UNION OF INDIA AND ORS. ETC. versus M/S. BANGALORE WIRE RED MILLS ETC.

Citation: [1996] 3 S.C.R. 656 · Decided: 19-03-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed
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Judgment (excerpt)

A 
UNION OF INDIA AND ORS. ETC. 
v. 
MJS. BANGALORE WIRE RED MILLS ETC. 
MARCH 19, 1996 
B 
[B.P. JEEVAN REDDY ANDS. SAGHIR AHMAD, JJ.) 
Customs Act, 1962 : 
Ss.59(l)(b),61(1)(b), 61(2}-Import of items falling within "Con-
C swnable stores''-Warehousing of-lmp01ter executing a bond in temis of 
s.59(1 )-Liability of importer to pay duty and interest thereott-Held, duty to 
be paid at the rate prevalent on date of clearance-Interest chargeable only 
after the expiry of period mentioned in notice on the amoullt computed 
according to the rates of duty in force from time to time. 
D 
The respondent in C.A. No. 431/93 imported a 'high reversible mill', 
an item covered under "consumable stores" within the meaning of' 
s.61(l)(a) of the Customs Act, 1962, in the year 1982 and warehoused the 
same on 11.11.1982 without paying any duty thereon. However, the respon-
dent executed a bond in terms of s.59(1). On 7.3.1985, a notice was issued 
E to the respondent to clear the goods within 15 days after paying the duty. 
On the date of warehousing the rate of customs duty chargeable was 40% 
ad valoram. This rate was increased from time to time and on 9.9.1988, 
when the respondent cleared the goods, the rate of duty was 90%. The 
... 
I 
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respondents paid the duty at 90% amounting to Rs. 1.40 crores and interest 
_, 
thereon amounting to Rs. 81.49 lakhs as demanded by the authorities, and, 
F after clearing the goods, filed a writ petition challenging the levy of duty 
at the rate of 90% as also the interest thereon from 11.11.1982 up to the 
date of clearance. The case of the respondent was that the initial warehous-
ing period was three years and the interest would start running only 
thereafter. The Single Judge disposed of the writ petition. Both the im-
G porter as also the Government filed appeals before the Division Bench or 
the High Court, which directed the Customs authorities to recompute the 
amount or interest from 22.3.1985 to 9.9.1988 on the amount or Customs 
duty prevailing from time to time during the aforesaid period. Aggrieved, 
the Government as also the importer filed the appeals. 
H 
Dismissing the appeals, this Court 
656 
1 
(-
U.O.L v. MIS BANGALORE WIRE RED MILLS 
657 
HELD : 1. In view of the provisions of the Customs Act, 1962, the A 
duty would be payable at the rate in force on the date of clearance from 
the warehouse and not at the rate in force on the date of import or on the 
date of warehousing. Though the period of three years for warehousing the 
goods prescribed in s.61 (l)(a) of the Act, was reduced to one year by an 
amendment in the Act with effect from May 13, 1983, neither the respon· B 
dent cleared the goods nor authorities issued the demand notice within 
one year from May 13, 1983. The respondents cleared the goods only on 
9.9.1988, and as such the duty was rightly imposed on and paid by the 
respondents at the rate of ninety per cent. [661-A; 660-G-H; 661-B] 
2.1. There is no justification or legal basis for the appellants to C 
demand the interest taking the rate of the duty at ninety per cent for the 
entire period from the date of ware housing the goods till its clearance. 
The language of Section 59(1)(b) of the Act, as it stood at the relevant time, 
clearly and unambiguously says that the importer shall have to execute a 
bond undertaking inter alia to pay interest from the date specified in the 
notice of demand. The liability to pay interest arises only after the expiry 
of the period prescribed in the notice of demand. Accordingly, the duty 
became due on issuing the notice of demand. The notice prescribed fifteen 
days for payment. Interest is chargeable only thereafter as rightly held by 
the High Court. (661-H; E·G] 
2.2. Further, the rate of duty on the goods was not ninety percent 
throughout the period from March 22, 1985 to September 9, 1988. It was 
varying. The High Court's directions therefore, to take the actual rate in 
force from time to time is a reasonable one. (661-H; 662-A] 
D 
E 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 431-32 F 
of 1993. 
From the Judgment and Order dated 10.4.92 of the Karnataka High 
Court in W.A. No. 1275/91 & 2419/91. 
WITH 
Civil Appeal Nos. 4601-02 of 1996. 
From the Judgment and Order dated 10.4.92 of the Karnataka High 
G 
Court in W.P. Nos. 1275/91 and 2649 of 1991. 
H 
658 
SUP!l.EME COURT REPORTS 
(1996)3 S.C.R. 
A 
N.K. Bajpai, S.D. Sharma (Rajiv Nanda) for T. Sridharan for the 
B 
Appellants. 
J oscph Vellapally
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