Circular No. 26/2007-Cus.,
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject : Waiver of interest on goods cleared from a warehouse when duty is paid by way of debit in DEPB licenses – Regarding
I am directed to refer to instructions contained in Board’s Circular No. 10/2006-Customs, dated 14-2-2006 (F.No. 473/07/2005-LC) [2006 (194) E.L.T. T23] regarding waiver of interest on Customs duty on warehoused goods and to say that a reference was received in the Board seeking clarification whether interest on warehoused goods is chargeable, if the Customs duty is paid by way of debit in DEPB.
2. The issue was examined and necessary clarification in the matter has been issued vide F.No. 605/85/2006-DBK, dated 21-7-2006 to the Commissioner concerned. Having regard to the general implications of the matter, a copy of the same is enclosed for information and necessary action.
3. In brief, the issue involved is, whether the duty paid through debits under DEPB is to be treated as payment of duty or exemption from duty. Hitherto, the stand taken by the Department was that goods cleared through debit under DEPB are exempted goods and, accordingly, no CENVAT or drawback was allowed for such payments. Para 4.3.5 of the Foreign Trade Policy, 2004-09 was amended allowing additional Customs duty paid through debit under DEPB to be adjusted as Cenvat credit or duty drawback. The said position was clarified vide Circular No. 59/2004-Cus., dated 21-10-2004 [2004 (173) E.L.T. T9]. It implies that the goods cleared by debits through DEPBs are not to be treated as exempted but duty paid.
4. Section 61 of the Customs Act, 1962 provides for charging of interest on duty payable on clearance of warehoused goods. Section 61(2)(i) and (ii) provides that the interest shall be payable on the amount of duty payable at the time of the clearance of the goods from the warehouse. In case of clearances under DEPB Scheme, the amount of duty payable is required to be debited from DEPB scrip. Therefore, it cannot be considered that the duty payable is nil or exempted. This is further supported by the fact that the CENVAT credit or duty drawback is available even when the additional Customs duty is debited under DEPB.
5. The issue regarding interest on warehoused goods has already been clarified by the Board vide Circular No. 10/2006-Cus., dated 14-2-2006 clarifying, inter alia, that interest on warehoused goods is not payable where the principal amount (duty) itself is not payable following the Apex Court Judgment in the case of Pratibha Processors [1996 (88) E.L.T. 12 (S.C.)] on this issue. In the case of notification governing imports under DEPB Scheme, the situation is slightly different. As explained above, the notification issued under DEPB Scheme provides for exemption subject to debit of duties in DEPB scrips. It is thus not a case where the goods are unconditionally exempt from duty.
6. In the light of the position explained above, it is clarified that interest is chargeable on duty paid by way of debit in DEPB on goods cleared from the warehouse.
7. The contents of this Circular may be brought to the notice of the field formations under your jurisdiction.