Warehousing – Waiver of interest on Customs duty on warehoused goods – Board issues a benign circular
For a change here comes a Board circular that is clear and benevolent. Even before the warehoused goods can be put to use, there is a demand for interest. Now Board has given a consolidated list of instruction on waiver of interest. Board had been kind enough to accept Supreme Court’s order that interest liability accrues only when there is duty liability. Board has further instructed the field not to enforce the demand for interest immediately as most often, interest merits waiver and the importer should be spared the hardship of first paying the interest and then, on waiver, seeking refund. Great CBEC! The Board should exist for this kind of clarification and not for confusion.
Gist of the instructions;
++ Don’t refer to Board unnecessarily:- Chief Commissioners can waive interest up to Rs. 2 Crores. Requests for waiver should be received and examined in the Commissionerates first.
++ Board recognizes the fact that in certain cases finally no duty is payable and in ship building, power generation etc, imported goods have to be generally retained for a longer period of time.
++ Waiver is to be considered in the following cases:-
(i) Goods supplied as ship stores/aircraft stores (waiver to be considered only after ex-bond clearance of goods)
(ii) Goods supplied to diplomats (waiver to be considered only after ex-bond clearance of goods)
(iii) Goods used in the units operating under manufacture-in-bond scheme
(iv) Goods imported by 100% EOUs ( on completion of export obligation)
(v) Goods warehoused and sold through duty free shops
(vi) Machinery, equipment and raw materials imported for building and fitment to ships (the waiver of interest shall be considered only after the imported goods have indeed been cleared from the warehouse for actual use for building and fitment to ships)
(vii) Petroleum products
(viii) Plant and Machinery imported for projects
(ix) Machinery, equipment and raw-materials imported for manufacture and installation of power generation units
(x) Goods imported under OGL and warehoused for subsequent clearance against valid advance licences/Import-Export Pass Book Scheme or any similar scheme
(xi) Goods imported in bulk by canalizing agencies/public sector trading or service agencies and warehoused for subsequent release for export production
(xii) Imports under EPCG Scheme
(xiii) Import of Capital Goods by Public Sector Undertakings
++ 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. The interest under Section 61 (2) of the Customs Act, 1962 has, thus, no independent or separate existence.
++ the demand for interest are to be raised when due
++ The same are, however, not to be enforced, and on fulfillment of the purpose of import, the waiver of interest is to be decided within six months. In other words, the activity of the importers is to be allowed to continue, which includes clearance of the goods from the warehouse for the purpose of use, and only at the last stage after the goods have been cleared or at the time of de-bonding in cases of 100% EOUs, the waiver of interest issue is to be decided
++ This approach is necessary since, by and large, the interest demanded may finally merit waiver and the importer should be spared the hardship of first paying the interest and then, on waiver, seeking refund
++ Cases which are not covered by the guidelines should be referred to the Board for decision
++ Cases relating to interest accrued on scrap generated during the manufacturing activity of 100% EOU should not be decided by the Chief Commissioners. These should be referred to the Board for decision.
CIRCULAR NO. , Dated: February 14, 2006