In a landmark judgment, the Delhi High Court ruled that interest on seized goods cannot be computed for periods before the liability is determined, offering partial relief to Vishal Oil and Lubricants Co.
In a significant ruling, the Delhi High Court has directed the Commissioner of Customs (Import) to recompute the interest liability concerning the confiscation and redemption of imported goods by Vishal Oil and Lubricants Co., a proprietorship owned by Mr. Dalip Singh Rathore. The court clarified that the interest on such liabilities could not be charged for periods before the determination of liability through adjudication proceedings.
The matter, which revolved around imported goods initially declared as "Bitumen" but later found to be "Used Oil," had been under scrutiny since 2015. The goods were seized, and subsequent show cause proceedings dragged on for over seven years. An Order-in-Original was eventually passed on February 28, 2023, allowing for redemption and confirming the customs duty initially assessed.
The petitioner, Vishal Oil and Lubricants Co., represented by Advocate Mr. Rohit Kapur, contended that they should not be liable for interest accrued during the prolonged adjudication period when the goods were seized and unavailable for clearance. The respondent, Commissioner of Customs (Import), argued that the liability emerged from the confiscation proceedings and was distinct from the original assessment.
The bench, comprising Justices Mr. Anil Kshetarpal and Shail Jain, concluded that the interest liability should be recalculated starting from February 28, 2023, when the adjudication determined the liability, and not from the original assessment date in May 2015. This judgment aligns with the Supreme Court’s stance in the Navayuga Engineering case, which differentiates between the occurrence of liability and its assessment under statutory provisions.
The Court instructed the customs authorities to issue a fresh computation, excluding the period from the original assessment to the adjudication, and to credit all payments already made. The judgment underscores the need for timely adjudication to prevent prejudicing importers due to departmental delays.
The decision provides a precedent for similar cases where prolonged adjudication impacts the financial liabilities of importers. It also emphasizes the importance of applying statutory schemes correctly concerning interest computations on delayed payments post-adjudication.
Bottom Line :
Customs Act, 1962 - Interest consequent to confiscation and redemption of imported goods cannot be computed for period prior to determination of liability in adjudication proceedings - Where goods were seized and show cause proceedings remained pending for more than seven years, interest shown in Customs EDI System from date of original assessment was unsustainable - Fresh computation directed from date of Order-in-Original determining liability.
Statutory provision(s): Customs Act, 1962 Sections 125, 28, 46(3); Constitution of India, 1950 Article 226
