Vishal Oil and Lubricants Co. v. Commissioner of Customs (Import)

What happened

The importer filed a bill of entry on 8 May 2015 declaring "Bitumen" at Inland Container Depot, Tughlakabad, with a declared value of ₹36,73,758 and assessed duty of ₹9,22,210. On examination, 80 of the 90 drums held a black substance and 10 were empty; the Central Revenue Control Laboratory reported on 2 June 2015 that the samples were used oil. The goods were seized on 5 June 2015 under section 110, a show-cause notice followed on 15 September 2015, and the Order-in-Original was passed only on 28 February 2023, nearly eight years later. The Customs system showed interest running from the original assessment, and the importer sought a waiver of the whole amount.

Questions before the court

• Can the importer be charged interest for the years during which the goods were seized and adjudication was pending?

Why the court ruled this way

The Court accepted that interest is payable on the liability as it stands after adjudication, but it held that the amount payable arose from the Order-in-Original of 28 February 2023. The earlier period, during which the confiscation proceedings were pending and the amount payable had not been finally determined, could not be treated as a period of delayed payment of the determined amount (paragraph 34). The challenge to the entire interest liability was therefore not accepted, but the computation for the earlier period could not be sustained (paragraph 50).

Controlling point

Interest, if otherwise payable, is to be determined from the liability fixed in the adjudication proceedings; the interval between the original assessment and the Order-in-Original is not a period of delayed payment.

Order and next steps

The Court partly allowed the petition. Customs must recompute the interest on the bill of entry excluding the period from May 2015 to 28 February 2023, determine the interest, if any, for the period after that date under the statute and the Order-in-Original, and take account of payments already made. The computation in the Customs system that treated the earlier period as delayed payment was set aside, and the Order-in-Original was left undisturbed.

Practical implications

An importer whose goods are held for years before adjudication can ask that interest run only from the date the liability was determined, particularly where the delay lay with the department. Any payments already made should be brought into the fresh computation, which the Court directed to be carried out within four weeks.

Limits of this ruling

• The Court expressed no opinion on the classification, confiscation, redemption fine or penalty findings in the Order-in-Original of 28 February 2023, which remains in force.