Legal principle

Where warehoused goods are not cleared under Section 68 within the permitted or extended bond period, they are deemed improperly removed under Section 72(1)(b), duty being payable at the rate applicable on the date of expiry of the permitted period under Section 61, together with interest under Section 61(2) until clearance, and an exemption notification confers its benefit only on goods cleared under Section 68.

Court decision

The Supreme Court dismissed the appeals with costs of ₹25,000, upholding the Bombay High Court. It held Sections 68 and consequently 15(1)(b) inapplicable because the goods were not cleared within the bond period; the goods were deemed improperly removed under Section 72(1)(b), duty being computable at the rate applicable on the date the permitted period under Section 61 expired, with interest payable under Section 61(2) until actual clearance, and the EPCG exemption benefit being confined to goods cleared under Section 68.

Facts

SBEC Sugar, a sugar manufacturer, imported capital goods for its unit and warehoused them under three bonds expiring 25.12.1996 and 01.01.1997, on which the Assistant Commissioner endorsed interest at 20% p.a. from bond expiry; its application for a six-month extension (made 19.12.1996) was rejected on 13.01.1997 for non-compliance with Public Notice No.102/96. After Notification No.29/97 dated 01.04.1997 under Section 25(1) exempted EPCG-covered capital goods for agro-based industries like sugar from the whole of customs duty and additional duty under Section 3, the importer obtained a zero-duty EPCG licence and filed ex-bond bills of entry on 21.01.1998, well after bond expiry. Meanwhile, by order dated 26.09.1997 under Section 72(1) the Superintendent had demanded full duty, penalties, rent, interest and charges, and on 30.03.1998 the Assistant Commissioner confirmed duty plus interest of ₹1,01,03,535 at 20% p.a.; the request for waiver of interest was rejected. The Bombay High Court dismissed the writ petitions and directed final assessment of duty and charges, with enforcement of the bond on default.

Key provisions

• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty