Legal principle

An exemption notification issued under Section 25(1) of the Customs Act, 1962 can validly impose, as a condition of exemption, liability to pay the duty leviable together with interest at 15% per annum from the date of clearance where the import conditions, such as export obligation under an Advance Authorisation, are not fulfilled.

Court decision

The writ petition was dismissed. The Court upheld the impugned order imposing interest of ₹1,15,13,067 on delayed payment of duty, holding it not contrary to law, and found the constitutional challenge to Notification No. 18/2015-Cus insubstantial; the decision went in favour of the Revenue (respondents).

Facts

KBS Industries Ltd imported Continuous Cast Copper Rod 8mm (₹10,85,60,299) and Copper Scrap (₹5,43,06,644.30) under two DGFT Advance Authorisations without payment of duties, availing exemption under Notification No. 18/2015-Cus dated 01.04.2015. It failed to discharge its export obligation and sold the goods in the local market, prompting searches by Customs (Preventive) and a statement of its director under Section 108. A show cause notice dated 16.07.2021 demanded duty of ₹2,35,24,597 with interest under Section 142, and proposed confiscation under Section 111(o) and penalties under Sections 112/114A/114AA. KBS filed a Section 127B settlement application, which the Settlement Commission disposed of by order dated 28.03.2024 under Section 127C(5), accepting the Commissioner's report under Section 127C(4) computing interest at ₹1,15,13,067; a Section 154 rectification application against the interest computation was rejected as beyond its scope.

Key provisions

• Section 127C(5), Customs Act, 1962 — Procedure on receipt of an application under Section 127B
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 9A, Customs Tariff Act, 1975 — Anti- dumping duty on dumped articles
• Section 3, Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 8C, Customs Tariff Act, 1975 — Omitted [****]
• Section 8B, Customs Tariff Act, 1975 — Power of Central Government to impose safeguard duty
• Section 142, Customs Act, 1962 — Recovery of sums due to Government