Legal principle

Under Rule 8 of the 1996 Rules, interest for failure to use imported goods for the intended end-use is chargeable by force of the Rule itself, and the reference to Section 28AB therein is only for adopting the rate of interest fixed by notification issued under that section, without importing Section 28AB's pre-conditions.

Court decision

The writ petition was dismissed with no costs: the petitioner was held liable to pay interest under Rule 8 of the 1996 Rules itself, at the rate fixed by the applicable notification issued under Section 28AB, and the Settlement Commission's orders were upheld to the extent of the interest direction.

Facts

Pioneer Soap and Chemicals, a sole proprietorship of Lalit Kumar Goyal, imported crude palm oil at a concessional ad valorem duty of 20% under notification No. 20/2004-CUS (NT) dated 16.01.2004, conditional on following the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, and gave an undertaking to that effect. The department discovered that instead of using the palm oil to manufacture soap, the petitioner diverted it into the local market. A show cause notice dated 24.04.2007 demanded import duty of Rs.1,27,72,140/- along with interest under Rule 8 of the 1996 Rules read with Section 28AB of the Customs Act, 1962. The petitioner, instead of contesting, approached the Settlement Commission, which by final order dated 24.02.2009 directed payment of the duty with interest, and dismissed his miscellaneous application seeking modification on 28.08.2009.

Key provisions

• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Rule 8, Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 — Recovery of duty in certain case