Warehousing - Interest chargeable if goods dutiable when warehoused - Subsequent exemption from duty irrelevant.

Document Text

Warehoused goods-Interest Chargeable warehoused if goods dutiable when F.No.475/10/89-Cus Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs. New Delhi dated 15-9-1989. Subject: Warehousing - Interest chargeable if goods dutiable when warehoused - Subsequent exemption from duty irrelevant. I am directed to say that representations have been received by the Board from the trade against the levy of interest on the amount of customs duty on warehoused goods which are cleared from the warehouses without payment of duty either for export or for home consumption. Importers have been disputing the levy of interest on the plea that when the goods are not at all levied to customs duty on clearances, they should not also be liable to the interest. References were also received from Collectors of Customs for clarification whether interest should be recovered on such duty free clearances. 2. The matter was referred to the Ministry of Law who have opined that the interest is leviable if the goods are dutiable at the time of warehousing and subsequent exemption of any kind may not get exemption from the interest which was due on the date of exemption unless the interest has been specifically waived under proviso to Section 61(2) of the Customs Act, 1962 (copy of their advice is enclosed). 3. The Board has decided that the interest shall be levied in cases where goods are cleared without payment of duty and such interest shall be calculated with reference to the rate of duty assessed, at the time of initial warehousing of the goods. Subsequently exemption of any kind shall not be regarded as automatically exempting such goods from interest liability. Government of India Ministry of Finance Department of Revenue. Subject: Levy of interest on warehoused goods when cleared without payment of duty. Section 61(2) of the Customs Act prescribes interest on the Customs duty leviable on the ware housed goods at the rate not exceeding 18% per annum, when the goods remain in the warehouse beyond the period of initial warehousing prescribed under section61(1), by way of extension of warehousing period or otherwise. The rate of interest fixed by the Board w.e.f.20.09.1988 for the purpose is 18%. 2. A question has been raised whether this interest would be leviable on the warehoused goods which are ultimately cleared without payment of duty. In the following situations, warehoused goods can be cleared without payment of duty- Goods which are removed from the warehouse for the purpose of export (i) under section 69 of the Customs Act. (ii) Goods which are originally dutiable at the time of warehousing but are subsequently exempted by virtue of notification issued under section 25(1) of the Customs Act during the intervening period. The duty leviable on such goods will be ‘nil’ in terms of section 15(b) of the Customs Act. Goods which are imported and warehoused but subsequently cleared free (iii) of customs duty under advance licence which provide for duty free importation of raw material and components for export production in terms of customs notification no.116/Cus/88. (iv) vessels or aircrafts under section 88 of the Customs Act without payment of duty. Goods imported as ship stores/aircraft stores and supplies to foreign going 3. In all the above cases, the goods may remain in a warehouse beyond an initial period of warehousing due to circumstances beyond the control of the importer and the department may have to extend the warehousing period. The practice in the department has been to recover the interest leviable on these goods even if they are cleared duty free. This view has found support in the advice of the Madras branch Secretariat of the ministry of law dated 25-07-1988 (copy enclosed). 4. The importers of the category of goods specified above have been representing against the levy of interest in such cases on the ground that interest cannot be levied on such warehoused goods when duty itself is not chargeable. This contention of the party finds support in the absence of a specific mention under section 61(2) as to how the interest date is to be reckoned. Whether it is on the duty liability at the time of initial warehousing of the goods or it is on the duty liability at the time of clearance from the warehouse. In the opinion tendered by the Madras Branch Secretariat of the Ministry of Law, the interpretation given is that the interest will have to be paid on the duty which might have been levied on the imported goods if there was no notification exempting the goods at the time of clearance from the warehouse. This opinion was, however, with reference to a specific case where the goods dutiable at the time of warehousing but it was subsequently exempted from duty which is a similar situation mentioned at Sr.No. (ii) of para 2 on pre-page. 5. The matter requires reconsideration in view of the following factors- It is not logical to collect interest on the warehoused goods when the duty Levy of interest is not envisaged when the goods are re-exported under (i) itself is not chargeable on clearance. (ii) section 69 of the Customs Act. (iii) The section 62(2) says that ‘interest shall be payable on the amount of duty on the warehoused goods’. This expression can be interpreted as the amount of duty which is payable on the warehoused goods at the time of clearance. (iv) If the interpretation that amount of duty refers to the duty leviable at the time of warehousing of the goods is adopted, then it will give rise to difficulties in calculating the rate of interest and also loss in the interest amount when the rate of duty on the goods have gone up after warehousing but before clearance. 6. Ministry of Law may kindly see for advice on whether- (1) Interest is leviable on customs duty on the warehoused goods when the goods are cleared free of duty from the warehouse in all the situations mentioned at (i) to (iv) in para 2. Whether interest on warehoused goods shall be calculated with reference (2) to the duty payable at the time of clearance of the goods from the warehouse or with reference to the rate of duty leviable on any other date. Sd/-Miss M.Michael Under Secretary. Copy of opinion of Ministry of Law at Branch Secretariat, Madras. According to facts narrated in the reference note, M/S. WCA Chemicals Ltd. Hyderabad, imported certain dutiable goods in June 1985 and kept them in the warehouse under the section 59 of the Customs Act. Thereafter obtained exemption from payment of duty from the Government. 2. The question for consideration is whether the importer is liable to pay interest on duty under the terms of section 61(2) of the said act. 3. No reported judgment appears to exist on this point. Therefore, we have to read the relevant sections and interpret them. 4. Section 59 starts stating ‘the importer of any dutiable goods which have been entered for warehousing and assessed to duty under section 17 or 18 shall execute a bond. This means that the importer while keeping imported goods in warehouse can do so only if they are dutiable goods. Customs duty becomes chargeable as soon as dutiable goods. 5. It is clear from the referring note that the importer was liable to pay duty for the goods on the date of import. It is presumed that duty was assessed as provided under section 59(1). 6. If that is so, any subsequent exemption granted to the importer from payment of customs duty may not jeopardize action contemplated under section 61(2) of the Customs Act. This interpretation is supported by the wording of sub- section 2 of section 61 namely”……..shall be payable on the amount of duty on warehoused goods………” This means that interest will have to be paid on the amount which might have been levied on the imported goods if there was no notification under section 25 for exemption. 7. This, of course, is subject to the proviso to section 61(2) which enables the Board to waive the whole or part of any interest payable, for the reasons stated therein. Sd/-T.R.Sethuraman Asst.Legal Adviser to the Government of India O/O Collector of Customs, Custom House, Madras-600 001 Min. of Law & Justice, Ms-6.I.D. Note No.5332/86/Adv/Mds.dt.25-07-1986. Ministry of Law Department of Legal Affairs Advice (b) Section The Department of Revenue have requested for reconsideration of the advice of our Madras Branch Secretariat vide Ms.6.I.D. note No.5332/86/Adv/Mds dtd.25-7-86. 2. It was advised earlier that if the importer was liable to pay duty for the goods on the date of import and duty was assessed as per section 59 of the Customs Act, 1962, any subsequent exemption granted to the importer from the payment of customs duty, may not jeopardize action contemplated under section 61(2) of the Customs Act. 3. The Department of Revenue wants the aforesaid opinion reconsidered in view of the following factors: “(i) It is not logical to collect interest on the warehoused goods when the duty itself is not chargeable on clearance. (ii) Levy of interest is not envisaged when the goods are re-exported under section 69 of the Customs Act. (iii) The section 61(2) says that ‘interest shall be payable on the amount of duty on the warehoused goods’. This expression can be interpreted as the amount of duty which is payable on the warehoused goods at the time of clearance. (iv) If the interpretation that amount of duty refers to the duty leviable at the time of warehousing of the goods is adopted, then it will give rise to difficulties in calculating the rate of interest and also loss in the interest amount when the rate of duty on the goods have gone up after warehousing but before clearance.” 4. We have considered the matter. The wording of section 61(2) are sufficiently clear to envisage that interest is leviable if the goods are dutiable at the time of warehousing and subsequent exemption of any kind may not get the exemption from the interest which was due on the date of exemption, unless the interest also has been specifically waived under proviso to the section 61(2) of the Customs Act. Sd/-K.D.Singh Deputy Legal Adviser Dt.12-05-1989. Deptt. of Revenue (Ministry of Finance) U.O.Dy.No.21262/89 dt. 12-05-1989.

HS Codes Referenced

Need the current duty rate?

Calculate the full duty cascade — BCD, SWS, IGST and trade remedies — for any HS code, free.