PRATIBHA PROCESSORS AND ORS., ETC. ETC. versus UNION OF INDIA AND ORS.

Citation: [1996] SUPP. 7 S.C.R. 596 · Decided: 11-10-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
PRATIBHA PROCESSORS AND ORS., ETC. ETC. 
v. 
UNION OF INDIA AND ORS. 
OCTOBER 11, 1996 
B 
[S.P. BHARUCHA AND K.S. PARIPOORNAN, JJ.) 
Customs Act 1962, s. 61 (2)-Payment of interest where no duty payable 
at the time of clearance of warehoused goods-Held, where goods are wholly 
exempt from payment of duty, there is no occasion to levy any interest; interest 
C is necessarily linked to duty payable and has no separate existence. 
The petitioners imported Polyester Filament Yarn of Taiwan origin. 
The goods were allowed to be warehoused under six bonds dated December 
4, 1990 expriring on March 3, 1991. Thereafter the petitioners obtained 
D Advance Licence under the Duty Exemption Entitlement Certificate 
(DEEC) Scheme. On or about May 9, 1991, the petitioners filed six Bills 
of Entry for Ex-Bond clearance for home consumption and also produced 
the Advance Ucence in view of which they were entitled to clear the goods 
without payment of duty under Exemption Notifltation read with DEEC. 
The Respondents accordingly assessed the Bills of Entry to "Nil" duty but 
E they endorsed thereon to recover interest at 18% on duty from March 4, 
1991 till clearance. 
The Bombay High Court dismissed the writ petitions of the 
petitioners challenging the levy of interest. It held that the petitioners were 
. F liable to pay interest on the amount of duty payable at the time when goods 
were warehoused till they were cleared at the rate then prevailing under 
Customs Tariff Act. The petitioners appealed to this Court. 
Allowing the appeals, this Court 
G 
Held : 1.1 The interest was necessarily linked to the duty payable. 
The interest provided under S.61 (2) has no independent or separate 
existence. When the goods were wholly exempted from the payment of duty 
on removal from the warehouse, one could not be saddled with the liability 
to pay interest on a non-existing duty. [608-H] 
H 
1.2 The mere fact of warehousing the goods on an anterior date and 
596 
' .. 
PRATIBHAPROCESSORSv. U.0.1.[PARIPOORNAN,J.] 
597 
clearing the same on the basis of a subsequent Advance Licence, validly A 
obtained under the Duty Exemption Scheme, could not import the idea of 
, 
levy of interest for the period the goods were kept in the warehouse. The 
interest payable under s.61 (2) of the Act is a mere "accessory" of the 
principal and if the principal is not recoverable I payable, so is the interest 
OD it. [607-D-E, 608-F] 
B 
-
Union of India v. Bangalore Wire Rod Mill, (1996) 83 ELT 251 SC • 
referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2412-15 
of 1993 etc. etc. 
c 
From the Judgment and Order dated 19.11.92 of the Bombay High 
Court in W.P. Nos. 3383-84, 3468 and 1854 of 1991. 
D.A. Dave, Joseph Vellapally, Ms. Meenakshi Arora, Ravi Sathe, 
Arun Dayal and Rajiv Dutta for the Appellants. 
D 
Gauri Shanker Murti, P. Parmeswaran and V.K. Verma for the 
Respondents. 
The Judgment of the Court was delivered by 
E 
PARIPOORNAN, J. Leave Granted in all the special leave petitions. 
2. In this batch of 31 appeals a common question of law arises for 
consideration. It is regarding the interpretation to be placed on Section 61 
(2) of the Customs Act (hereinafter referred to as the 'Act'). The High 
Court of Bombay dismissed a batch of 36 writ petitions in the matter by a F 
common judgment dated 19th November, 1992. The question that arose for 
consideration was posed, thus:· 
=-=-
"On importation of goods under OGL if the importers had kept 
the same in the warehouse under Section 59 of the Act and after G 
expiry ofstatutory period of three months if they clear the goods 
--1 
under the Advance Licence issued under DEEC Scheme, whether 
i 
such importers are liable to pay interest on the amount of duty 
which was assessed and ascertained on the date of warehousing 
until the goods is cleared under Section 68 of the Act (excluding 
the free period of three months)." 
H 
598 
SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R. 
A 
3. Writ Petition No. 1854of1991 was treated as the main case. The 
facts in the said case were adverted to in detail. The judgment in the said 
case was followed in all other cases, including Writ Petition Nos. 1908 of 
' 
1991, 1958 of 1991 and 3145 of 1991. The three appeals C.A. Nos. 2416-
2418 of 1993 are preferred against the judgments in the said writ petitions. 
B 
For convenience sake the facts relevan~ to Writ Petition No. 1854 of 1991 
(the main judgment) will be adverted to since the facts are almost
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