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Judgment
Prabha Sridevan, J.—The respondent imported 10800 of HDPL on 11-01-2000 under an Open General Licence; it bonded the goods in a
warehouse. On 09-02-2000, the inbound bill of entry was filed. On 26-05-2000, it obtained by transfer an Advance Licence under the DEEC
Scheme in No. 03026397 dated 19.11.1998 issued in the name of Indco remedies Ltd., Bombay. On 18.11.2000, the above DEEC Licence
expired. The importer filed the Ex-Bond bill of Entry on 08.12.2000, for assessment of the imported goods. Since the validity of the licence had
expired the Deputy Commissioner of Customs refused to grant the benefit of the Customs Notification No. 31 of 1997 and held that the goods
should be assessed on merits. On appeal, the CEGAT held that the only issue that should be considered is whether the material imported is
covered by the licence, and allowed the appeal holding that as per the ""Notification in question (that) the material imported should be covered by
DEEC licence which follows that the licence is for the goods and not specifically for the importer alone"". Even on the face of it, it appears that the
CEGAT lost sight of the actual question to be decided by it. The CEGAT had itself framed it at the beginning of the impugned order i.e., ""The
question is as to whether the licence which was valid when the goods were under import at the time of shipment can be accepted by the
authorities"". So the issue was regarding the existence of a valid licence at the time of clearance and not whether the licence is goods-specific or
importer-specific.
This CMA was therefore admitted on the following question of law:
Whether the Tribunal was correct in law to have held that the validity of the Advance Licence in terms of the date of shipment which exempted the
Basic Customs Duty, whereas the Additional Duty payable under the same licence for the same goods is payable as per Section 15(1)(b) of the
Customs Act, 1962?
The facts of the case are not disputed. The licence was valid when it was transferred to the importer, it was not valid when the goods were
cleared from the warehouse. So we only have to see if despite the expiry of the Advance Licence the importer was entitled to claim exemption.
The Learned Senior Central Government Standing Counsel, Mr. T.S. Sivagnanam submitted that the Notification is clear, the language of
Sections 15 and 68 of Customs Act, 1962 (hereinafter referred to as the Act) is clear. So there is no controversy that there should be a valid
licence at the time of clearance. He also submitted that the Supreme Court in Pratibha Processors and others Vs. Union of India and others, . has
clearly spelt out what is the crucial date for assessment of duty.
The learned Counsel appearing for for the respondent would submit that Section 15 of the Act is only for the purpose of assessment of the rate
of duty and cannot apply in a situation like this. He also referred to various circulars, notifications and in particular, to the Telegraphic Release
Advice to support his case.
Section 15 of the Customs Act reads as follows:
Date for determination of rate of duty and tariff valuation of imported goods.� (1) The rate of duty and tariff valuation, if any, applicable to
any imported goods, shall be the rate and valuation in force �
(a) in the case of goods entered for home consumption u/s 46, on the date on which a bill of entry in respect of such goods is presented under that
section;
(b) in the case of goods cleared from a warehouse u/s 68, on the date on which the goods are actually removed from the warehouse;
(c) in the case of any other goods, on the date of payment of duty:
Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry
shall be deemed to have been presented on the date of such entry inwards.
(2) The provisions of this section, shall not apply to baggage and goods imported by post.
Section 68 of the Act reads as follows:
Clearance of warehoused goods for home consumption.�
The importer of any warehoused goods may clear them for home consumption if �
(a) a bill of entry for home consumption in respect of such goods has been presented in the prescribed form;
(b) the import duty leviable on such goods and all penalties, rent, interest and other charges payable in respect of such goods have been paid and
(c) an order for clearance of such goods for home consumption has been made by the proper officer.
The following extracts are relevant from Circular No. 12/95:
...With a view to ensure for implementation of the Duty Exemption Scheme on an all India basis, it is necessary to direct that this practice should be
immediately stopped because such situations has affected the Customs House later on to log the DEEC Book keeping in account the various
provisions of the various exemption notifications issued under the DEEC Scheme.
In this connection, your attention is also invited to Ministry''s Circular No. 14/94 dated 1-6-1994 (F. No. 605/139/92-DBK) under which
detailed instructions were issued relating to issue of TRAs under the DEEC Scheme. The said instructions envisage that the licence under DEEC
Book would be debited by the Customs authorities at the port of registration. The Port of clearance would only be debiting the TRAs received by
them after satisfying regarding the admissibility of import goods for duty concession and clearing the import goods and report the particulars of
clearance to the port of registration of the licence. It is therefore necessary that in all cases under the Duty Exemption Scheme, TRAs are issued
only by Group-7/DEEC itself after debit entries have been made in the DEEC Book after due satisfaction that the goods sought to be cleared duty
free are eligible for exemption in terms of the advance licence/DEEC Book and the conditions of the exemption notifications.
Revised instructions were given in Circular No. 51 of 1995, which read as follows:
In view of the above procedural/practical difficulties, it is decided in partial modification of the Ministry''s Circular No. 12/95-Customs dated 20th
February, 1995 that the TRAs should be issued by the Customs Houses only after satisfying that Licence in question is valid and prima facie
covers the goods which are sought to be cleared from the Port of Clearance. The TRAs should clearly indicate to the Port of Clearance to verify
all other aspects for assessment of the goods under the relevant Exemption Notification and the admissibility of the goods under the Advance
Licence produced at the time of clearance. Therefore, all checks which are required to be carried out as per the Ministry''s Circular issued from
time to time for clearance of goods imported under the DEEC Scheme must be carried out at the time of clearance of the goods. It may, however,
be reiterated that the instructions in Ministry''s Circular No. 14/94-Customs dated 1-6-1994 (F. No. 605/139/92-DBK) that the Licences under
DEEC Book would be debited by the Custom `Houses at the Port of Registration, would continue to apply as before. The Port of Clearance
would debit the TRA received by them after the goods have been cleared for duty concession. The logging of the DEEC Books in all such cases
would also continue to be done at the Port of Registration as per existing instructions in Ministry''s Circulars issued from time to time.
Since there was delay in issuing TRA and representations were received in this regard, Circular No. 117 of 1995 was issued. This reads as
follows:
Please refer to the Ministry''s earlier Circular No. 12/95-Cus., dated 20.2.1995 and Circular No. 51/95-Cus., dated 24th May, 1995 regarding
issue of Telegraphic Release Advice (TRA) for imports under DEEC Scheme. Some representations have been received from the trade circles
complaining about delay in issue of TRA. Reasons cited for delay in the representations are that the Customs Houses insist on furnishing the
following documents by the importer:
(a) Production of advance licence duly registered with the Customs House for the purpose of debiting the same before issue of TRA.
(b) Production of DEEC book Part-I for the purpose of verifying details fo particulars mentioned in the advance licence for correlation with the
DEEC book Part-I. The Customs Houses also insist on details of LUT/bond executed by the exporter with the licencing authority for the licences
issued prior to 1-4-1995. In addition, details about bond and Bank Guarantee executed with the Customs House in respect of licences issued on
or after 1-4-1995 is also insisted upon for the purpose of making an entry in the DEEC book.
(c) A copy of Invoice is insisted upon for the purpose of verifying the description, quantity and value of the goods under the Advance Licence and
DEEC book.
(d) A copy of Bill of Lading/Air Freight Bill is insisted upon to verify that the shipment is covered by the licence.
The matter has been examined by the Ministry and it is felt that whereas the documents listed at (a) to (c) are required to be produced to the
Customs House before issue of TRA, but insistence on Bill of Lading/Air Freight Bill does not appear to be correct as there is no need for the
Customs House to verify whether shipment is covered by the licence produced as all these aspects regarding licence can be verified at the
Customs House/Port/ICD at which the goods are imported and sought to be cleared....
The telegraphic release Advice issued by the authorities at Mumbai which is the port of registration reads thus:
ALL ASPECTS FOR ASSESSMENT OF THE GOODS UNDER THE RELEVANT EXEMPTION NOTIFICATION SHOULD BE
VERIFIED AT YOUR END(.) PLEASE SEE THAT THE IMPORTED ITEM IS SIMILAR IS QUALITY & TECHNICAL
CHARACTERISTICS TO THE MATERIAL UTILISED IN THE EXPORT PRODUCT OF ALREADY EXPORTED(.) PARTY TO
PRODUCE ORIGINAL LICENCE AT YOUR END FOR VERIFICATION OF ADMISSIBILITY OF THE GOODS AND VALIDITY OF
LICENCE.
As seen earlier, The Bill of Entry for ex-bond clearance was submitted on 11-2-2000.
General Exemption No. 84-I that deals with exemption to materials imported against Advance licence issued after 1-4-97 reads as follows:
Exemption to materials imported against Advance Licence issued after 1.4.1997.- In exercise of the powers conferred by Sub-section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do,
hereby exempts materials imported into India, against an Advance Licence issued on or after 1st April, 1997 (hereinafter referred to as to the said
licence), from the whole of the duty of customs leviable thereon which is specified in First Schedule to the Customs Tariff Act, 1975 (51 of 1975)
subject to the following conditions, namely,....
(iii) that the said licence and the said certificate are produced before proper officer of the Customs (at the time) of clearance of imported materials
for debit;
(viii) that where benefit of this notification is sought by a person other than the licencee, such benefit shall be allowed against the said licence and
the said certificate only if it bears endorsement of transferability by the Licensing Authority:
Provided that benefit of this notification shall not allowed to a transferee of the licence for import of Acetic Anhydride, Ephedrine and
Pseudophedrine.
The rest of the terms are not relevant.
Duty Exemption Scheme provides for transferability of licences under Paragraph 7.27. It says, ""Upon endorsement of transferability, a duty
free licence shall be valid for the balance period of validity or for a period of six months from the date of endorsement, whichever is later.
Several orders of the Tribunal have been produced, which are to the effect that when the Advance Licence was valid at the time of physical
arrival of the goods, the exemption cannot be denied on the ground that the said licence was not valid on the date of clearance of goods from
warehouse.
Now we will look at Pratibha Processors and others Vs. Union of India and others, . In this case, the assessee imported under OGL and kept
in the warehouse. The Advance Licence under DEEC Scheme was obtained. Bill of Entry for ex-bond clearance was filed and the goods were
assessed to ""Nil duty"". But the authorities sought to recover interest for the period during which the goods were kept in the warehouse beyond the
permitted period. The Supreme Court held as follows:
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 assessee to pay the duty arises only on 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.
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 u/s 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 u/s 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 u/s 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 the 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 u/s 61(1) and (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 commonsense and also flowing from the language of Section 61(1)
and (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 u/s 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 u/s 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.
In 1991 Supp (1) S.C.C. 102 [Priyanka Overseas (P) Ltd. v. Union of India], it was held as follows:
Section 15 of the Act provides for determination of rate of duty on imported goods. The rate of duty and tariff valuation, if any, applicable to
any imported goods, shall be the rate and valuation in force in the case of goods cleared from a warehouse u/s 88, the date on which the goods are
actually removed (emphasis added) from the warehouse. There can be no manner of doubt that the term �actual removal� is even more
stronger than the term �physical removal� and the intention of the legislature in using these words clearly stipulates the actual removal of the
goods from the warehouse. The rate of duty and tariff valuation on the imported goods may be changed from time to time and as such the
legislature has clearly expressed its intention u/s 15 as to on what date the rate of duty and tariff valuation is to be determined. We cannot introduce
the concept of deeming provision while determining the question of actual removal of the goods from the warehouse. The rate has to be determined
on the basis of the date on which the goods are actually removed from the warehouse and thereafter the question would be examined as to how
the relief is to be moulded in case it is found that the customs authorities were themselves responsible in preventing the importer of goods from
actually removing the goods from the warehouse. In a case of the present kind where there is no ambiguity in the expressed intention of the
legislature in determining the date for applying the rate of duty, no juristic principle of deemed removal of the goods, can be applied as contended
by Mr Sen. Many contingencies may happen in between the filing of bill of entry and actual removal of the goods from the warehouse for which
sometimes the importer of goods may himself be responsible, in some cases the responsibility may lie on the customs authorities and there may also
be contingencies beyond the control of both the parties. In any case the intention of the legislature being clear, rate of duty is to be applied, as may
be in force on the date of actual removal of goods from the warehouse u/s 15(1)(b) of the Customs Act.
In D.C.M and Anr. v. Union of India and Anr., 1995 Supp (3) SCC 223) , the Supreme Court held thus:
Section 68 provides for clearance of warehoused goods for home consumption by the importer. It says that where an importer warehouses the
imported goods, he can clear them for home consumption by filing a bill of entry for home consumption in respect of such goods in the prescribed
form and on payment of the import duty and other charges thereon. In other words, where the initial bill of entry is filed for warehousing and the
imported goods are warehoused, a separate bill of entry for home consumption has to be filed when the importer wishes to clear the goods from
warehouse for home consumption. It is the date of such clearance for home consumption that is prescribed as the relevant date for determining the
rate of duty. We are unable to see how the provision can be characterised as discriminatory.
In Union of India and others Vs. Apar Private Ltd. and Others, , it was held by the Supreme Court thus:
The brief facts on which the Bombay High Court proceeded were that when the goods of the respondents entered the territorial waters of India
from the foreign country as also on the day they were stored in the bonded warehouse, they were wholly exempt from payment of basic customs
duty under a notification issued by the Central Government in exercise of its powers u/s 25(1) of the Customs Act, 1962. When these goods were
sought to be removed from the bonded warehouse, the exemption notification had been rescinded and the exemption granted thereunder was
withdrawn.
The case of the respondents was that on the day when the goods entered the territorial waters, that is the point of time when the taxable event
u/s 12 occurred; and as the duty was nil on that day, therefore the question of paying any duty with reference to a subsequent point of time,
namely, when the goods were removed from the warehouse did not arise.
In 1993 Supp (3) SCC 453 [Dhiraj Lal H. Vohra v. Union of India], it was held as follows:
The operation of Sections 46 and 31(1) of the Act. Section 46(1) provides that the importer of any goods, other than goods intended for transit or
transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed
form and it may be presented under Sub-section (3) thereof at any time after delivery of the import manifest. Section 31(1) provides that the
master of the vessel shall not permit the unloading of any imported goods until an order has been given by the proper officer �granting entry
inwards� to such vessel and no order under Sub-section (1) shall be given until an import manifest has been delivered or the proper officer is
satisfied that there was sufficient cause for not delivering it. Granting entry inwards on delivery of import manifest and the date of arrival of the
vessel into port admittedly are on March 2, 1989 and the Master of the vessel made a declaration in this behalf that they would discharge the
cargo on March 2, 1989 therefore, the relevant date u/s 15(1)(a) is the date on which entry inwards after delivery of import manifest was granted
to discharge the cargo for the purpose of the levy of the customs duty and rate of tariff. The contention, therefore that the ship entered Indian
territorial waters on February 20, 1989 and was ready to discharge the cargo is not relevant for the purpose of Section 15(1) read with Sections
46 and 31 of the Act. The prior entries regarding presentation of the bill of entry for clearance of the goods on February 27, 1989 and their receipt
in the appraising section on February 28, 1989 also are irrelevant. The relevant date to fix the rate of customs duty, therefore, is March 2, 1989.
The rate which prevailed as on that date would be the duty to which the goods imported are liable to the impost and the goods would be cleared
on its payment in accordance with the rate of levy of customs prevailing as on March 2, 1989.
In Priyanka Overseas'' case (supra), the Supreme Court has clearly held that the words �actually removed� give no room for
interpretation and that they are categoric. and no deeming provision can be introduced. But in that case, the goods were prevented from being
removed because of the authorities, so the date of actual removal was fixed on an earlier date. In this case, the importer was not prevented from
clearing the goods from the bonded warehouse before the date of expiry of the valid licence.
In Dhiraj lal''s case (supra), the Supreme Court held that where Section 15(1)(a) of the Act applies, it is the date of entry inwards that is
crucial, and the fact that the bill of entry was presented earlier or that the goods were appraised on an earlier date are irrelevant. Similarly in this
case the fact that the Port of registration sent an advice regarding the DEEC licence within the currency of the Advance Licence is hardly relevant.
It is also of no avail to plead that the licence was valid at the time of import.
A similar issue arose for consideration in Apar''s case (supra). The goods were not dutiable at the time of import, but on the date when they
were cleared ex-warehouse, the exemption was lifted. The Supreme Court clearly held that the date of clearance of the goods from the warehouse
is alone the relevant date. This also answers the objection of the learned Counsel for the respondent that the section is relevant only for fixing the
rate of duty and not in a case like this where the question is whether the duty should be levied at all.
The importer�s right to bring in the goods duty-free depends on the Advance licence, and when the Licence is not valid on the date when
the duty is to be assessed, the right of exemption ceases.
In Pratibha Processors'' case (supra), the Supreme Court held that there was no liability to pay interest because ""on the date of clearance of
the goods, no duty is paid"". In that case also, the importer brought in the goods under an open general licence. His right to claim exemption from
duty arose only because they had obtained advance licence under the DEEC Scheme at a later point of time, i.e., subsequent to the import. The
Supreme Court held that interest is necessarily linked to the duty payable and when the goods were wholly exempt from payment of duty on the
date of removal from the warehouse, there can be no liability to pay interest on a non-existing duty. The words used in this case are, ""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"". Therefore, there cannot be a more clear answer to the question raised in this case.
In Circular No. 51 of 1995, it is indicated that TRAs should be issued only after satisfying that the licence in question is valid. It also shows that
the Port of Clerance must verify all aspects under the relevant Exemption Notification and the admissibility of the goods ""under the Advance
Licence produced at the time of clearance"". This definitely indicates a live Advance Licence and not a licence which has expired. Circular No. 117
of 1995 says that the Customs House need not verify certain aspects ""since all these aspects regarding licence can be verified at the Customs
House/Port/ICD at which the goods are imported and sought to be cleared"". The words ""Aspects regarding licence"" will definitely indicate the
validity of the licence.
The Telegraphic Release Advice directs, ""The party should produce original licence at your end for verification of admissibility of the goods
and the validity of the licence"" (emphasis supplied). This is addressed to the Port of Clearance. This also underscores the importance of the validity
of the licence. Condition (iii) of the General Exemption No. 84-I also refers to production of licence at the time of clearance. Therefore, even the
circulars produced by the respondent only stress the importance of the validity of the licence. The order of the Tribunal is, therefore, clearly
erroneous. Therefore, the substantial question raised in the present civil miscellaneous appeal is answered accordingly.
Learned Counsel for the respondent submitted that the respondent''s case is the first time that objection is taken by the department that the
validity of the licence has expired at the time of clearance, and importers like the petitioner in whose case the goods were imported when the
licence was valid, but whose licence had expired when the goods cleared were allowed to be cleared duty free. We are not impressed by this
argument. When the section as well as the judgments of the Supreme Court indicate that the incidence of duty depends on the time of clearance,
and if the licence entitling the importer to bring in goods duty free had expired at the time when the goods were cleared, the department is right in
objecting to his claim for exemption from duty on the ground that he had a valid Advance Licence under the DEEC Scheme at the time of the
import.
For all these reasons, the order dated 13.12.2004 passed in Final Order No. 2000 of 2004 on the file of the CESTAT, Bangalore is set aside
and the Civil Miscellaneous Appeal is allowed. There shall be no order as to costs.