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Customs Duty to be paid on the basis of Sale Proceeds and not on the basis of Customs Duty payable a


CORAM : The bench consisted of Justice A.M.Khanwikar, Justice Hemant Gupta, Justice Dinesh Maheshwari.

The appeal is challenged against the order passed by the Delhi HC dated 28th November 2007, Letters were found to be without authority of law, appellants were directed to refund sum of Rs.27,47,146/- together with interest @12% per annum. One M/s. Kushang Apparel Ltd. had imported CTV kits and filed six Bills of Entries, all dated 9th February, 2001. Such goods were permitted by the Custom Department to be kept in warehouse for one year in terms of Section 59 of the Customs Act, 19621 at ICD, Faridabad. The Bond period expired on 28th February, 2002 but the importer did not clear the imported goods and also did not pay the rent for the warehouse. The warehouse issued notices for the recovery of its dues failing which it will be constrained to sell the imported goods by public auction/tender sale. With the approval of custom authorities, the imported goods were put for sale through auction under Section 63(2) of the Act with a valuation of imported goods at Rs.1,52,04,176/-. However, the goods could not be successfully sold. Auction was not confirmed. Thereafter, tender sale was resorted to dispose of the goods in the warehouse.

The argument of the learned counsel for the Revenue is that the distribution of sale proceeds has to be in accordance with Section 150 of the Act as there is a specific provision concerning custom duty charges which will have precedence over recovery of warehouse charges under 150(2)(e) of the Act. Kesoram is a case where the importer claimed levy of custom duty which remained in bonded warehouse beyond the permitted period claiming that the duty as is applicable on the date the goods were sought to be removed for home consumption, will be chargeable. This Court found that the goods can be kept in a warehouse in terms of the period specified under Section 61 of the and, therefore, Section 68 and Section 15(1)(b) apply only when the goods were cleared from the warehouse within the permitted period or with permitted extension and not beyond the permitted period or permitted extension.

The issue required to be examined in the present appeal is whether the calculation of the custom duty would be assessed as on the date of the deemed removal of goods from the warehouse in terms of Section 61 as interpreted by this Court in Kesoram or on the date of sale for the reason that the importer has failed to seek clearance of the goods imported.

The Court held that the present case is not a case of levy of custom duty on the importer. The importer has not sought the release of goods within the permitted period of warehouse. Therefore, the judgment in Kesoram will not be applicable in respect of the goods to be auctioned on account of failure to seek the release of imported goods by the importer though after the permission from the proper officer.

It was held that the custom duty has to be paid on the basis of sale proceeds realised from the sale of the goods kept in a warehouse and not on the basis of the custom duty payable at the time of filing the Bill of Entry or on the date of expiry of permitted period of warehouse.

Therefore the appeal was disposed of with directions to ascertain the customs duty keeping in mind the dispensation indicated in the enabling provisions of the Customs Act, 1962 and Chapter 21 of Central Board of Excise and Customs Manual read with circular dated 20th November, 2011 and adjust the same as per the priority specified in Section 150(2) of the stated Act.

–  Saral M



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