1. Both the aforesaid appeals are directed against the common order of the Collector (Appeals) bearing No. S/49-122 & 126/89 MISC dated 15-3-1990. The Collector (Appeals) disposed of 2 appeals of the appellants against the orders of the Asstt. Collector one bearing order-in-original No. 28/89 and Another bearing order-in-original bearing No. 31/89. Since the issues involved are the same, they were argued together and proposed to be disposed of by this common order.
2. The appellants warehoused consignments on 27-3-1982 and 16-4-1982.
The period of warehousing was extended from time to time and finally the goods were cleared on 29-12-1987 and 14-10-1988 in respect of both the warehoused consignments. Show cause notices were issued for payment of interest in respect of the goods cleared demanding interest at 6% per annum and accordingly in the case of appeal No. 233/90 a demand of Rs. 2,15,225/- and in the case of appeal No. C/237/90 a demand of Rs. 45,752/- were confirmed. In the adjudication proceedings initiated by the Asstt. Collector, the Asstt. Collector held that since the goods were warehoused before 13-5-1983, the rate of interest on the goods warehoused on or before 13-5-1983 and cleared after that date will be only 6% and not 12% or no interest. Hence as per Section 59(b) of the Customs Act, 1962, the appellants are required to pay interest at 6% per annum and accordingly he has confirmed the demand under Section 59(b) read with Section 28 of the Customs Act. Against the aforesaid orders, the appellants went in appeal before the Collector (Appeals).
The Collector (Appeals) while rejecting the appeals, have also observed that the interest of 12% is also payable in respect of the goods warehoused and continued to remain in bond after 13-5-1983 and cleared thereafter. The present appeals are against the aforesaid order of the Collector (Appeals).
3. Shri Hidayatullah, the learned Advocate on behalf of the appellants, took us through the provisions of Section 61 of the Customs Act prior to the amendment carried out by the Finance Bill, 1983, which came into force on enactment on 13-5-1983. According to him, Section 61 did not contain the provision for charging interest prior to amendment.
However, under Section 59, there is a provision that the bond is required to be executed for warehousing and the bond provides for payment of interest at 6% or such other rate as may be specified by the Board. It was only for the first time that under Notification No.143/83, the Board fixed the rate of interest at 12% and hence no interest is chargeable in respect of the goods warehoused prior to 13-5-1983. He also referred to the Board's letter F. No.473/ICO/83-CUS. VII dated 8-9-1983. In this letter it is clarified that the amended provisions would apply only in respect of goods warehoused on or after 13-5-1983 and this clarification has been issued based on the Law Ministry's opinion given in the past in the context of the amended Sec. 61. He also took us through the Law Ministry's U.O. No.25150/70 dated 12-9-1978, wherein it has been held that in the context of the amendment which came into effect from 1-7-1978 whether the amended warehousing period would be applicable to the goods bonded before 1-7-1978, the Law Ministry have clearly held in that clarification that the depositor of the goods in the warehouse had acquired a right to keep such goods in the warehouse for 3 years prior to the amendment which came into effect from 1-7-1978 and this was legally enforceable right and would continue to be so because this right has not been extinguished either expressly or by necessary implication by the amending Act. It is also held in the clarification by the Law Ministry that the amendment would apply to the goods which are warehoused after the amendment of the Act and the goods, which are already warehoused before the amended Act was brought into force, would continue to be governed by the provisions as they were in force at the time the proper officer passed the order under Section 60 of the Customs Act. Based on the clarification given as early as in 1978, the Board has given the clarification on 8-9-1983 with regard to the interest payable consequent on the amendment of Section 61. In the clarification of the Board dated 8-9-1983, it has been held that the amended provisions would apply only in respect of goods warehoused on or after 13-5-1983 and the interest prescribed under Notification No.143/83 would not be applicable in respect of goods warehoused prior to 13-5-1983. He also contended that Section 50 of the Finance Act, 1983, under which the amendment of Section 61 has been carried out is not retrospective in operation and in that context he referred to Bemion Statutory interpretation and Maxwell Law of interpretation. [We do not propose to discuss these in detail because of the fact that Shri Mondal, SDR agreed that the amendment carried out under Section 50 of the Finance Act was not meant to be applied retrospectively.] 4. He, thereafter, contended that even the interest at 6% is not payable under Section 59 of the Customs Act. Section 59 is only a machinery provision for furnishing a bond. It is not a section providing for charge of interest. This came to be introduced only by way of amendment of Section 61 for the first time through the Finance Act of 1983 and the Notification fixing the rate of interest at 12% was also issued for the first time on 13-5-1983. Hence in the light of the Board's clarification and the Law Ministry's opinion, no interest is payable at all in respect of the goods warehoused prior to 13-5-1983.
Thereafter he based his arguments on the following propositions: (i) At the time of warehousing the goods on 27-3-1982 and 16-4-1982, Section 61 as it stood did not provide for charging interest for warehousing goods. A vested right therefore accrued to the appellants that the goods could be continued to be warehoused without charge of interest. Section 61(2) of the Customs Act came into force only on 13-5-1983 and it does not have retrospective effect. Hence, no interest is payable in respect of goods warehoused prior to that date; (ii) The clarification given by the Central Board of Excise & Customs based on the Law Ministry's opinion given in the context of amendment to Section 61 in the year 1978 is in the nature of administrative interpretation and has to be followed; (iii) The Customs Department has not charged interest at the time of clearance of the goods even in respect of similar other Bs/E, warehoused during the same period. Hence this is a consistent practice. When there is a consistent and established practice of not charging any interest, the benefit should be given in this case as well.
(iv) In the case of appeal No. 233/90, the demand is time-barred under Section 28 of the Customs Act because the demand raised thereunder related to the period of six months after the date of clearance of the goods. The demand letter is dated 1-6-1988 and the date of clearance of the goods was on 29-12-1987; (v) Section 59 of the Customs Act is merely enabling provisions and it is not the charging section. Hence, Section 59 cannot be relied upon for charging the interest even at the rate of 6% per annum.
5. Shri Mondal, the learned SDR, on the other hand, contended that as per the clarification given by the Board referred to by the learned Advocate, it is, no doubt, clear that the amended provisions of Section 61 of the Customs Act would not be attracted in respect of the goods warehoused prior to 13-5-1983 being the date of the amendment. All the same, he could not accept the view of the learned Advocate on the other side that no interest is chargeable in this case. It is an admitted fact that under Section 59 of the Customs Act, there is a provision for taking a bond not only covering duty but also interest chargeable at 6%. The Collector (Appeals) has clearly brought out that the appellants have given such a bond undertaking to pay interest at the rate of 6% per annum. Enforcement of any dues arising out of the bond is also permissible under Section 142(2) of the Customs Act. Accordingly, when the appellants have specifically given a bond for payment of interest at 6% they cannot now say that the bond is not enforceable against them. Moreover, there is a statutory provision under Section 59 and only by virtue of that provision the bond has been taken. In the circumstances, it is not correct to say that no interest is payable in respect of the goods warehoused prior to 13-5-1983. Even the Board's clarification referred to by the learned advocate does not lead to such a conclusion. The Board's clarification has been given in the context of the rate of interest fixed under Notification No. 143/83 dated 13-5-1983. The clarification does not state that no interest is payable at all. This clarification has been given in the context of amended provision of Section 61 of the Customs Act. Hence this clarification is to be taken that the rate of interest at 12% prescribed under Notification No. 143/83 could not be applied retrospectively and would not apply in respect of goods warehoused prior to 13-5-1983. In so far as the goods warehoused prior to 13-5-1983 they are governed by Section 59 of the Customs Act and the proper officer has ordered deposit of the goods only on execution of a bond agreeing to pay interest at 6% as per the provisions of Section 59 of the Customs Act. He also contended that interest is not a customs duty. The bond is a facility given to the importers for making the deferred payment of duty. This facility is given only on execution of a specific bond undertaking to pay duty alongwith interest. The interest payable is specifically mentioned under Section 59 of the Customs Act and accordingly the appellants have furnished the bond for payment of interest. Hence, there is no need for separate charging section as contended by the learned advocate. On the question of time bar, he contended that this is a demand for the payment of interest and Section 28 is applicable only in respect of duties and hence if at all any time limit is to be applied, it will be governed by the general law of limitation. Shri Mondal also contested the factual position that it is an accepted practice of not charging interest on goods warehoused prior to 13-5-1983. According to his information, in all major Custom Houses, interest at 6% was charged on all such goods warehoused prior to 13-5-1983.
6. Shri Hidayatullah, in reply contended that when for recovery of any sum payable under the Customs Act, no time limit is prescribed, it has to be governed by Section 28 of the Customs Act. In this context he referred to the decision of this Bench in the case of recovery of modvat credit under Rule 57(1) of the Central Excise Rules.
7. After hearing both the sides, we find that the short point raised by the learned Advocate in both the appeals is, whether any interest is chargeable at all in both the cases of appeals of the appellants and if interest is chargeable, whether it could be at 12%? The question of going into the short point as to whether the interest at 12% is chargeable in these cases does not seem to be necessary because of the following reason. The admitted facts are that the goods were warehoused in the year 1982 prior to the amendment of Section 61 of the Customs Act. The appellants have executed a bond undertaking to pay duty alongwith 6% interest. The Asstt. Collector's orders in both the cases confirmed the interest demand at 6% per annum under Section 59 of the Customs Act. The Collector (Appeals) by rejecting the appeals of the appellants has only confirmed the aforesaid orders of the Asstt.
Collector. The Collector (Appeals) cannot traverse beyond the scope of the orders of the Asstt. Collector, since the Department has not come in appeal before him seeking for enhancement of rate of interest from 6% to 12%. In this view of the matter, the question of going into the applicability of rate of interest at 12% in this case is not at all called for. The short point of the appeals is therefore limited to the consideration of the issue as to whether interest at 6% is chargeable at all in respect of the goods warehoused prior to 13-5-1983 and this is what we propose to consider.
8. The Board's clarification F. No. 473/ICO/83-CUS. VII dated 8-9-1983, the relevant extract of which is reproduced below: "I am directed to say that a doubt has arisen whether the interest prescribed under Notification No. 143/83-Customs, dated 13-5-1983 is chargeable on the goods warehoused prior to 13-5-1983 even if extension is granted. It is clarified that the amended provisions would apply only in respect of goods warehoused on or after 13-5-1983." 9. From the above it can be seen that a doubt arose whether the interest prescribed under Notification No. 143/83, dated 13-5-1983 is chargeable on the goods warehoused on 13-5-1983 even if extension is granted and in that context it has been clarified that the amended provisions will apply only in respect of goods warehoused on or after 13-5-1983. This clarification does not talk about the existing provision under Section 59 for taking a bond at 6% interest payable alongwith the duty amount. Prima facie it appears to us that the clarification has been given with regard to the question as to whether 12% interest could be chargeable in respect of goods warehoused prior to 13-5-1983, where extension has been granted and based on this extension clearance has been effected after 13-5-1983. This clarification cannot be taken to mean that no interest is chargeable at all. Hence the proposition made by the learned Advocate that under this clarification no interest could be chargeable from the appellants is not explicit from the wording of this clarification. In the circumstances, we are to look into the provisions of the Customs Act as to whether there is any provision for recovery of interest in respect of goods warehoused prior to 13-5-1983.
10. It is not disputed that under provisions of Section 59 of the Customs Act, the importer is required to furnish a bond for payment of duty as well as interest at 6% and also rent payable. As seen from the order of the Collector (Appeals) the appellants also have furnished a bond to that effect undertaking to pay interest at 6% alongwith the duty payable and this factual position as is evidenced from the order of the Collector (Appeals) is also not seriously disputed. The learned Advocate, however, contended that Section 59 is not the charging section but it is only a machinery provision enabling the Department to take a bond. The charging section was first introduced only on 13-5-1983 by amendment of Section 61 of the Customs Act.
11. We have carefully considered the argument. Under Section 59 of the Customs Act, the importer of any dutiable goods which have been entered for warehousing and assessed to duty shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods undertaking to observe all the provisions of the Act and the Rules and regulations in respect of such goods and to pay on or before a date specified in a demand notice, all duties, rent and charges claimable on account of such goods under this Act, together with interest on the same from the date so specified at the rate of six per cent per annum or such other rate as is for the time being fixed by the Board.
12. From the above it is clear that the rate of interest at 6% is provided for on the total sum including the duties, rent and other charges. The appellants have also given a bond accordingly. It is not although this bond has been taken without any legal authority. The legal authority is provided under Section 59 itself. The rate of interest chargeable at 6% is on the total sum payable, which covers not only duties but also rent and other charges. However, under Section 61(2) of the Customs Act effective from 13-5-1983, it is laid down that where any warehoused goods remain in a warehouse beyond the period of one year or three months, as the case may be, by reason of the extension of the warehousing the period or otherwise, interest at such rate, not exceeding eighteen per cent, per annum, as is for the time being fixed by the Board, shall be payable on the amount of duty on the warehoused goods for the period from the expiry on the period of one year or three months, as the case may be, till the date of the clearance of the goods from the warehouse.
13. From the above it is seen that the maximum interest specified under the aforesaid section is 18%. However, subject to this hailing the Board can fix the rate of interest for the time being and the interest is related to the amount of duties on the warehoused goods and it is chargeable for the period from the expiry of the initial warehousing period, till the date of clearance of the goods. It is also to be noted that Section 59 of the Customs Act, has not been amended consequent on the introduction of sub-sec. (2) of Section 61 of the Customs Act.
14. Thus it is clear that in respect of the goods warehoused prior to 13-5-1983, they are to be governed by the bond executed as per the provisions of Section 59 of the Customs Act and that position has not been affected even after the amendment of Section 61.
In view of this position, we are unable to accept the contention of the learned Advocate that no interest is payable at all by the appellants, since the goods have been warehoused prior to 13-5-1983. In these cases, since it is not disputed that the appellants have given a bond as per the provisions of Section 59 of the Customs Act undertaking to pay the interest at 6%, they are bound by the conditions of the bond and if the amount of interest is not paid in terms of the bond, they are enforceable and any dues which are enforceable under the bond can also be recovered by resorting to provisions under Section 142 of the Customs Act. We, therefore, hold that interest demanded at 6% is legally sustainable and is within the purview of Section 59 of the Customs Act. Moreover, collection of interest on deferred payment of dues to the Government stands on a different footing from that of levy of a tax. What is required is, therefore, there should be a legal provision enabling collection of interest on such deferred payments. We find that such an enabling provision exists under Section 59 of the Customs Act by requiring the Importer to execute a bond undertaking to pay the duty, rent and other charges as also interest at 6% on the same. When such an enabling provision exists in the statute and accordingly a bond has been furnished, on other authority by way of a charging section is needed for collection of the interest.
15. The other question raised by the learned Advocate is the question of limitation of time. In this case, though the Asstt. Collector in his order has confirmed the demand under Section 59 read with Section 28 of the Customs Act, the learned SDR has argued that Section 28 is not applicable because of the fact that it relates to duties not levied, short-levied or erroneously refunded. In this case, the amount involved relates to interest payable and hence Section 28 is not attracted. The learned Advocate contends that as in the case of modvat credit where this Bench has held that even erroneous credit of modvat sought to be recovered under 57-I, is subject to the limitation under Section 11A.16. We have considered both the arguments. Modvat credit relates to the credit of duty paid on inputs. When the credit has been taken on the inputs and utilised, duty payable on the finished product falls short to that extent and hence in that view we have held that it amounts to short-levy or non-levy. In this case, the amount sought to be recovered relates to interest and not to any duty short-levied or non-levied.
Hence we are of the view that the learned Advocate's argument that it should be brought within the purview of Section 28 is not tenable. Even the Asstt. Collector's order invoking Section 28 does not appear to be called for. In our view, the demand for interest can be enforced only in terms of the bond executed under Section 59 of the Customs Act and if such a demand is not met, without prejudice to any other action, it can be recovered by resorting to Section 142 of the Customs Act. In this view of the matter, the argument of the learned Advocate that time limit prescribed under Section 28 would be applicable, cannot be accepted.
17. The learned Advocate's contention that there is an established practice of not recovering interest in respect of goods warehoused prior to 13-5-83 is challenged by the SDR. The appellants have not produced any documents showing clearances of such goods without interest effected at other parts. Hence, plea of universal practice cannot be accepted in view of the assertion by the learned SDR that in all the major Custom Houses, interest was charged at 6% in respect of such goods.
18. In the appeal memorandum in both the appeals, it is contended that without prejudice to the other arguments and assuming that the appellants are required to pay interest at 6%, the Asstt. Collector has committed a calculation error in arriving at the interest figure in both the cases. According to the appellants, the interest payable at 6% will be at Rs. 19, 943.92 in the case of appeal No. 237/90 and Rs. 1,85,387.89 in the case of appeal No. 233/90. We do not have any finding of the Collector (Appeals) on this point. Even the Asstt.
Collector has not discussed this aspect in his order. Hence, while holding that in the case of both the consignments of the appellants warehoused prior to 13-5-1983, interest is payable at 6% per annum, we would deem it proper to remand the case back to the Asstt. Collector for looking into the alleged calculation error committed in both the cases at the time of confirmation of the demands. The appellants shall produce their work sheet along with other documents for establishing the calculation error before the Asstt. Collector. The Asstt. Collector shall pass orders in accordance with law. With these observations we set aside the orders of the authorities below and remand the case back to the Asstt. Collector to look into the limited question of calculation error, while confirming the demands for interest chargeable at 6%.