Legal principle

Warehoused goods that remain beyond the permitted bond period are deemed improperly removed under Section 72, duty being payable at the rate applicable on the date the bond expired, Sections 68 and 15(1)(b) having no application; since interest under Section 61(2) is merely an accessory to the principal duty, interest is payable wherever such duty is payable.

Court decision

The Bombay High Court dismissed the writ petition with costs of Rs.10,000/-. It held that Sections 68 and consequently Section 15(1)(b) had no application because the goods were not cleared from the warehouse within the bond period and no extension was granted; the goods were deemed improperly removed under Section 72 on expiry of the bonds (25-12-1996 for two consignments and 1-1-1997 for the third), and the Proper Officer was justified in computing duty at the rate applicable on the date of bond expiry together with interest. Respondent No.4 was directed to finally assess duty, interest and other charges under the three bills of entry and recover them, failing which the bond executed on 6-5-1998 was to be enforced.

Facts

SBEC Sugar Limited, setting up a sugar plant at Malkapur (UP), imported plant machinery (batch centrifugals, hydraulic drives, continuous centrifugals and control/manual valves) and kept it in a bonded warehouse under three bonds expiring 25-12-1996 and 1-1-1997. Its application dated 19-12-1996 for extension of the bond period was rejected on 13-1-1997 under public notice 102/96 dated 5-6-1996. The company later obtained an EPCG licence with a 'zero duty' endorsement under notification 29/97 dated 1-4-1997, executed a bond and 100% bank guarantee of duty saved, and filed three bills of entry for ex-bond clearance for home consumption on 21-1-1998, after the bonds had expired. The department, by demand notice dated 26-9-1997 under Section 72, had called upon it to pay the full duty plus interest, penalty, rent and other charges on the goods lying beyond the bond period, treating them as improperly removed, and computed duty and interest on the reverse of the bill of entry.

Key provisions

• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 68, Customs Act, 1962 — Clearance of warehoused goods for home consumption
• Section 61, Customs Act, 1962 — Period for which goods may remain warehoused
• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 58, Customs Act, 1962 — Licensing of private warehouses
• Section 15(1)(b), Customs Act, 1962 — Date for determination of rate of duty and tariff valuation of imported goods
• Section 2(43), Customs Act, 1962 — Definitions