1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELATE JURISDICTION WRIT PETITION NO. 2986 OF 2005 1. M/s.Suresh Chand & Sons, 2. Rekha Bansal, 3. Naveen Kumar Bansal, 4. M/s.Shadi Ram & Son, 5. M/s.Shadi Ram Anokhi Ram, 6. M/s.Naveen Exporters, 7. M/s.Ghanshyam Dass & Co. 8. Kamal Kumar Bansal, 9. M/s.Anokhi Ram & Sons, 10. M/s.Gopi Ram & Company, 11. M/s.Naveen International, 12. M/s.Gopi Ram Suresh Chand, 13. M/s.Gopi Ram & Sons, 14. M/s.Anokhi Ram Gopi Ram. ... Petitioners. V/s. 1. Union of India. 2. Commissioner of Customs, Bombay. 3. Assistant Commissioner of Customs. 4. The Chairman, Central Board of Excise & Customs. ... Respondents. 2 Rajiv Datta, senior counsel with Ms.Shikha Raniwala i/b. Nanu Hormasjee & Co. for the petitioners. A.S.Rao for the respondents. CORAM : V.C.DAGA AND K.K.TATED, JJ. DATED : 7th May 2010. JUDGMENT : (Per Vijay Daga, J.) Heard. Perused petition. 2. The petitioners, who are the proprietary firms carrying on trade and business activities of import and export of spices etc., have jointly filed this petition under Article 226 of the Constitution of India seeking to claim refund of the amount of interest alleged to have been illegally imposed upon and recovered from them without issuing notice as contemplated under section 59(1) of the Customs Act, 1962 (“Act” for short). The Facts : 3. The factual backdrop leading to the petition is that when the goods were imported by the petitioners, the customs authorities, respondent Nos.2 and 3 herein did not permit the clearance of the goods since some investigation was necessary. The petitioners, therefore, had to file bills of entry for bonding the goods in a warehouse. The respondents made endorsements 3 on the bills of entry filed by the petitioners for bonding of the goods that ex-bond clearance of the goods will not be permitted until the investigation with regard to import of the goods i.e. Import Trade Control Angle involved in the goods is not cleared by the SIIB. In the process, the customs authorities assessed the goods provisionally as per section 18 of the Act. 4. According to the petitioners since the auction notices were issued to auction goods, they were required to invoke writ jurisdiction of the Delhi High Court under Article 226 of the Constitution of India challenging auction notices issued and the demand of interest on the customs duty made by respondent Nos.2 and 3 contending that the interest demanded by them was bad, illegal and not recoverable from them since the imports were under Open General Licence (OGL). The Delhi High Court directed the customs authorities to issue notice of demand prescribed under section 59 of the Act vide its order dated 18th February, 1991. However, it appears that in spite of said order of the Delhi High Court, no notice under section 59 were issued in spite of specific demand made in this behalf. In fact, legal notices were also served on the Principal Collector of Customs, Bombay calling upon him to issue demand notices under section 59 of the Act as was ordered by the High Court of Delhi. 5. It appears that the petitioners were in need of goods. Consequently, they approached the customs authorities (i.e. respondent Nos.2 and 3) and requested them to release the goods. The petitioners were permitted to release the goods subject to payment of 4 interest which the petitioners have paid under protest to the respondents and, simultaneously, applied for refund of interest amount, which, according to the petitioners, had been imposed upon and recovered from them illegally. Since the request of the petitioners for refund of interest paid under protest was not decided by the respondents, the petitioners again invoked writ jurisdiction of the Delhi High Court through Writ Petition No.13184-97/2004, which came up for hearing on 28th April, 2004, inter alia; praying for identical relief prayed in the present petition. However, the Delhi High Court was pleased to dismiss the same for want territorial jurisdiction reserving liberty in favour of the petitioners to approach this Court. The petitioners left with no other alternative have invoked writ jurisdiction of this Court to claim relief as mentioned in the opening para of the judgment to seek directions against the customs authorities to refund the interest amount with interest thereon at the rate of 18% per annum from the date of payment till the repayment thereof in full and final. 6. On the above factual backdrop, this petition was heard finally. Mr.Rajiv Datta, learned senior counsel appeared along with Ms.Shikha Raniwala for the petitioners , whereas Mr.A.S.Rao, learned counsel appeared for the Revenue. Both were heard. Relevant Statutory Provisions : 7. In order to appreciate rival contentions, it would be necessary to refer to relevant provisions under the Customs Act. Section 2(14) of the Act defines 5 "dutiable goods" to mean any goods which are chargeable to duty and which has not been paid. Section 2(15) defines "duty" to mean a duty of customs leviable under the Act. Section 12 is a charging section and it reads thus : "12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs, shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or exported from India. (2) ............" Section 14 deals with valuation of goods for the purposes of assessment. Section 15 deals with determination of rate of tariff valuation of imported goods and since we are concerned in this petition with this aspect, we may reproduce the same : "15. 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 case of goods entered for home consumption under Section 46, on the date on which a Bill of Entry in respect of such goods is presented under this section; (b) in case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse; (c) in 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 6 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 17 deals with assessment of duty and it prescribes procedure thereof. Section 25 gives powers to the Central Government to grant exemption from the duty if it is satisfied that it is necessary in the public interest to do so. Since there is no challenge to the Exemption Notification, it is not necessary to set out the said provision. Section 46 deals with entry of goods on importation and permit the importers of any goods, subject to exception therein to make entry thereof by presenting to the proper officer a Bill of Entry for home consumption or warehousing in the prescribed form. Section 48 prescribes procedure in case of goods, not cleared, warehoused or transshipped within two months after unloading. Section 49 permits storage of imported goods in warehouse pending clearance. 8. Now, we come to the relevant provisions dealing with warehousing. Sections 59, 61, 69 and 72 are contained in Chapter IX of the Act. Section 59 reads thus :- "59. Warehousing bond. - 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 assessed on such goods - (a) to observe all the provisions of this Act and the rules and regulations in respect of such goods; 7 (b) 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 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. (2) for the purposes of sub-section (1), the Assistant Collector of Customs may permit an importer to enter into a general bond in such amount as the Assistant Collector of Customs may approve in respect of the warehousing of goods to be imported by him within a specified period. (3) A bond executed under this section by an importer in respect of any goods shall continue in force, notwithstanding the transfer of goods to any other person or the removal of the goods to another warehouse : Provided that where the whole of the goods or any part thereof are transferred to another person, the proper officer may accept a fresh bond from the transferee in a sum equal to the twice the amount of duty assessed on the goods transferred and thereon the bond executed by the transfer or shall be enforceable only for a sum mentioned therein less the amount for which a fresh bond is accepted from the transferee." Section 60 comes into operation when provisions of section 59 have been complied with in respect of goods so imported. Thereupon the proper officer may make an order permitting the deposit of the goods in warehouse without payment of duty. Section 61 reads thus : 8 "61. Period for which goods may remain warehoused. - (1) Any warehoused goods may be left in the warehouse in which they are deposited or in any warehouse to which they may be removed - (a) in the case of non-consumable stores, till the expiry of three years; and (b) in the case of any other goods, till the expiry of one year; after the date on which the proper officer made an order under section 60 permitting the deposit of the goods in a warehouse. Provided that (i) .................... (ii) in the case of any goods which are not likely to deteriorate, the aforesaid period (one year or three months) as the case may be, may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding ("six months") and by the Board for such further period as it may deem fit : Provided further ........ (2) Where any warehoused goods remain in a warehouse beyond the period of one year or three months specified in Clause (a) of Clause (b) of sub-section (1) by reason of the extension of the aforesaid 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 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." 9 Section 68 reads thus : "68. Clearance of goods for home consumption. - The importer of any warehoused goods may clear them for home consumption if - (a) .................... (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) ..................." Section 72 reads thus : “72. Goods improperly removed from warehouse, etc. - (1) in any of the following cases, that is to say, - (a) where any warehoused goods are removed from a warehouse in contravention of Section 71; (b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under Section 61 to remain in a warehouse; (c) where any warehoused goods have been taken under Section 64 as samples without payment of duty; (d) where any goods in respect of which a bond has been executed under Section 59 and which have not been cleared for home consumption or exportation are not duty accounted for to the satisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods. 10 (2) If any owner fails to pay any amount demanded under Sub-section (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select. 9. If one breaks the limbs of the above statutory provisions, one would find that section 61 prescribes the period for which goods may be warehoused. They may be left in the warehouse in which they are deposited for the period of one year if they are such goods as are referred to in Clause (a) of Sub-section (1), and for the period of three months counted from the date of the order permitting warehousing if they are not such goods. The first proviso to Sub-section (1) contemplates the reduction of the periods aforementioned, of one year and three months respectively (now referred to as "the permitted periods"), if the goods are likely to deteriorate. It also permits, if the goods are not likely to deteriorate, an extension of the permitted periods on sufficient cause being shown; the Collector of Customs can extend the permitted periods by six months and the Central Board of Excise and Customs can do so for as long as it deems fit. By reason of Sub- section (2), interest is payable on the amount of duty on the warehoused goods for the period from the expiry of the permitted periods till the date of their clearance from the warehouse, regardless of whether the goods have remained in the warehouse beyond the permitted periods by reason of extension of such periods or otherwise. 11 10. Put briefly, so far as it is relevant for our purpose, warehousing is permissible for only a stated period; the period is extendible if cause for doing so is shown; and, whether or not the permissible period has been extended, interest on the amount of duty on the warehoused goods is payable for the period subsequent to the permissible period up to their clearance. 11. Section 72 deals with goods improperly removed from a warehouse. Goods are improperly removed from a warehouse under the terms of Sub-section (1) if they are removed clearance under Section 71 (Clause (a); if they are taken as samples but without payment of duty (Clause (c); if a warehousing bond has been executed in respect of the goods under Section 59 but they are not satisfactorily accounted for (Clause (d); and if they have not been removed from the warehouse on the expiration of the permitted period or its permitted extension [Clause (b)]. In all such cases the Customs officer is empowered to demand, and the importer is liable to pay, the full amount of duty chargeable on the goods and interest, penalties, rent and other charges thereon. If payment as demanded is not made, it is recoverable by sale of other goods of the importer kept in the warehouse. 12. Goods which are not removed within permissible time frame from the warehouse are treated as goods improperly removed from the warehouse. In other words, such improper removal takes place when the goods remain in the warehouse beyond the permitted period or its permitted extension. The importer of the goods, then may be called upon to pay Customs duty and, necessarily, it 12 would be payable at the rate applicable on the date of their deemed removal from the warehouse, i.e. the date on which the permitted period or its permitted extension came to an end. 13. Section 15(1)(b) applies to the case of goods cleared under Section 68 from a warehouse upon presentation of a bill of entry for home consumption; payment of duty, interest penalty, rent and other charges; and an order for home clearance. The provisions of Section 68 and, consequently, of Section 15(1)(b) apply only when goods have been cleared from the warehouse within the permitted period or its permitted extension and not when, by reason of their remaining in the warehouse beyond the permitted period or its permitted extension, the goods have been deemed to have been improperly removed from the warehouse under Section 72. Rival Submissions : 14. Mr.Rajiv Datta, learned senior counsel appearing for the petitioners urged that the petitioners are, inter alia, seeking refund of interest illegally collected from them without the respondents complying with the provisions of section 59 of the Act. Reading of the provision of section 59, he submits that liability to pay interest arises only after expiry of period specified in the notice of demand. He placed heavy reliance on the order of the Delhi High Court; wherein similar imports made during the same period and several parties including the petitioners had approached 13 the Delhi High Court vide Writ Petition No.725/1990 and Writ Petition No.1116/1990; wherein, inter alia; the demand for interest had been challenged contending it to be illegal. The Delhi High Court disposed of those petitions recording the statement made on behalf of the Revenue that notices of demand under section 59 of the Act were in contemplation of the department. In the circumstances, Delhi High Court in its order observed that the respondents are expected to issue notice of demand, under which they would quantify the amount of duty, rent and charges claimable on account of such warehoused goods. The writ petitions in the light of the circumstances mentioned herein were disposed of. 15. According to Mr.Datta, it was obligatory on the part of the Revenue to issue notices of demand in accordance with the provision of section 59(1) of the Act as stated by them before the Delhi High Court, but no such notices of demand were ever issued by the Revenue to any of the petitioners. He, thus, submits that in absence of compliance with the statement made before the Delhi High Court and in absence of notices of demand in accordance with the provision of section 59(1) of the Act, the recovery of interest from the petitioners was illegal and hence the petitioners are entitled to get back the said amount illegally recovered from them. 16. Mr.Datta further pressed into service another order of the Delhi High Court dated 14th August, 2003 passed in Writ Petition No.1648/1991 (M/s.Ghanshyamdas Suresh Chand v. Union of India & ors.); wherein the 14 Delhi High was pleased to analyze section 59(1)(b) of the Act relying on the judgment of the Apex Court in the case of Union of India v. Bangalore Wire Rod Mills, (1996) 3 SCC 588 to hold that the interest became payable by the importer/petitioner in that petition only from the date of notice of demand, and not for the period anterior to the date of such a notice. In the case of Ghanshyamdas before Delhi high Court, the customs authorities had issued a demand notice under section 59(1)(b) by which they had erroneously computed the interest for the period prior to the date of notice. The Delhi High Court, thus, concluded that no interest could be charged for a period prior to the date of issuance of the notice of demand. In that petition, the Delhi High Court was pleased to direct the department to quantify the amount of interest afresh after the date of notice and directed refund of the excess amount of interest which the Revenue was required to deposit along with interest thereon at the rate of 15% per annum. 17. According to Mr.Datta, in spite of repeated requests no notices of demand was issued to the petitioners, hence, they were required to approach this Court. Mr.Datta reiterated his reliance on the judgment of the Apex Court in the case of Bangalore Wire Rod Mills (supra) in support of his submission and tried to analyze the provision of sections 59 and 61 of the Act. According to him, section 59 relates to the warehousing bond and further to pay on or before the date specified in the notice of demand. According to him section 61 only specifies period for which the goods may remain in the warehouse. Turning to section 61(2) of the Act, he submits that the said sub-section (2) of section 61 has 15 been brought on the statute book by way of amendment on 13th May, 1983 which deals with the situation when the goods have been kept in warehouse beyond the period prescribed in section 61(1) of the Act by reason of extension and those goods will be liable to pay interest as specified therein. But, according to him, nowhere the said provision takes away the necessity of issuing notice of demand under section 59(1)(b) of the Act. In the conclusion, Mr.Datta submits that once the goods are warehoused under section 59(1) of the Act, they will remain in warehouse for a fixed period as provided in section 61(1) of the Act after which notice of demand will have to be issued under section 59(1)(b) and interest will be payable on or after the date specified in the said notice of demand. In his submission, section 61(2) will only apply to the goods which are kept in warehouse beyond the period specified in section 61(1) of the Act and interest will be charged on the amount of duty on the warehoused goods for the period they are kept warehoused beyond the prescribed period. He, thus, submits that the petitioners are entitled to refund of interest paid under protest. Per Contra : 18. Mr.Rao, learned counsel appearing for the Revenue submits that the petitioners’ submissions mainly revolves around the contention regarding necessity of notice under section 59(1)(b) of the Act and that without issuance of such notice interest cannot be demanded. The said submission, according to Mr.Rao, is misplaced. Relying upon the scheme of Chapter IX and various sections falling within that chapter, Mr.Rao 16 submits that from a comprehensive reading of the scheme of the Act, in totality, synchronizing the provisions of each section with the other, in particular dealing with the warehousing, it is absolutely clear that Section 59 only deals with the conditions and contents of the bond and the obligations of the bond executer, who seeks to warehouse goods. The goods can be warehoused for the free period mentioned under section 61(2) and if the goods are kept in the warehouse beyond that period, the same carries liability of interest. The goods can be removed from the warehouse only by way of clearance for home consumption or for re-exportation after filing bill of entry and after paying all the dues and after getting an order or by transferring the goods from one warehouse to another warehouse. Mr.Rao submits that the scheme of the Act also provides for improper removal of the goods and an embargo not to remove the goods except as provided in the Act, i.e. as per sections 67, 68 and 69. 19. Mr.Rao submits that the petitioners had furnished bond under Section 59, including the undertaking that they shall observe all the provisions of the Act and rules and regulations, at the time of warehousing goods, and that they on their own filed ex- bond Bill of Entry for home consumption; got the said bill of entry assessed by the