Subject : Warehousing – Levy of interest on the customs duty under section 61 of the Customs Act, 1962- Clarification regarding
Vide Finance act, 1994, Section 61 of the Customs Act, 1962 was amended and the normal warehousing period in respect of capital goods warehoused by 100% EOUs have been fixed for five years which is further extendable. Further the Board had been vested with powers under section 61(2) to specify class of goods in official Gazette in which no interest on duty shall be chargeable. Consequent ot the amendment in the Finance Act, 1994, representations have been received from different sectors of the industry requesting for issuing necessary notification under section 61(2) exempting their warehoused goods from payment of interest on customs duty.
2. The Board has examined the matter and identified certain class of goods in which cases interest on duty would not be chargeable at the time of their clearance from the warehouse. Accordingly notification No. 67/95 (NT) – Customs, dated 1.11.95 payable on the goods warehoused under Chapter IX of the Customs Act, 1962 and specified in the Table to the above mentioned notification at the time of clearance from the customs bonded warehoused under section 68 ibid.
3. After issue of the notification, a doubt has arisen as to whether the goods which have been warehoused prior to the amendment of the Customs Act and issue of the notification and intended to be cleared for home consumption are eligible for exemption from payment of interest on duty under the aforesaid notification at the time of clearance from the warehouse. The matter has been examined by the Board in the light of the opinion given by the Ministry of Law on 11.3.85 and decided that since the warehoused goods have not been cleared for home consumption as on the date of amendment to Customs Act, 1962 (1994-95) as well as the issue of notification, the benefit of notification No. 67/95 (NT)- Customs, dated 1.11.95 should be extended to these goods. However, the capital goods imported by 1100% EOUs and debonded prior to amendment of section 61 of the Customs Act, 1962 vide Finance Act, 1994 would continue to be governed by the old provisions.
4. In view of the position explained above, I am directed to request you to appraise all field formation under your charge of the above Board’s decision so as to avoid many doubts in their minds.
5. Representations have also been received by the Board from various quarters of trade and industry for discontinuation of practice of issuing interest demand notices issued at the time of extension in warehousing period or otherwise. It has been represented that the interest on the customs duty is to be collected only at the time of clearance of the goods from the warehouse for DTA and as such the demand notice appears necessary only at the stage of clearance and not each time the extension is given to the Bond period.
6. The matter has, accordingly, been examined by the Board. It has been observed that the practice of issuing the interest demand notices at the time of granting extension of warehousing period would not be proper because consequent to coming into force of the Finance Act, 1994-95 interest on warehoused goods is to be calculated with reference to the duty payable at the time of clearance of goods from the warehouse. Accordingly, it has been decided that the interest may be collected at the time of clearance of the goods from the warehouse. In cases where there is a policy to waive interest in terms of Board’s circular F.No. 475/82/92-LC dated 27.12.93, demand notices may be issued but may not be enforced till the issue of waiver of interest is decided. The instructions of the Board contained in circular F.No. 475/42/91/ – CUS VII dated 6.6.91, F.No. 475/37/92-LC dated 2.12.92 and F.No. 475/59/92-LC dated 16.2.93 are no more relevant in view of the fact that the interest amount will also be nil in cases where the duty payable at the time of clearance of goods from the warehouse is nil. Further, in any case, interest can be quantified only at the time of clearance of the goods from the warehouse. All the field formations may be suitably advised in this regard.
7. The Board has also decided that the demand notice already issued may be decided in terms of the instructions contained in Board’s circular F.No. 475/82/92-LC dated 27.12.93 & 10.2.94 laying down the guidelines for waiver of the interest by the Chief Commissioner of Customs & Central Excise. any difficulties arising on account of these instructions may be brought to the notice of the Board immediately.