(1.) BY filing this writ under Articles 226 and 227 of the Constitution of India, the petitioner in substance seeks issuance of writ of mandamus claiming refund of Rs. 22,85,790/- deposited by the petitioner towards purported demand of interest under the Customs Act raised by the respondents (Customs Authorities) for release of certain goods kept in warehouse and seeks to question the legality of order (Annexure J) passed by Assistant Collector rejecting the claim of petitioner for refund of interest amount. In order to appreciate the grievance urged by the parties, it is necessary to state the facts-which are brought on record by the parties.
(2.) PETITIONER is a limited Company registered as such under the Companies Act. It is engaged in the manufacturing activities and has a plant at Ghatabillod in District Dhar. It is the case of petitioner that for the 1988 -99, the Government had formulated the policy of Import-Export pursuant to which any manufacturer engaged in export business of their finished goods could import any raw material to be used in manufacture of finished goods without payment of customs duty. Petitioner claiming to be such manufacturer imported certain goods (C. R. Coils) under OGL (Open General Licence/advance Licence) and kept them in warehouse of Government as per the requirement of Customs Act till the formalities of clearance were completed by the concerned authorities. By letter dated 11-9-1989 (Annexure
b), the petitioner requested the Collector Customs and Central Excise to allow them to remove/release their goods i. e. C. R. Coils Without payment of customs duty and interest as according to petitioner in terms of Chapter XIX of Export-Import policy 1988-91 and Notification No. 116/88, dated 30-3-1988, the goods imported by any assessee under OGL, or any person claiming to be the supported manufacturer of the goods can claim exemption from payment of duty on the said goods. The petitioner therefore, claimed that they being a supported manufacturers of one Company M/s. Arandi (P) Ltd. who have duly authorised them against their advance licence are entitled to remove the goods in terms of the said policy without payment of any Customs Duty.
(3.) THE Additional Collector by its letter dated 12-9-1989 (Annexure C) rejected the application made by petitioner. Though while rejecting the said application the Collector did not give any reasons except to state that after perusing the application and the documents enclosed the petitioner is not entitled to any duty exemption. This was followed by another letter dated 22-9-1989 (Annexure E) containing reasons for rejections. The petitioner then felt aggrieved of the aforesaid rejection filed their representation before the Board. It appears that the Board accepted the request made by the petitioner and allowed them to clear the goods without payment of Customs Duty by its telex dated 22-3-1990 sent to Collector (Annexure F). It reads as under :
"f. No. 605/79/89-DBK (.) M/s. National Steel Industires Limited, New. Delhi has represented that CR sheets imported by them under OGL and lying in the Custom bonded warehouse are not being allowed clearance even against the advance licence issued in the name of the company (.) Earlier correspondence on this issue refers (.) Board has accepted the request of the company to permit clearances of warehoused goods against the advance licences issued to the company notwithstanding the fact that warehousing period may have expired if goods are otherwise covered by the advance licence in terms of description quality technical characteristics etc (-) This will be further subject to payment of appropriate interest under Customs Act provisions which the company has agreed (.)"
(4.) SINCE in the meantime, the petitioner was required to deposit the interest amount demanded by the Customs Authorities, as a condition precedent to clear the goods kept in warehousing, the petitioner deposited a sum of Rs. 22,85,793/ (Annexure G2) towards demand of interest on the Customs Duty. As a consequence of the order/directions passed by the Board referred supra, the petitioner then made an application dated 10-1-1991 (Annexure G) to Assistant Collector, Indore claiming refund of the interest amount deposited by the petitioner. In substance, the case of petitioner in claiming refund of interest amount was when the petitioner is held not liable to pay duty on the goods cleared - they cannot be made to pay interest on nil duty. In other words, the contention put forth in the application was that when there is no duty there can be no interest and hence, the amount deposited by the petitioner towards interest be refunded.
(5.) WHILE the aforesaid application was pending or/and instead of deciding the said application, the Assistant Collector, on 27-5-1992 (Annexure H) issued a show cause notice to the petitioner. By this show cause notice, it was said that why a refund application made by the petitioner in claiming refund of interest amount be not rejected. The show cause was founded on these two grounds :
2. Where as on scrutiny of the above refund claim it has been found that (1) The goods were originally Imported under OGL but at the specific requirement of the importer were allowed to be cleared against advance licence and the importer agreed to pay interest, (ii) The goods were chargeable to duty at the time of importation and assessment but subsequently only the goods were cleared without payment of duty against advance licence which did not waive any interest leviable on duty. "
(6.) THE petitioner by their two reply (Dated 16-6-1992 Annexure 1) and dated 17-9-1992 Annexure II opposed the show cause and asserted that they are entitled for refund of their money which they have deposited towards purported demand of interest which is held to be bad in law. The petitioner inter alia asserted that when their case has been accepted by the Board and they are allowed to clear the goods by paying nil duty, then in such event, the question of demanding interest which is essentially linked with payment of Customs duty does not arise.
(7.) BY impugned order (Annexure J), the Assistant Collector rejected the application made by the petitioner for claiming refund of the amount deposited by them towards demand of interest. In other words, the Assistant Collector upheld the show cause notice so too upheld their demand towards interest demanded from the petitioner for clearance of goods from the warehouse. It is against this order (Annexure J), the petitioner has felt aggrieved and filed this writ for claiming reliefs set out, supra.
(8.) THE respondents i. e. Customs Authorities have defended the impugned proceedings which eventually culminated in passing impugned orders.
(9.) HEARD Shri G. M. Chafekar, learned Senior Counsel with Shri V. K. Jain, learned Counsel for petitioners and Shri B. C. Neema, learned Counsel for respondents.
(10.) WHILE attacking the entire proceedings, beginning from issuance of show cause notice dated 22-5-1992 (Annexure H) which resulted in passing of an order Annexure J whereby, the show cause was upheld and refund application 10-1-1991 (Annexure G) made by petitioner, learned Counsel for the petitioner mainly made two fold submissions firstly, it was submitted that when admittedly, the Central Customs Board by its order dated 22-3-1990 (Annexure F) accepted the prayer of petitioner and allowed them to clear the goods from the warehouse without payment of Customs Duty, the respondents i. e. customs authorities did not have any right much less legal right under the Customs Act to ask the petitioner to pay interest. It was urged that it being not an issue in dispute that the order of Board dated 22-3-1990 was binding on Customs Authorities, it had to be given effect to but only insofar as it related to release of goods are concerned. The second submission was that it being a settled principle of law that the liability to pay interest is linked with payment of duty and since in this case the goods were cleared without payment of duty by virtue of order of Board dated 22-3-1990, there did not arise any occasion for the respondents to demand interest. Learned Counsel placed heavy reliance on the decision of Supreme Court reported in 1996 (88) E. L. T. 12 (S. C.) Pratibha Processors v. Union of India and 1991 (52) E. L. T. 357 (Ker.) which according to learned Counsel decided this very issue in favour of petitioner. This, in substance, was the submission pressed into service by the learned Counsel for the petitioner.
(11.) IN reply, learned Counsel for the respondent while defending the impugned proceedings including the impugned order, relied on the decision of Supreme Court rendered in Mafatlal's case and urged that this petition has rendered infructuous inasmuch as the remedy of petitioner was to apply to the authorities for claiming refund within the time mentioned in the said decision. Yet another submission was that petitioner has an alternative remedy of an appeal to challenge the impugned order. In the last place, learned Counsel while relying on the decision of Calcutta High Court, reported in 1993 (66) E. L. T. 361 submitted that the issue decided by the authority concerned is covered by the said Calcutta decision and hence, be upheld. These were mainly the submission, pressed into service by the learned Counsel for respondents in support of the impugned order.
(12.) HAVING heard the learned Counsel for the parties at length and having examined the issue in the light of the cases cited I am inclined to accept the submission of learned Counsel for the petitioner. In my opinion, the petition deserves to be allowed.
(13.) COMING to the preliminary objection raised by the respondent about the maintainability of the writ on the ground of alternative remedy being available under the Customs Act by way of an appeal, I may usefully refer and rely upon the law laid down by their Lordships of Supreme Court in the case reported in AIR 1971 SC 33 Hirdeya Narayan v. Income tax Officer, wherein their Lordships have held that once the writ is admitted for final hearing, then it should not to be dismissed at the final hearing stage on the ground of availability of an alternative remedy. This is what their Lordships ruled :
"para 12 - An order under Section 35 of the Income-tax Act is not appealable. It is true that a petition to revise the order could be moved before the Commissioner of Income-lax. But Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. If the High Court had not entertained his petition, Hirday Narain could have moved the Commissioner in revision, because at the date on which the petition was moved the period prescribed by Section 33a of the Act had not expired. We are unable to hold that because a revision application could have been moved for an order correcting the order of the Income-tax Officer under Section 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition, which was entertained and was heard on the merits. "
(14.) IN view of aforesaid settled legal position, I do not find any ground to dismiss the writ after seven years of its admission and ask the petitioner to file an appeal to an appellate authority and challenge the order impugned herein. Moreover, when the facts are not in dispute and the issue essentially relates to legal one, it becomes all the more for this Court to reject the preliminary objection raised. It is well said that such objection is more a matter of convenience and is no bar to entertain the writ filed under Articles 226 and 227 of the Constitution of India. Accordingly this submission of learned Counsel for the respondent must fail. It is rejected.
(15.) COMING to the merits of the case, I am inclined to hold that the issue on merits is fully covered in favour of petitioner by the decision of Supreme Court rendered in the case of Pratibha Processors v. Union of India -1996 (88) E. L. T. 12, supra.
(16.) INDEED this very issue which is raised by the petitioner in this case by claiming refund of amount deposited by them by way of interest demanded by the Customs Authorities was formulated by their Lordships of Supreme Court while deciding the appeal :the question that arose for consideration was posed, thus :
"on importation of goods under OGL if the importers had kept the same in the warehouse under Section 59 of the Act and after expiry of statutory period of three months if they clear the goods under the Advance licence issued under DEEC Scheme, whether such importers are liable to pay interest on the amount of duty which was assessed and ascertained on the date of warehousing until the goods is cleared under Section 68 of the Act (excluding the free period of three months). "
(17.) AFTER examining the entire scheme of the Customs Act and in particular Sections 15, 25, 59, 61 and 68 of the Act their Lordships had this to rule:
"para 12 - On a fair reading of the relevant provisions of the Act and in particular Sections 15, 25, 59, 61 and 68 and the General Exemption granted by the Notification (Pages 169-170 of the paper book) and the Import-Export (Trade) Policy, 1990-93 (Blue Book) (Page 176 of the paper book), we are of the opinion that the entire Scheme is in a 'package'. In allowing exemption to imported goods the Government had made it clear that goods imported into India against the Advance Licence includes goods imported under any licence (Including Open General Licence) for which at the time of clearance out of Customs control a valid Advance Licence is produced by the importer. It is open to the importer to import the items in advance under Open General Licence and keep the same in Customs Bond for getting a clearance against the valid Licence issued subsequently under Duty Exemption Scheme. When the notification granting the exemption and also the import Policy has totally liberalised the entire process, the mere fact of warehousing the goods on an anterior date and clearing the same on the basis of a subsequent Advance Licence, validly obtained under Duty Exemption Scheme, cannot by any stretch of imagination import the idea of levy of interest for the period the goods were kept in the warehouse. The liability of the assesses to pay the duty arises only oh clearance of the goods from a warehouse. The assessee has no obligation to pay duty as long as the goods were kept or remained in the warehouse. It is only in cases where the goods kept in the warehouse are exigible to duty, and they are so kept in the warehouse for more than the permitted period and the said goods are cleared subsequently and duty paid, interest is chargeable for the period of delay in the clearance of the goods. Since the goods warehoused are kept for a longer period such delay entails delayed payment of duty payable and so interest is charged for such delayed payment of duty. 13. In fiscal statutes, the import of the words - "tax", "interest", "penalty", etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay-in paying the tax on the due date. Essentially, it is compensatory and different from penalty which is penal in character. 14. In the above backdrop, let us consider the scope and content of Section 61 (2) of the Act as it existed at the relevant time. Section 61 (1) prescribes the period during which the goods imported may remain in the warehouse. The normal period in different cases are provided therein. Extension of time in special cases is also provided. If the goods imported remain in warehouse beyond the period provided or extended under Section 61 (1), the consequences are specified in Section 61 (2) of the Act. As per the provisions of the Act duty is payable (only) when the goods are cleared. If the goods are not cleared within the time granted under Section 61 (1) of the Act, and the goods are cleared later, the payment of duty exigible on the goods gets automatically delayed. It is to meet the said contingency. Section 61 (2) provides that if the goods warehoused are cleared beyond the time specified or granted under Section 61 (1) of the Act, interest not exceeding 18% per annum shall be payable on the amount of duty on the warehoused goods. It is implicit from the language of Section 61 (2} of the Act that the interest shall be payable on the amount of duty "payable or due" on the warehoused goods for the period from the expiry of period specified or granted till the date of clearance of the goods from the warehouse. In this case, on the date of clearance of goods no duty is payable. The goods are not exigible to duty at that time. Calculation of interest is always on the principal amount. The "interest" payable under Section 61 (2) of the Act is a mere "accessory" of the principal and if the principal is not recoverable/payable, so is the interest on it. This is a basic principle based on common sense and also flowing from the language of Section 61 (1), (2) of the Act. The principal amount herein is the amount of duty payable on clearance of goods. When such principal amount is nil because of the exemption, a fortiori, interest payable is also nil. In other words, we are clear in our mind that the interest is necessarily linked to the duty payable. The interest provided under Section 61 (2) has no independent or separate existence. When the goods are wholly exempted from the payment of duty on removal from the warehouse, one cannot be saddled with the liability to pay interest on a non-existing duty. Payment of interest under Section 61 (2) is solely dependent upon the exigibility or factual liability to pay the principal amount, that is, the duty on the warehoused goods at the time of delivery. At that time, the principal amount (duty) is not payable due to exemption. So, there is no occasion or basis to levy any interest, either. We hold accordingly. "
After concluding the discussion, their Lordships allowed the appeal by observing as under :
"para 16 - We are of opinion that the High Court erred in holding that the importers-assessees are liable to pay interest in the instant cases in respect of warehoused goods, though at the time of clearance the goods were exempted from payment of duty. The common judgment of the Bombay High Court dated 19th November, 1992 is reversed. All the appeals are allowed with costs including Counsel fee Rs. 5,000/- in each case. "
(18.) NOW when I examine the facts of this case noted supra, I do not find any distinguishing or rather significant distinguishing feature in the facts of this case and that of one involved in Pratibha Processors case, supra, so as to distinguish the law laid down by their Lordships in the said case. Indeed as observed supra, facts are almost identical and therefore, it is difficult for one to accept the submission of learned Counsel for the respondents.
(19.) THIS was also a case where the petitioner either they may be dis-cribed as manufacturer or supporting manufacturer of M/s. Arandi (P) Ltd. , had imported the goods against OGL/advance licence and kept them in warehouse as per requirement of Section 59 of the Act. It is also, not in dispute that petitioner cleared the goods after their prayer was accepted by the Customs Board. It is also not in dispute that the order of Board held the field throughout and was therefore, binding on the customs authorities. Mere reference in the order of Board to pay interest would not by itself tentamount to a legal binding unless it satisfy the requirement of Act. In other words, the same has to be interpreted to mean that what the Board meant while passing the order dated 22-3-1990 was in case if the petitioner is legally liable to pay the interest under the Act for clearance of the goods kept in the warehouse then they have to pay. The petitioner had every legal right to say that when under the Act, they are not liable to pay any interest to the Customs Department then in such eventuality any recovery made by the department towards claim of interest has to be quashed - it being against the authority of law. Indeed, this is what their Lordships ruled in Pratibha's case, supra that when the petitioner is not liable to pay duty, he cannot be made to pay interest both being linked together. It is not in dispute in this case that petitioner ever paid customs duty on the said goods.
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(20.) RELIANCE placed by learned Counsel for the respondent in the case reported in 1993 (66) E. L. T. 361 Calcutta is misplaced after the authoritative pronouncement of Apex Court on this very issue. In my opinion, the view taken by the Calcutta High Court stands overruled after the decisions of Supreme Court in the case of Pratibha Processor's and at the same time view taken by Kerala High Court in a case reported in 1991 (52) E. L. T. 357 stands approved. (21.) RELIANCE placed by learned Counsel for the respondent in the case of Mafatlal's case of Supreme Court 1997 (89) E. L. T. 247 has no application to the facts of the case. In other words, it is distinguishable. Here is a case where the Customs authorities made a specific demand towards payment of interest amount which was satisfied by the petitioner by depositing it. So it was a clear case where petitioner deposited a specific sum against specific demand and hence, the question was, whether a demand for interest is legal or not? By passing the impugned, order (Annexure J), the authority concerned upheld the demand of interest. In a case of this nature the question of deciding the plea of undue enrichment does not arise. It is a clear case where the impugned recovery was without authority of law i. e. Customs Act as has been held to be so by their Lordships of Supreme Court in the case of Pratibha Processor's, supra, and hence, the impugned order (Annexure J) has to be quashed. (22.) IN my opinion, claim of petitioner for interest on this amount is not acceptable. Firstly, the provision to pay interest was brought on Statute Book for the first time in 1995 onwards (22/95). Secondly, it is not a case of any direction where the authority had directed refund of duty paid but was not being refunded. (23.) ACCORDINGLY and in view of aforesaid discussion, the petition succeeds and is allowed. The impugned order Annexure J, passed by Assistant Collector, Central Excise Division II, Indore is hereby set aside by issue of writ of certiorari. A writ of mandamus is issued against the respondents to refund a sum of Rs. 22,85,793/- which the petitioners have claimed to have deposited on various dates as set out in Annexure G 1 after making proper verifications. Let the amount be paid within six months from the date of or der. No costs.