Case law

Bombay High Court · 15 Sep 2005

Mr. Damodar Narcinva Naik, Mr. Narcinva… vs Union Of India (Uoi) And Ors.,…

Legal principle

A dispute as to whether goods lying in a bonded warehouse are imported or indigenous is itself a dispute covered by the Kar Vivad Samadhan Scheme, and the department cannot reject a declaration under KVSS by relying on a clarification applicable only to undisputed warehousing liability under Sections 61 and 72 of the Customs Act.

Court decision

The petition was allowed with no order as to costs: without deciding the validity of the 28/10/1998 clarification, the court held that the dispute whether the warehoused goods were imported or indigenous was a dispute covered under KVSS; the impugned orders dated 26/02/1999 and 24/03/1999 were quashed and set aside, and the customs authorities were directed to entertain the declaration dated 23/12/1998 and pass appropriate orders in accordance with law.

Facts

The petitioners, ex-partners of M/s Zuari Stainless Steel Industries (a 100% EOU making stainless steel utensils), stored imported raw materials in a bonded warehouse alongside indigenously acquired raw materials, and goods remained in the warehouse beyond the bond period. Customs demanded duty with interest under Sections 61 and 72 of the Customs Act treating the residual goods as imported; the Assistant Commissioner confirmed Rs. 18,78,500, but the Commissioner (A) deleted Rs. 16,55,448 on the finding that the remaining goods were indigenous, and the revenue appealed to CEGAT. While that appeal was pending, the petitioners filed a KVSS declaration on 23/12/1998 offering 50% of the disputed duty (Rs. 3,45,294). Customs first partially accepted (26/02/1999) and then wholly rejected (24/03/1999) the declaration, relying on the Finance Ministry's clarification dated 28/10/1998 that warehoused goods not cleared under Section 72 at the expiry of the warehousing period attract duty that is 'not under dispute' and so fall outside the Samadhan Scheme.

Key provisions