CBEC consolidates interest waiver orders

EXIM MATTERS

The Central Board of Excise and Customs (CBEC) has consolidated all the earlier instructions relating to waiver of interest on Customs duty on goods that are warehoused after import under Section 61 of the Customs Act, 1962.

The CBEC's intention is to allow the activity of importers to continue, including clearance of the goods from the warehouse for use and decide waiver of interest only at the last stage, which may be after the goods have been cleared""thus, eliminating the need to pay interest and then claim refund.

The consolidated circular (No 10/2006, dated February 14, 2006) ensures certain uniformity while considering requests for waiver of interest on Customs duty on warehoused goods.

In the case of goods supplied as ship stores and goods supplied to diplomats from the bonded warehouses, waiver of interest is to be considered only after ex-bond clearance of the goods for the said purposes.

In the case of goods imported by 100 per cent export-oriented units, waiver of interest is to be considered only on completion of the export obligation period.

In the case of machinery, equipment and raw materials imported for building and fitment to ships, requests for waiver of interest must be considered only after the imported goods have been cleared from the warehouse for actual use for building and fitment to ships.

The circular lists a number of situations where interest is not recoverable for the simple reason that duty is not payable on the warehoused goods as the interest under Section 61(2) of the Customs Act, 1962, has, thus, no independent or separate existence.

For example, goods warehoused and sold through duty-free shops, goods re-exported under Section 69 of the Customs Act, 1962, goods imported for manufacture-in-bond under Section 65 of the Customs Act, 1962, goods imported and warehoused for subsequent clearance against valid advance licences/Import-Export Pass Book Scheme or any similar scheme suffer no duty at the time of clearance from the bonded warehouses.

There are also situations where goods may be imported for shipbuilding and for setting up power project, where the production programme or nature of activity might require the imported goods to be stored in the bonded warehouses for longer period of time.

The Central Board of Excise and Customs says in all such and similar cases listed in the circular, demand for interest must be raised when due.

The demands, however, should not be enforced and on fulfilment of the purpose of import, the waiver of interest is to be decided within six months, says the CBEC. The power of chief commissioners to waive interest up to Rs 2 crore is retained undisturbed.

The Central Board of Excise and Customs says it has now been decided to accept the Supreme Court judgment in the case of Pratibha Processors (1996 (88) ELT 12 (SC)) wherein it was held that the interest on warehoused goods is merely an accessory of the principal and, if the principal is not recovered/payable, so is the interest on it.

It is rather reprehensible but not unusual that it takes the government 10 years to revise instructions in conformity with a ruling given by the highest judicial body without ever bothering to appeal against the ruling.

The very idea of the government reserving a right to accept a Supreme Court decision is abhorrent.

tncr@sify.com