Legal principle

Where an importer breaches both the advance licence and the duty-exemption notification, the executed bond making him liable to pay duty with interest empowers the Settlement Commission to order recovery of duty with interest even absent a statutory interest provision for the period, and a Board circular cannot override the law laid down by the Supreme Court or High Courts.

Court decision

The Bombay High Court dismissed the petition with no order as to costs, upholding the Settlement Commission's order insofar as it directed recovery of duty with interest at 10% p.a.: the Commission had jurisdiction, the petitioners' admitted duty liability bound them, and the interest direction was sustained on the strength of the bond executed by the petitioners making them liable to pay duty with interest.

Facts

Pratibha Syntext Ltd. held 15 advance licences (1994-95 and 1995-96) for export of dyed fabrics/sarees made from 100% polyester filament yarn, permitting duty-free import of PFY and inputs under Notification No. 204/92-Cus., dated 19-5-1992. On 5-7-1997 customs issued a show cause notice alleging manipulation of the weight of fabric and PFY in shipping bills and failure to produce evidence of proper utilisation of exempt material, demanding Rs. 1,11,25,570 under the proviso to Section 28(1) and proposing penalty. After adjudication on 31-3-2000 and withdrawal of a Tribunal appeal, the petitioners applied under Section 127M to the Settlement Commission, which by final order No. 21/2000 dated 3/10-5-2002 settled duty at Rs. 1,17,41,107.86 (adjusted against a Rs. 1,25,12,000 deposit), granted immunity from fine, penalty and prosecution, but directed payment of interest at 10% p.a. from the date of import till deposit. The petitioners challenged only the interest levy by writ petition under Article 226.

Key provisions

• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 127B(1), Customs Act, 1962 — Application for settlement of cases
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 127A(b), Customs Act, 1962 — Definitions
• Section 127(b), Customs Act, 1962 — Award of confiscation or penalty by customs officers not to interfere with other punishments
• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded