs Department issued a show cause notice dated 25th March, 1989 alleging that the machines were exported without carrying out any process, thereby violating the exemption conditions. The matter was adjudicated, and the duty demand was confirmed by the Supreme Court on 14th August, 2001. Thereafter, the respondent No.4 demanded interest under Section 28AA of the Customs Act, 1962 vide communication dated 25th August, 2001, calculating interest from 26th August, 1995 (three months after Section 28AA came into force) to 14th November, 2001, amounting to Rs.4,67,02,251/-. The petitioner challenged this demand, arguing that interest under Section 28AA is payable only from the date the duty becomes due, which in this case was after the Supreme Court's decision. The court framed two issues: (1) whether interest is payable from 26th August, 1995 or from 14th November, 2001, and (2) whether the interest demand of Rs.4,67,02,251/- is proper. The court held that interest under Section 28AA is payable from the expiry of three months from the date of the Supreme Court's decision (14th August, 2001), i.e., from 14th November, 2001, and not from the date of coming into force of the section. Consequently, the interest demand of Rs.4,67,02,251/- was held to be improper. The court allowed the writ petition and set aside the interest demand.
Headnote
A) Customs Law - Interest on Delayed Payment of Duty - Section 28AA of Customs Act, 1962 - Interest liability under Section 28AA arises only after the duty amount is determined and the period of three months from the date of such determination expires - In the present case, the duty liability was confirmed by the Supreme Court on 14th August, 2001, and thus interest is payable from 14th November, 2001, not from the date of coming into force of Section 28AA (Paras 2-3).
Issue of Consideration
Whether interest under Section 28AA of the Customs Act, 1962 is payable from 26th August, 1995 (immediately after three months of coming into force of Section 28AA) or from 14th November, 2001 (on expiry of three months from the date of decision of the Supreme Court dated 14th August, 2001) and whether the interest demand of Rs.4,67,02,251/- is proper.
Final Decision
Writ petition allowed. The interest demand of Rs.4,67,02,251/- is set aside. Interest under Section 28AA is payable from 14th November, 2001.
Law Points
- Interest under Section 28AA of Customs Act
- 1962 is payable from the date of expiry of three months from the date of the Supreme Court decision upholding the duty demand
- not from the date of coming into force of the section
- when the duty demand was pending adjudication and the liability was crystallized only after the Supreme Court's decision.
