Case Note & Summary
The petitioner, M/s. R. K. Chemicals, a proprietorship firm, imported a consignment of Mono Sodium Glutamate in 1996. There was a dispute regarding the levy of countervailing duty of customs on the goods. Pending further enquiry, the bill of entry was provisionally assessed under Section 18 of the Customs Act, 1962. On 2 May 1997, two demand notices were issued under Section 28 of the Act seeking recovery of Rs.2,08,103/- as duties of customs on the ground that the petitioner was liable to pay countervailing duty. By an order dated 7 November 1996, the Assistant Commissioner of Customs confirmed the demand notices. The petitioner challenged the demand before the Commissioner of Customs (Appeals), who by order dated 30 June 1998 set aside the Assistant Commissioner's order and remanded the matter for fresh adjudication. Thereafter, the Deputy Commissioner of Customs passed an order on 31 January 2002 confirming the demand of Rs.2,08,103/-. The petitioner paid the duty amount on 8 February 2002. Subsequently, the Customs Department issued a notice dated 12 March 2013 demanding interest of Rs.2,86,877/- under Section 28AA of the Act for the period from the date of clearance of goods (1996) till the date of payment of duty (2002). The petitioner filed a writ petition under Article 226 of the Constitution of India challenging the interest demand. The main legal issue was whether interest under Section 28AA could be levied retrospectively for the period prior to its insertion, when the provisional assessment under Section 18 did not provide for interest. The petitioner argued that at the time of provisional assessment, Section 18 did not provide for interest, and Section 28AA was inserted later with effect from 11.05.2001. The respondents contended that the duty was payable from the date of clearance and interest was leviable under Section 28AA. The Court analyzed the provisions and held that Section 28AA was inserted by the Finance Act, 2001 with effect from 11.05.2001, and prior to that, there was no provision for interest on duty payable under provisional assessment. The Court noted that the provisional assessment was made in 1996, and the final assessment order was passed on 31 January 2002. The duty was paid on 8 February 2002. The Court held that interest under Section 28AA cannot be levied for the period prior to 11.05.2001, as the statute does not have retrospective effect. The Court quashed the demand for interest of Rs.2,86,877/- and allowed the petition.
Headnote
A) Customs Law - Interest on Duty - Retrospective Operation - Section 28AA Customs Act, 1962 - Section 18 Customs Act, 1962 - The petitioner imported goods in 1996 which were provisionally assessed under Section 18 of the Customs Act, 1962. At that time, Section 18 did not provide for payment of interest on duty. Subsequently, Section 28AA was inserted with effect from 11.05.2001 providing for interest on delayed payment of duty. The Customs Department demanded interest of Rs.2,86,877/- for the period from the date of clearance of goods (1996) till the date of final assessment and payment of duty (2002). The Court held that interest under Section 28AA cannot be levied retrospectively for the period prior to its insertion, as the provisional assessment under Section 18 did not contemplate interest. The demand for interest was quashed. (Paras 1-6)
B) Constitutional Law - Article 226 - Writ Jurisdiction - High Court can interfere with demand of interest which is without authority of law and has no retrospective effect. (Para 6)
Issue of Consideration
Whether interest under Section 28AA of the Customs Act, 1962 can be demanded on duty payable on goods provisionally assessed under Section 18 of the Act for the period prior to the insertion of Section 28AA, when the provisional assessment order was passed before the amendment and the duty was paid after the amendment.
Final Decision
The petition is allowed. The demand of interest of Rs.2,86,877/- under Section 28AA of the Customs Act, 1962 is quashed and set aside. No order as to costs.
Law Points
- Retrospective operation of statutes
- Interest on customs duty
- Provisional assessment
- Section 18 Customs Act 1962
- Section 28AA Customs Act 1962
- Article 226 Constitution of India
Case Details
2014 LawText (BOM) (01) 47
Writ Petition No.1650 of 2013
Mohit S. Shah, C.J., M.S. Sanklecha, J.
Mr. H. R. Shetty for Petitioner, Mr. Pradeep S. Jetly for Respondent Nos.1 and 2, Mr. Pankaj Vijayan i/b. M/s. Interalegal for Respondent No.3
Chief Commissioner of Customs, Commissioner of Customs (General), Deputy Commissioner of Customs, Branch Manager, Punjab National Bank
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging demand of interest on customs duty.
Remedy Sought
Quashing of demand notice dated 12 March 2013 demanding interest of Rs.2,86,877/- under Section 28AA of the Customs Act, 1962.
Filing Reason
The Customs Department sought to recover interest on duty payable on goods imported in 1996, which were provisionally assessed under Section 18 of the Customs Act, 1962. The petitioner contended that at the time of provisional assessment, Section 18 did not provide for interest, and Section 28AA was inserted later with effect from 11.05.2001, and thus interest cannot be levied retrospectively.
Previous Decisions
The Assistant Commissioner of Customs confirmed the demand notices on 7 November 1996. The Commissioner of Customs (Appeals) set aside that order on 30 June 1998 and remanded the matter. The Deputy Commissioner of Customs passed a fresh order on 31 January 2002 confirming the demand of Rs.2,08,103/-. The petitioner paid the duty on 8 February 2002.
Issues
Whether interest under Section 28AA of the Customs Act, 1962 can be demanded for the period prior to its insertion, i.e., before 11.05.2001, when the provisional assessment under Section 18 did not provide for interest.
Whether the demand of interest is without authority of law and liable to be quashed under Article 226 of the Constitution of India.
Submissions/Arguments
Petitioner: At the time of provisional assessment in 1996, Section 18 of the Customs Act did not provide for payment of interest. Section 28AA was inserted by the Finance Act, 2001 with effect from 11.05.2001. The demand of interest for the period prior to 11.05.2001 is retrospective and without authority of law.
Respondents: The duty was payable from the date of clearance of goods, and interest under Section 28AA is leviable for the period of delay in payment of duty. The demand is valid.
Ratio Decidendi
Interest under Section 28AA of the Customs Act, 1962 cannot be levied retrospectively for the period prior to its insertion (11.05.2001) when the provisional assessment under Section 18 did not provide for interest. The statute does not have retrospective effect, and the demand of interest for the period before the amendment is without authority of law.
Judgment Excerpts
This petition under Article 226 of the Constitution of India, the petitioner challenges the action of the Customs Department in seeking to recover interest amounting to Rs.2,86,877/ from the petitioner in respect of duty payable on goods which were imported in the year 1996.
It is the case of the petitioner that at the time of imports, the goods were provisionally assessed under Section 18 of the Customs Act, 1962 (the Act) and the same at the relevant time did not provide for payment of any interest on the duty payable on goods provisionally assessed.
In the present case, the provisional assessment was made in the year 1996. At that time, Section 18 of the Act did not provide for payment of interest. Section 28AA was inserted by the Finance Act, 2001 with effect from 11th May, 2001. Therefore, the demand of interest for the period prior to 11th May, 2001 is without authority of law and is liable to be quashed.
Procedural History
The petitioner imported goods in 1996, which were provisionally assessed under Section 18 of the Customs Act. On 2 May 1997, demand notices were issued under Section 28. On 7 November 1996, the Assistant Commissioner confirmed the demand. The petitioner appealed to the Commissioner of Customs (Appeals), who on 30 June 1998 set aside the order and remanded. On 31 January 2002, the Deputy Commissioner confirmed the demand of Rs.2,08,103/-. The petitioner paid the duty on 8 February 2002. On 12 March 2013, the Department demanded interest of Rs.2,86,877/- under Section 28AA. The petitioner filed the present writ petition on 12 March 2013.
Acts & Sections
- Customs Act, 1962: Section 18, Section 28, Section 28AA
- Constitution of India: Article 226
