Legal principle

Where duty-free clearance of warehoused goods under Section 90 is obtained by misdeclaration, the clearance becomes an improper removal and, once the assessment is set aside and duty is found payable, Section 72 read with Section 61 mandates recovery of that duty with interest from the date of removal till payment — exemption notifications being strictly construed, their conditions must actually be fulfilled and cannot be saved by invoking substantial compliance where the imported goods never reached the intended government consignee.

Court decision

The Bombay High Court upheld the Settlement Commission's final order in full: it held the barges were not covered by Exemption Notification No. 291/84-Cus. and customs duty was payable, and that the Commission was justified in directing payment of the duty with 10% simple interest from the date of removal from the warehouse till payment/deposit; the writ petition was dismissed with costs.

Facts

The petitioners, engaged in supplying ship stores and spares, imported two collapsible Dracone barges for warehousing (bills of entry dated 18-12-1992 and 28-1-1993) and cleared them duty-free under Section 90 of the Customs Act by declaring on pink shipping bills that the barges were to be supplied to the Indian Navy. DRI investigation in October 1997 revealed the barges were never supplied to the Navy; the petitioners admitted supplying them to the Indian Coast Guard, claiming a bona fide belief that the Coast Guard was part of the Navy. A show cause notice dated 19-12-1997 under Sections 124 and 28 proposed recovery of duty of Rs. 83,18,712 under Section 72 read with Section 28(1) and penalty, and adjustment of Rs. 59,35,455 deposited during investigation. Before adjudication, the petitioners filed a Section 127(B) application before the Settlement Commission, which by final order dated 8-1-2003 settled the case for duty of Rs. 83,18,742, levied Rs. 10,00,000 penalty, granted immunity from fine, and imposed 10% simple interest from removal of the barges from the warehouse till payment. The petitioners challenged this final order by writ petition before the Bombay High Court.

Key provisions

• Section 90, Customs Act, 1962 — Concessions in respect of imported stores for the Navy
• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 61(2), Customs Act, 1962 — Period for which goods may remain warehoused
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 127(b), Customs Act, 1962 — Award of confiscation or penalty by customs officers not to interfere with other punishments
• Section 88(a), Customs Act, 1962 — Application of section 69 and Chapter X to stores
• Section 129, Customs Act, 1962 — Appellate Tribunal