Kesoram Reyon (A Unit Ofm/S Kesoram ... vs The Collector Of Customs,Calcutta on 23 August, 1996

Summary of Judgment: Kesoram Reyon vs. The Collector of Customs, Calcutta

1. Outcome
The appeal filed by Kesoram Reyon was dismissed with costs. The Supreme Court upheld the levy of customs duty at the rate prevailing on the date the permitted warehousing period expired, rather than a later date when an exemption notification came into force or when the demand notice was issued.

2. Core Issue
The core issue was to determine the applicable rate of customs duty on imported goods that remained in a private bonded warehouse beyond the statutorily permitted period without an extension, and were subsequently removed after a demand notice under Section 72 of the Customs Act, 1962. Specifically, whether the rate should be determined under Section 15(1)(b) (date of actual removal from warehouse for home consumption) or on the date the goods were deemed improperly removed under Section 72(1)(b) (expiry of the permitted warehousing period).

3. Key Facts
* Importer: Kesoram Reyon (appellants).
* Goods: 832 bales of rayon grade wood pulp.
* Warehousing: Goods were imported, and a bill of entry for warehousing was filed on May 25, 1984. They were warehoused in a private bonded warehouse on June 16, 1984.
* Permitted Period Expiry: The initial three-month warehousing period under Section 61(1)(b) of the Customs Act, 1962, expired on September 15, 1984. No extension was granted.
* Exemption Notification: An exemption notification, exempting pulp derived from vegetable fibre from customs and additional duties, came into force on March 17, 1985.
* Demand Notice: On May 8, 1985, the Assistant Collector of Customs issued a demand notice under Section 72(1) for duty and interest, as the goods remained in the warehouse beyond the permitted period.
* Bill of Entry for Home Consumption: On May 30, 1985, the appellants filed an ex-bond bill of entry for home consumption.
* Clearance Order for Warehouse De-licensing: On June 25, 1985, an order was issued recalling the May 8, 1985, demand notice, directing clearance of goods under Section 72 (not Section 68) and stating the warehouse would be de-licensed.
* Goods Removal: The bales were removed from the warehouse between June 29 and July 2, 1985.

4. Arguments
* Taxpayer (Kesoram Reyon):
* The applicable rate of duty should be the rate in force on the date of actual removal of the goods from the bonded warehouse, as per Section 15(1)(b) of the Customs Act. Since an exemption notification came into effect on March 17, 1985 (before actual removal), no duty was payable.
* Alternatively, the rate of duty should be the rate in force on May 8, 1985, the date the demand notice under Section 72 was issued.
* Relied on the Supreme Court decision in D.C.M. and Another vs. Union of India and another to support the argument that the date of clearance from the warehouse for home consumption determines the rate of duty.
* Revenue (Collector of Customs):
* Section 15(1)(b) is not applicable because the goods remained in the warehouse beyond the permissible warehousing period.
* The goods were removed under Section 72, which deals with goods improperly removed (or not removed) from a warehouse, not under Section 68 (proper clearance for home consumption).
* The date of the demand notice under Section 72 is not the relevant date for determining the rate of duty.

5. Court’s Reasoning
* Distinction between Section 68 and Section 72: The Court distinguished between "clearance of warehoused goods for home consumption" under Section 68 and situations where goods remain in a warehouse beyond the permitted period, which are covered by Section 72.
* Applicability of Section 15(1)(b): Section 15(1)(b) explicitly states it applies to goods "cleared from a warehouse under section 68." Clearance under Section 68 requires a bill of entry for home consumption, payment of duty/charges, and an order for clearance.
* Nature of Clearance in this Case: In this case, the goods were not cleared under Section 68. They remained in the warehouse beyond the permitted period (September 15, 1984), triggering the provisions of Section 72(1)(b). The subsequent order of June 25, 1985, also clarified that the clearance was "not a case of clearance under Section 68... but on realisation of charges under Section 72."
* Deemed Improper Removal under Section 72: Goods not removed from a warehouse at the expiration of the permitted period (or its extension) are treated as "improperly removed" under Section 72(1)(b). In such a scenario, the duty chargeable is determined on the date of their deemed removal, which is the date the permitted warehousing period expired.
* Irrelevance of Ex-bond Bill of Entry: While the appellants filed an ex-bond bill of entry on May 30, 1985, there was no order for clearance under Section 68. Since the goods were already deemed improperly removed as of September 15, 1984, the later bill of entry did not change the legal position.
* Irrelevance of Demand Notice Date: The date the demand notice under Section 72 is issued is not the relevant date for determining the rate of duty; the liability arises when the goods are deemed improperly removed.
* Precedent (D.C.M. case): The Court held that D.C.M. and Another vs. Union of India and another was not applicable as it dealt with the constitutionality of Section 15(1)(b) in general and did not address situations where goods remained in a warehouse beyond the permitted period under Section 72.
* Tribunal's View Correction: The Court noted that the Tribunal's view that the rate applicable was on the date of the into-bond bill of entry was not entirely accurate. However, since the liability under Section 72(1)(b) arose on the expiry of the three-month period (September 15, 1984), and there was no change in duty rates during those three months, the ultimate outcome of the Tribunal was correct. The crucial date for duty determination was September 15, 1984.

6. Statutory References
* Customs Act, 1962:
* Section 2(43) - Definition of "warehouse"
* Section 2(44) - Definition of "warehoused goods"
* Section 12 - Levy of customs duty
* Section 15(1)(b) - Date for determination of duty on goods cleared from a warehouse
* Section 18 - Provisional assessment of duty
* Section 46 - Bill of entry for home consumption or warehousing
* Section 47 - Clearance of goods for home consumption
* Section 59 - Warehousing bond
* Section 61 - Period for which goods may be left in warehouse
* Section 62 - Control over warehoused goods
* Section 68 - Clearance of warehoused goods for home consumption
* Section 71 - Goods not to be taken out of warehouse except as provided
* Section 72 - Goods improperly removed from warehouse, etc.

7. Precedents Cited
* D.C.M. and Another vs. Union of India and another, 1995 Supp.(3) SCC 223. (Distinguished)