Full Judgment Text
1
2006:BHC-OS:3853-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.338 OF 2006
M/s.M.J. Exports Pvt. Ltd.
113, Jolly Maker Chambers
No.II, Nariman Point,
Bombay - 400 021. .. Petitioner.
V/s.
1. Union of India, through
the Secretary, Ministry
of Law Justice and Company
Affairs, Aayakar Bhavan,
M.K. Road, Churchgate,
Bombay - 400 020.
2. Central Board of Excise
& Customs, Department of
Revenue, Ministry of
Finance & Company Affairs,
Government of India
Through Director, Drawback.
3. Chief Commissioner of Customs
New Custom House, Ballard
Estate, Mumbai - 400 001
4. Commissioner of Customs,
New Custom House, Ballard
Estate, Mumbai 400 001.
5. The Assistant Commissioner
of Customs, Appraising
Group VB New Custom House,
Ballard Estate, Mumbai 400 001
6. The Additional Commissioner of
Customs (General), Mumbai
7. The Deputy Commissioner of
Customs Central Revenue
Recovery Cell, 6th Floor,
Annexe Building, New Custom
House, Ballard Estate,
Mumbai - 400 001. .. Respondents.
Mr.Vikram Nankani with Ms.Sathe i/b. Madhur Baya for
the petitioner.
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Mr.A.J. Rana with Mr.P.S. Jetly for the respondents.
CORAM : R.M. LODHA &
CORAM : R.M. LODHA & CORAM : R.M. LODHA &
J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ.
DATED : 28TH MARCH, 2006. DATED : 28TH MARCH, 2006. DATED : 28TH MARCH, 2006.
ORAL JUDGMENT (Per R.M. Lodha, J.) :
Rule. Returnable forthwith. The
advocate on record for the respondents waives
service. By consent, rule is heard finally at this
stage.
2. In the light of the submissions advanced
before us by the senior counsel and the counsel for
the parties, we find that two questions arise for our
consideration :
one) Is M.J. Exports (the petitioner) liable
to pay interest on the delayed payment of
duty under Section 28AA of the Customs
Act, 1962 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) ?
two) Is the interest in the sum of
Rs.4,67,02,251/- as demanded by the
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respondent No.4 from M.J. Exports (the
petitioner) vide communication dated 25th
August, 2001 proper ?
Re : Question (one)
3. M.J. Exports Pvt. Ltd. (hereinafter
referred to as ‘M.J. Exports’ or ‘the petitioner’)
imported 53 numbers of Haemodialysis Machines and
accessories and spares under an Open General License
(OGL). They claimed exemption under Exemption
Notification No.208/81-cus for the import of the said
machines. Admittedly the said machines after the
import were exported by M.J. Exports to the
erstwhile USSR.
4. The Customs Department issued a show
cause notice dated 25th March, 1989 to M.J. Exports
for exporting the machines outside the country
without carrying out any process. On 6th April, 1993
another show-cause notice was issued to them under
Section 124 of the Customs Act, 1962 for clearance of
53 numbers of Haemodialysis Machines and accessories
and spares under an OGL by evading customs duty to
the tune of Rs.2,94,42,867/- and exporting the same
to USSR without utilising the goods in India.
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5. On 28th January, 1994, the Collector of
Customs, Bombay after hearing M.J. Exports in
response to the show-cause notice under Section 124
of the Customs Act, 1962 passed an order that they
were not entitled to Exemption Notification
No.208/82-cus dated 22nd September, 1981 and that the
duty of customs amounting to Rs.2,94,42,867/- shall
be recovered from them under proviso to Section 28(1)
of the Customs Act, 1961. The Collector of Customs
also imposed penalty of Rs.1,00,00,000/- on them
under Section 112(a) of the Customs Act, 1961.
Though the Haemodialysers were liable for
confiscation, the Collector of Customs noted that the
said goods having already been exported, those were
not available for confiscation.
6. M.J. Exports felt aggrieved by the order
dated 28th January, 1994 passed by the Collector of
Customs - II, Bombay and filed an appeal before the
Customs, Excise and Gold (Control) Appellate Tribunal
(CEGAT). The two members of the CEGAT differed in
their opinion and the matter was referred to the
third member. Ultimately, in view of the majority
opinion, the appeal filed by M.J. Exports was
allowed on 20th May, 1999 and the order passed by the
Collector of Customs was set aside.
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7. This time, the revenue felt aggrieved by
the order of the CEGAT and carried the matter to the
Supreme Court. The Supreme Court vide its order
dated 14th August, 2001 set aside the order of the
CEGAT and restored the order of the Collector of
Customs dated 28th January, 1994 and confirmed the
duty to the tune of Rs.2,94,42,687/- and penalty of
Rs.1,00,00,000/-.
8. Going a little backwards to have a full
view of facts, it may be noticed here that in the
appeal preferred by M.J. Exports against the order
of the Collector of Customs dated 28th January, 1994,
the petitioner made an application for dispensation
of pre-deposit. By the order dated 26th October,
1994, CEGAT, passed a conditional order directing
M.J. Exports to deposit a sum of Rs.1,50,00,000/-
within 12 weeks from the date of receipt of the order
and upon compliance, the deposit of balance duty
amount and penalty amount was ordered to be dispensed
with. M.J. Exports challenged the order dated 26th
October, 1994 before the Delhi High Court. By an
ad-interim order dated 25th January, 1995, the
Division Bench of the Delhi High Court ordered that
on depositing an amount of Rs.50,00,000/- within 12
weeks from the date of receipt of the order of the
CEGAT, the appeal filed by the petitioner shall not
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be dismissed. M.J. Exports challenged the said
order before the Supreme Court. By its order dated
31st March, 1995, the Supreme Court dismissed the
Special Leave Petition but extended the time for
depositing the sum of Rs.50,00,000/- upto 30th April,
1995. The petitioner, accordingly, deposited a sum
of Rs.50,00,000/- with the Customs authorities on
22nd April, 1995. When the matter further came up
before the Delhi High Court after the notice was
served on the Customs department, by its order dated
12th May, 1995, the Delhi High Court disposed of the
writ petition and modified the order of the CEGAT
dated 26th October, 1994 by directing that in
addition to the deposit of Rs.50,00,000/-, the
petitioner shall also furnish bank guarantee in the
sum of Rs.50,00,000/-. In other words, the
conditional pre-deposit order passed by the Tribunal
on 26th October, 1994 stood modified by condition of
pre-deposit of Rs.50,00,000/- and also bank guarantee
in the sum of Rs.50,00,000/-.
9. The provision relating to delayed payment
of duty was inserted in the Customs Act, 1962 by way
of Section 28AA vide Act 22 of 1995. Section 28AA
reads thus :
"28AA. Interest on delayed payment
of duty. - (1) Subject to the provisions
contained in section 28AB, where a
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person, chargeable with the duty
determined under sub-section (2) of
section 28, fails to pay such duty within
three months from the date of such
determination, he shall pay, in addition
to the duty, interest at such rate not
below eighteen per cent and not exceeding
thirty-six per cent per annum, as is for
the time being fixed by the Central
Government, by notification in the
Official Gazzette, on such duty from the
date immediately after the expiry of the
said period of three months till the date
of payment of such duty :
Provided that where a person,
chargeable with duty determined under
sub-section (2) of section 28 before the
date on which the Finance Bill, 1995
receives the assent of the President,
fails to pay such duty within three
months from such date, then, such person
shall be liable to pay interest under
this section from the date immediately
after three months from such date, till
the date of payment of such duty.
Explanation 1. - Where the duty
determined to be payable is reduced by
the Commissioner (Appeals), Appellate
Tribunal or, as the case may be, the
court, the date of such determination
shall be the date on which an amount of
duty is first determined to be payable.
Explanation 2. - Where the duty
determined to be payable is increased or
further increased by the Commissioner
(Appeals), Appellate Tribunal or, as the
case may be, the court, the date of such
determination shall be, -
(a) for the amount of duty first
determined to be payable, the
date on which the duty is so
determined;
(b) for the amount of increased
duty, the date of order by
which the increased amount of
duty is first determined to
be payable;
(c) for the amount of further
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increase of duty, the date of
order on which the duty is so
further increased.
(2) The provisions of sub-section (1)
shall not apply to cases where the duty
or the interest becomes payable or ought
to be paid on and after the date on which
the Finance Bill, 2001 receives the
assent of the President."
10. The petitioner has set up diverse grounds
challenging the legality of levy of interest under
Section 28AA. However, during the course of hearing
Mr.Vikram Nankani, the learned counsel for the
petitioner confined his argument to one aspect. His
submission is : on the date Section 28AA came into
force (26th May, 1995) and three months from such
date, the liability to pay duty vide the order of the
Collector of Customs stood suspended because of the
pendency of the appeal before CEGAT and the interim
order operating at that time; that CEGAT ultimately
allowed the appeal and, therefore, there was no
liability upon the petitioner to pay the duty until
the order came to be passed by the Supreme Court on
14th August, 2001. The counsel would submit that
there was no failure to pay the duty within three
months from the date Section 28AA came into force
and, in these circumstances, the interest cannot be
levied upon the petitioner under Section 28AA from
26th August, 1995. According to him, if at all it is
leviable, it could only be from the expiry of three
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months of the order of the Supreme Court passed on
14th August, 2001.
11. On the other hand, Mr.A.J. Rana, the
senior counsel argued that by the order of the
Supreme Court passed on 14th August, 2001, the order
of the Collector of Customs has been restored and,
thus as on 28th January, 1994 M.J. Exports was
liable to pay the duty of Rs.2,94,42,687/- and since
they failed to pay the said duty within three months
of coming into force of Section 28AA, they are liable
to pay interest under Section 28AA from the date
immediately after three months from the date of
coming into force of Section 28AA.
12. From the facts that we have narrated
above, it is clear that by the order dated 28th
January, 1994, the Collector of Customs determined
the duty and, accordingly, M.J. Exports became
liable to pay the customs duty to the tune of
Rs.2,94,42,687/- and penalty of Rs.1,00,00,000/-. It
is true that the said order was challenged by the
petitioner before CEGAT and at the time of coming
into force of Section 28AA there was an interim order
operating in favour of the petitioner and the
petitioner also succeeded before CEGAT. However, in
appeal that was carried by the revenue to the Supreme
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Court, the order of CEGAT dated 20th May, 1990 was
set aside and the order of the Collector of Customs
passed on 28th January, 1994 was restored. It would
be, thus, seen that on 26th May, 1995 when Section
28AA came into force, after receiving the assent from
the President, the petitioner was liable to pay the
duty already determined under sub-section 2 of
Section 28. They failed to pay such duty within
three months from 26th May, 1995. In terms of
proviso appended to Section 28AA, the petitioner
became liable to pay interest from the date
immediately after three months from 26th May, 1995.
13. The submission of the counsel for the
petitioner is that the expression ‘fails to pay such
duty’ in Section 28AA indicates positive and
deliberate inaction on the part of the person saddled
with payment of customs duty and in the facts of the
present case as the appeal was pending and the
interim order was operative, non deposit of the duty
determined by the Collector of Customs cannot be
construed to be failure on the part of the petitioner
to pay such duty under Section 28AA. We do not
agree. The expression ‘fails to pay such duty’ in
the context of Section 28AA, in our opinion would
mean unable to pay such duty or choose not to pay the
duty. The reason for not paying the duty may be many
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and varied. The reason is not material nor the
intention. What is important is the factum of non-
payment of duty determined under sub-section 2 of
Section 28 within three months from the date Section
28AA came into force. The fact that the petitioner
did not pay duty (for whatever reason; may be
because interim order of the Delhi High Court dated
26th October, 1994 was operating in petitioner’s
favour) within concessional period would render the
petitioner liable to interest as ultimately the order
of Collector of Customs was restored. The law-makers
while enacting Section 28AA by providing interest on
delayed payment for the first time gave an
opportunity to a person chargeable of duty under
sub-section 2 of Section 28 to discharge their
liability of payment of duty within three months from
the date of coming into force of Section 28AA. The
proviso to Section 28AA is by way of concession to
the defaulter to save payment of interest if the duty
was paid within three months from the date the said
provision came into force. If the defaulter failed
to take advantage of such statutory concession and
sought to wait until outcome of pending litigation
arising out of chargeability of duty, he has to thank
himself.
14. In our considered opinion, it has to be
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held that the petitioner was chargeable of duty
determination under sub-section 2 of Section 28 on
21st August, 1994 (i.e. before the date on which
Section 28AA came into force) and since they failed
to pay such duty within three months from the date of
coming into force of Section 28AA, they are liable to
pay interest from 26th August, 1995. The demand of
interest from the petitioner on unpaid duty from 26th
August, 1995 cannot be said to be bad-in-law.
Re : Question (two)
15. By the order dated 25th August, 1994, the
respondent No.4 has demanded a sum of
Rs.4,67,02,251/- towards interest on unpaid duty from
26th August, 1995. The calculation thereof is shown
in the chart annexed with the communication dated
25th August, 2005. The calculation shows that the
interest is calculated on the duty amount of
Rs.2,94,42,867/- from 26th August, 1995. Mr.A.J.
Rana, the learned senior counsel for the revenue did
not dispute that under the interim order, the
petitioner had deposited a sum of Rs.50,00,000/- on
22nd April, 1995 towards the duty. Though, upon
appeal having been allowed by the CEGAT in the year
1999, the said sum of Rs.50,00,000/- was refunded in
the year 2000, yet the fact remains that atleast for
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the period from 26th August, 1995 until the refund of
Rs.50,00,000/-, no interest could be charged on
Rs.50,00,000/-. We do not intend to go into the
calculation part in detail but suffice it to say that
the calculation of interest by the respondent No.4 is
not proper and it needs to be recalculated. As a
matter of fact, Mr.A.J. Rana, the senior counsel for
the revenue fairly submitted that the department
shall have to give credit of Rs.50,00,000/- which the
petitioner deposited on 22nd April, 1995 until it was
refunded to the petitioner pursuant to the order of
the CEGAT. He also stated that the interest rate
shall have to be as per the notifications issued by
the Central Government from time-to-time under
Section 28AA.
16. We, accordingly, dispose of the writ
petition by following order :
i) The demand of interest from the
petitioner by the respondent No.4 on
unpaid duty from 26th August, 1995 is
legal and valid.
ii) The calculation of interest as
communicated to the petitioner vide
communication dated 25th August, 2005 is
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not proper, and, therefore, set aside.
iii) The respondent No.4 is directed to
re-calculate the interest from 26th
August, 1995 by not charging interest on
Rs.50,00,000/- from 26th August, 1995
until the date of return of the said
amount to the petitioner.
iv) While re-calculating the interest,
the respondent No.4 shall apply the
interest rate as per the notifications
issued by the Central Government under
Section 28AA from time-to-time.
No costs.
(R.M. LODHA, J.)
(J.P. DEVADHAR, J.)
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2006:BHC-OS:3853-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.338 OF 2006
M/s.M.J. Exports Pvt. Ltd.
113, Jolly Maker Chambers
No.II, Nariman Point,
Bombay - 400 021. .. Petitioner.
V/s.
1. Union of India, through
the Secretary, Ministry
of Law Justice and Company
Affairs, Aayakar Bhavan,
M.K. Road, Churchgate,
Bombay - 400 020.
2. Central Board of Excise
& Customs, Department of
Revenue, Ministry of
Finance & Company Affairs,
Government of India
Through Director, Drawback.
3. Chief Commissioner of Customs
New Custom House, Ballard
Estate, Mumbai - 400 001
4. Commissioner of Customs,
New Custom House, Ballard
Estate, Mumbai 400 001.
5. The Assistant Commissioner
of Customs, Appraising
Group VB New Custom House,
Ballard Estate, Mumbai 400 001
6. The Additional Commissioner of
Customs (General), Mumbai
7. The Deputy Commissioner of
Customs Central Revenue
Recovery Cell, 6th Floor,
Annexe Building, New Custom
House, Ballard Estate,
Mumbai - 400 001. .. Respondents.
Mr.Vikram Nankani with Ms.Sathe i/b. Madhur Baya for
the petitioner.
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Mr.A.J. Rana with Mr.P.S. Jetly for the respondents.
CORAM : R.M. LODHA &
CORAM : R.M. LODHA & CORAM : R.M. LODHA &
J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ.
DATED : 28TH MARCH, 2006. DATED : 28TH MARCH, 2006. DATED : 28TH MARCH, 2006.
ORAL JUDGMENT (Per R.M. Lodha, J.) :
Rule. Returnable forthwith. The
advocate on record for the respondents waives
service. By consent, rule is heard finally at this
stage.
2. In the light of the submissions advanced
before us by the senior counsel and the counsel for
the parties, we find that two questions arise for our
consideration :
one) Is M.J. Exports (the petitioner) liable
to pay interest on the delayed payment of
duty under Section 28AA of the Customs
Act, 1962 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) ?
two) Is the interest in the sum of
Rs.4,67,02,251/- as demanded by the
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respondent No.4 from M.J. Exports (the
petitioner) vide communication dated 25th
August, 2001 proper ?
Re : Question (one)
3. M.J. Exports Pvt. Ltd. (hereinafter
referred to as ‘M.J. Exports’ or ‘the petitioner’)
imported 53 numbers of Haemodialysis Machines and
accessories and spares under an Open General License
(OGL). They claimed exemption under Exemption
Notification No.208/81-cus for the import of the said
machines. Admittedly the said machines after the
import were exported by M.J. Exports to the
erstwhile USSR.
4. The Customs Department issued a show
cause notice dated 25th March, 1989 to M.J. Exports
for exporting the machines outside the country
without carrying out any process. On 6th April, 1993
another show-cause notice was issued to them under
Section 124 of the Customs Act, 1962 for clearance of
53 numbers of Haemodialysis Machines and accessories
and spares under an OGL by evading customs duty to
the tune of Rs.2,94,42,867/- and exporting the same
to USSR without utilising the goods in India.
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5. On 28th January, 1994, the Collector of
Customs, Bombay after hearing M.J. Exports in
response to the show-cause notice under Section 124
of the Customs Act, 1962 passed an order that they
were not entitled to Exemption Notification
No.208/82-cus dated 22nd September, 1981 and that the
duty of customs amounting to Rs.2,94,42,867/- shall
be recovered from them under proviso to Section 28(1)
of the Customs Act, 1961. The Collector of Customs
also imposed penalty of Rs.1,00,00,000/- on them
under Section 112(a) of the Customs Act, 1961.
Though the Haemodialysers were liable for
confiscation, the Collector of Customs noted that the
said goods having already been exported, those were
not available for confiscation.
6. M.J. Exports felt aggrieved by the order
dated 28th January, 1994 passed by the Collector of
Customs - II, Bombay and filed an appeal before the
Customs, Excise and Gold (Control) Appellate Tribunal
(CEGAT). The two members of the CEGAT differed in
their opinion and the matter was referred to the
third member. Ultimately, in view of the majority
opinion, the appeal filed by M.J. Exports was
allowed on 20th May, 1999 and the order passed by the
Collector of Customs was set aside.
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7. This time, the revenue felt aggrieved by
the order of the CEGAT and carried the matter to the
Supreme Court. The Supreme Court vide its order
dated 14th August, 2001 set aside the order of the
CEGAT and restored the order of the Collector of
Customs dated 28th January, 1994 and confirmed the
duty to the tune of Rs.2,94,42,687/- and penalty of
Rs.1,00,00,000/-.
8. Going a little backwards to have a full
view of facts, it may be noticed here that in the
appeal preferred by M.J. Exports against the order
of the Collector of Customs dated 28th January, 1994,
the petitioner made an application for dispensation
of pre-deposit. By the order dated 26th October,
1994, CEGAT, passed a conditional order directing
M.J. Exports to deposit a sum of Rs.1,50,00,000/-
within 12 weeks from the date of receipt of the order
and upon compliance, the deposit of balance duty
amount and penalty amount was ordered to be dispensed
with. M.J. Exports challenged the order dated 26th
October, 1994 before the Delhi High Court. By an
ad-interim order dated 25th January, 1995, the
Division Bench of the Delhi High Court ordered that
on depositing an amount of Rs.50,00,000/- within 12
weeks from the date of receipt of the order of the
CEGAT, the appeal filed by the petitioner shall not
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be dismissed. M.J. Exports challenged the said
order before the Supreme Court. By its order dated
31st March, 1995, the Supreme Court dismissed the
Special Leave Petition but extended the time for
depositing the sum of Rs.50,00,000/- upto 30th April,
1995. The petitioner, accordingly, deposited a sum
of Rs.50,00,000/- with the Customs authorities on
22nd April, 1995. When the matter further came up
before the Delhi High Court after the notice was
served on the Customs department, by its order dated
12th May, 1995, the Delhi High Court disposed of the
writ petition and modified the order of the CEGAT
dated 26th October, 1994 by directing that in
addition to the deposit of Rs.50,00,000/-, the
petitioner shall also furnish bank guarantee in the
sum of Rs.50,00,000/-. In other words, the
conditional pre-deposit order passed by the Tribunal
on 26th October, 1994 stood modified by condition of
pre-deposit of Rs.50,00,000/- and also bank guarantee
in the sum of Rs.50,00,000/-.
9. The provision relating to delayed payment
of duty was inserted in the Customs Act, 1962 by way
of Section 28AA vide Act 22 of 1995. Section 28AA
reads thus :
"28AA. Interest on delayed payment
of duty. - (1) Subject to the provisions
contained in section 28AB, where a
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person, chargeable with the duty
determined under sub-section (2) of
section 28, fails to pay such duty within
three months from the date of such
determination, he shall pay, in addition
to the duty, interest at such rate not
below eighteen per cent and not exceeding
thirty-six per cent per annum, as is for
the time being fixed by the Central
Government, by notification in the
Official Gazzette, on such duty from the
date immediately after the expiry of the
said period of three months till the date
of payment of such duty :
Provided that where a person,
chargeable with duty determined under
sub-section (2) of section 28 before the
date on which the Finance Bill, 1995
receives the assent of the President,
fails to pay such duty within three
months from such date, then, such person
shall be liable to pay interest under
this section from the date immediately
after three months from such date, till
the date of payment of such duty.
Explanation 1. - Where the duty
determined to be payable is reduced by
the Commissioner (Appeals), Appellate
Tribunal or, as the case may be, the
court, the date of such determination
shall be the date on which an amount of
duty is first determined to be payable.
Explanation 2. - Where the duty
determined to be payable is increased or
further increased by the Commissioner
(Appeals), Appellate Tribunal or, as the
case may be, the court, the date of such
determination shall be, -
(a) for the amount of duty first
determined to be payable, the
date on which the duty is so
determined;
(b) for the amount of increased
duty, the date of order by
which the increased amount of
duty is first determined to
be payable;
(c) for the amount of further
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increase of duty, the date of
order on which the duty is so
further increased.
(2) The provisions of sub-section (1)
shall not apply to cases where the duty
or the interest becomes payable or ought
to be paid on and after the date on which
the Finance Bill, 2001 receives the
assent of the President."
10. The petitioner has set up diverse grounds
challenging the legality of levy of interest under
Section 28AA. However, during the course of hearing
Mr.Vikram Nankani, the learned counsel for the
petitioner confined his argument to one aspect. His
submission is : on the date Section 28AA came into
force (26th May, 1995) and three months from such
date, the liability to pay duty vide the order of the
Collector of Customs stood suspended because of the
pendency of the appeal before CEGAT and the interim
order operating at that time; that CEGAT ultimately
allowed the appeal and, therefore, there was no
liability upon the petitioner to pay the duty until
the order came to be passed by the Supreme Court on
14th August, 2001. The counsel would submit that
there was no failure to pay the duty within three
months from the date Section 28AA came into force
and, in these circumstances, the interest cannot be
levied upon the petitioner under Section 28AA from
26th August, 1995. According to him, if at all it is
leviable, it could only be from the expiry of three
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9
months of the order of the Supreme Court passed on
14th August, 2001.
11. On the other hand, Mr.A.J. Rana, the
senior counsel argued that by the order of the
Supreme Court passed on 14th August, 2001, the order
of the Collector of Customs has been restored and,
thus as on 28th January, 1994 M.J. Exports was
liable to pay the duty of Rs.2,94,42,687/- and since
they failed to pay the said duty within three months
of coming into force of Section 28AA, they are liable
to pay interest under Section 28AA from the date
immediately after three months from the date of
coming into force of Section 28AA.
12. From the facts that we have narrated
above, it is clear that by the order dated 28th
January, 1994, the Collector of Customs determined
the duty and, accordingly, M.J. Exports became
liable to pay the customs duty to the tune of
Rs.2,94,42,687/- and penalty of Rs.1,00,00,000/-. It
is true that the said order was challenged by the
petitioner before CEGAT and at the time of coming
into force of Section 28AA there was an interim order
operating in favour of the petitioner and the
petitioner also succeeded before CEGAT. However, in
appeal that was carried by the revenue to the Supreme
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10
Court, the order of CEGAT dated 20th May, 1990 was
set aside and the order of the Collector of Customs
passed on 28th January, 1994 was restored. It would
be, thus, seen that on 26th May, 1995 when Section
28AA came into force, after receiving the assent from
the President, the petitioner was liable to pay the
duty already determined under sub-section 2 of
Section 28. They failed to pay such duty within
three months from 26th May, 1995. In terms of
proviso appended to Section 28AA, the petitioner
became liable to pay interest from the date
immediately after three months from 26th May, 1995.
13. The submission of the counsel for the
petitioner is that the expression ‘fails to pay such
duty’ in Section 28AA indicates positive and
deliberate inaction on the part of the person saddled
with payment of customs duty and in the facts of the
present case as the appeal was pending and the
interim order was operative, non deposit of the duty
determined by the Collector of Customs cannot be
construed to be failure on the part of the petitioner
to pay such duty under Section 28AA. We do not
agree. The expression ‘fails to pay such duty’ in
the context of Section 28AA, in our opinion would
mean unable to pay such duty or choose not to pay the
duty. The reason for not paying the duty may be many
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11
and varied. The reason is not material nor the
intention. What is important is the factum of non-
payment of duty determined under sub-section 2 of
Section 28 within three months from the date Section
28AA came into force. The fact that the petitioner
did not pay duty (for whatever reason; may be
because interim order of the Delhi High Court dated
26th October, 1994 was operating in petitioner’s
favour) within concessional period would render the
petitioner liable to interest as ultimately the order
of Collector of Customs was restored. The law-makers
while enacting Section 28AA by providing interest on
delayed payment for the first time gave an
opportunity to a person chargeable of duty under
sub-section 2 of Section 28 to discharge their
liability of payment of duty within three months from
the date of coming into force of Section 28AA. The
proviso to Section 28AA is by way of concession to
the defaulter to save payment of interest if the duty
was paid within three months from the date the said
provision came into force. If the defaulter failed
to take advantage of such statutory concession and
sought to wait until outcome of pending litigation
arising out of chargeability of duty, he has to thank
himself.
14. In our considered opinion, it has to be
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held that the petitioner was chargeable of duty
determination under sub-section 2 of Section 28 on
21st August, 1994 (i.e. before the date on which
Section 28AA came into force) and since they failed
to pay such duty within three months from the date of
coming into force of Section 28AA, they are liable to
pay interest from 26th August, 1995. The demand of
interest from the petitioner on unpaid duty from 26th
August, 1995 cannot be said to be bad-in-law.
Re : Question (two)
15. By the order dated 25th August, 1994, the
respondent No.4 has demanded a sum of
Rs.4,67,02,251/- towards interest on unpaid duty from
26th August, 1995. The calculation thereof is shown
in the chart annexed with the communication dated
25th August, 2005. The calculation shows that the
interest is calculated on the duty amount of
Rs.2,94,42,867/- from 26th August, 1995. Mr.A.J.
Rana, the learned senior counsel for the revenue did
not dispute that under the interim order, the
petitioner had deposited a sum of Rs.50,00,000/- on
22nd April, 1995 towards the duty. Though, upon
appeal having been allowed by the CEGAT in the year
1999, the said sum of Rs.50,00,000/- was refunded in
the year 2000, yet the fact remains that atleast for
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the period from 26th August, 1995 until the refund of
Rs.50,00,000/-, no interest could be charged on
Rs.50,00,000/-. We do not intend to go into the
calculation part in detail but suffice it to say that
the calculation of interest by the respondent No.4 is
not proper and it needs to be recalculated. As a
matter of fact, Mr.A.J. Rana, the senior counsel for
the revenue fairly submitted that the department
shall have to give credit of Rs.50,00,000/- which the
petitioner deposited on 22nd April, 1995 until it was
refunded to the petitioner pursuant to the order of
the CEGAT. He also stated that the interest rate
shall have to be as per the notifications issued by
the Central Government from time-to-time under
Section 28AA.
16. We, accordingly, dispose of the writ
petition by following order :
i) The demand of interest from the
petitioner by the respondent No.4 on
unpaid duty from 26th August, 1995 is
legal and valid.
ii) The calculation of interest as
communicated to the petitioner vide
communication dated 25th August, 2005 is
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not proper, and, therefore, set aside.
iii) The respondent No.4 is directed to
re-calculate the interest from 26th
August, 1995 by not charging interest on
Rs.50,00,000/- from 26th August, 1995
until the date of return of the said
amount to the petitioner.
iv) While re-calculating the interest,
the respondent No.4 shall apply the
interest rate as per the notifications
issued by the Central Government under
Section 28AA from time-to-time.
No costs.
(R.M. LODHA, J.)
(J.P. DEVADHAR, J.)
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