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PETITIONER: UNION OF INDIA AND ORS. ETC.

       Vs.

RESPONDENT: M/S. BANGALORE WIRE AND MILL ETC.

DATE OF JUDGMENT:       19/03/1996

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) AHMAD SAGHIR S. (J)

CITATION:  1996 SCC  (3) 588        JT 1996 (3)   435  1996 SCALE  (3)3

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P. JEEVAN REDDY, J.      Leave granted in Special Leave Petitions.      The respondent-M/s.Bangalore Wire Rod Mill imported a ’high  reversible mill’  in the year 1982. On November 11, 1982, he  warehoused the  said goods  without paying duty as contemplated by  Sections 58 and 59 of the Customs Act, 1962 [the Act]. On March 7, 1985, the authorities issued a notice to the  respondent to  clear the  goods from  the  warehouse within fifteen days of the said notice after paying duty due thereon. The  respondent, however,  did not  clear the goods until September  9, 1988  on which day he paid a duty of Rs. 1.40 crores  and interest  of Rs.81.49  lakhs as demanded by the authorities.  Having cleared  the goods,  the respondent filed a writ petition in the Karnataka High Court contending that levy  of interest  from November 11, 1983 upto the date of clearance  of the  goods from  the warehouse and that too treating the  rate of  duty as ninety percent is contrary to law and  unsustainable. It asked for refund of excess amount of interest collected from it. Its case was that the initial warehousing period  was for  three years and, therefore, the interest, if  at all,  should be charged only for the period after the  expiry of  the said three years’ period. The writ petition was heard and disposed of by a learned Single Judge against whose  decision both the respondent and the Union of India  filed   writ  appeals.  The  Division  Bench  of  the Karnataka High  Court disposed  of the writ appeals with the following directions:      "(a) The  respondents are  directed      to recompute the amount of interest      payable by  the petitioner  at  the      prescribed rate  with  effect  from      22.3.1985  upto   9.9.1988  on  the      basis of the amount of customs duty      which  the  petitioner  would  have

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    been liable  to pay  to the Central      Government at  the rate,  which was      prevailing  during   the  different      periods   between    22.3   85   to      9.9.1988;      (b)  After   computing  the   total      amount of  interest payable for the      entire period  as  directed  above,      the respondents  shall  refund  the      balance of  the amount  of interest      collected from the petitioner."      The judgment  of the Division Bench is being questioned both by  the Union  of India  and by  the importer  in these appeals.      For a  proper appreciation  of  the  questions  arising herein, it  is necessary  to state  a few more facts: on the date of  warehousing the  goods, the  rate of  customs  duty chargeable on  the  imported  goods  was  forty  percent  ad valorem. The rate of duty was being raised from time to time and on  September 9,  1988, the date on which the goods were cleared from  the warehouse,  the rate  of duty  was  ninety percent.  The  Act,  as  in  force  at  the  relevant  time, permitted an  importer either to clear the goods immediately on their  import or  to warehouse  them without  paying  the duty. The  warehousing of  the goods without paying the duty was, however,  subject to  certain conditions  specified  in Section 59.  Sub-section (1)  of Section  59, which alone is relevant for our purposes, read thus at the relevant time:      "59.  Warehousing  bond--  (1)  The      importer  of   any  dutiable  goods      which   have   been   entered   for      warehousing and  assessed  to  duty      under  Section  17  or  Section  18      shall  execute   a   bond   binding      himself in a sum equal to twice the      amount of the duty on such goods;      (a) to  observe all  the provisions      of  this  Act  and  the  Rules  and      Regulations  in   respect  of  such      goods;      (b) to  pay on  or  before  a  date      specified in  a notice  of demands,      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      percent per  annum  or  such  other      rate as is for the time being fixed      by the Board; and      (c)  to   discharge  all  penalties      incurred  for   violation  of   the      provisions  of  this  Act  and  the      rules and regulations in respect of      such goods."      A reading  of Section  59(1) shows that an importer who seeks to  have the  imported goods  warehoused has  to first have the  goods assessed  under Section 17 or Section 18, as the case  may be, and then execute a bond binding himself to pay double the amount of duty assessed on the said goods and undertaking "to  pay on  or before  a date  specified  in  a notice of  demand 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

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being fixed  by the Board". Clause (a) of sub-section (1) of Section 61,  as obtaining  on the date of warehousing of the said goods,  [it is not disputed before us that the imported goods represent  "consumable stores"  within the  meaning of Section 61(1)(a)]  prescribed a period of three years beyond which the imported goods could not be warehoused. On May 13, 1983, however,  this clause  was amended  and the  period of three years  was reduced  to one  year. Sub-section  (2)  of Section 61 [as inserted by Act 11 of 1983] read as follows:      "(2)  Where  any  warehoused  goods      remain in  a warehouse  beyond  the      period of  one year or three months      specified in  clause (a)  or clause      (b) of sub-section (1) by reason of      the aforesaid  period or otherwise,      interest   at    such   rate,   not      exceeding  eighteen   percent   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 of  the period  of      one year  or as  the case  may  be,      three months,  till the date of the      clearance of  the  goods  from  the      warehouse.           Provided that  the board  may,      if it  considers it necessary so to      do  in   the  public  interest,  by      special     order     and     under      circumstances  of   an  exceptional      nature  to  be  specified  in  such      order, to  whole  or  part  of  any      interest payable  under  this  sub-      section   in    respect   of    any      warehoused goods."      We have  referred to  sub-section (2) of Section 61 for the reason  that it  was relied upon by the appellant before us, though, in our opinion, it is not really relevant herein as we shall point out presently.      In this  case, the  respondent did  execute a  bond  as contemplated by Section 59(1) while warehousing the goods on November  11,   1982.  Though  the  period  of  three  years prescribed in  Section 61  (1)(a) was reduced to one year by an Amendment  Act with effect from May 13, 1983, neither the respondent cleared  the goods  nor the  authorities issued a demand notice  within one  year from  May 13,  1983. Only on March 7,  1985 did  the authorities  issue a  notice to  the respondent calling upon him to clear the goods on paying the appropriate duty.  Now,  according  to  the  Act,  the  duty payable would  be the duty in force on the date of clearance from the  warehouse and not the date in force on the date of import or  on the  date of warehousing. For one or the other reasons the  respondent did  not clear the goods immediately but cleared them only on September 9, 1988. He paid the duty at the  rate of  ninety percent and that aspect is no longer in issue  herein. while  learning the goods, the authorities demanded and  collected interest  on the said amount of duty for  the   period  commencing  from  November  11,  1982  to September 9,1988.  It is  this  aspect  which  alone  is  in dispute between  the parties  in these appeals. The Division Bench of  the High  Court has  held  that  the  interest  is chargeable only  for the period March 22, 1985] on expiry of fifteen days  from the date of notice dated March 7 1985] to September 9,1988.  The Division  Bench has  further directed

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that interest shall be calculated taking the rate of duty in force from  time to  time during  the said period. The State has preferred  these  appeals  contending  that  (1)  it  is entitled to  interest from  November 11,  1982 and  (2)  the interest should  be charged  calculating the  duty a  ninety percent for the entire period November 11, 1982 to September 9,1988.      We do  not think  that the  claim of  the appellant  is sustainable in law. The language of Section 59(1) (b), as it stood at  the relevant  times unambiguous.  It says that the importer shall  have to execute a bond undertaking interalia to pay  interest from  the date  specified in  the notice of demand.  We  have  already  extracted  clause  (b)  in  full hereinbefore. The  liability to  pay  interest  arises  only after the  expiry of  the period prescribed in the notice of demand. It  has been held by the High Court that the present matter is  not governed  by Section 61(2) as it stood at the relevant times  but by  Section 59(1)  alone. Indeeds  it is submitted that  when the respondent applied for extension of time of warehousing under Section 61(2), the Government told it that  the said  provision had  no application  and hence, time cannot  be thereunder.  Once that  is so  we must go by what Section 59(1) says. According to it the duty became due on issuing  the notice  of  demand.  The  notice  prescribed fifteen  days  for  payment.  Interest  is  chargeable  only thereafter as hold by the High Court, which, in our opinions is a reasonable way of understanding the provision. Secondly we see  no justification  or legal  basis for the appellants plea that  the interest  must be paid taking the rate of the duty at  ninety percent  for the  said entire  period. As  a matter of  facts the  rate of duty on the said goods was not ninety  percent  throughout  the  period  March  22,1985  to September 9,  1988.  It  was  varying  .  The  High  Court’s direction, therefore  to take  the actual  rate from time to time is  a reasonable  one. We are, therefore of the opinion that the  judgment of  the High  Court does not call for any interference. The  appeals are  accordingly dismissed  .  No costs.