DEEC Licence Must Be Valid On Date Of Warehouse Clearance To Claim Customs Exemption: Supreme Court

The Supreme Court of India has recently reiterated that in the case of warehoused goods, customs duty liability arises on the date of actual clearance from the warehouse, and an importer cannot claim exemption under a DEEC advance licence if the licence has expired by then.

Upholding the High Court's decision, a bench of Justices Manmohan and Vipul M. Pancholi ruled that entitlement to exemption must subsist on the date duty is assessed.

“From the aforesaid provisions, it is evident that the liability of the assessee to pay customs duty arises upon clearance of the goods from the warehouse. The expression 'clearance from the warehouse' denotes the date on which the goods are actually removed therefrom.”

The case arose from the import of 10,800 kilograms of HDPE granules by Bangalore Mono Filaments Pvt Ltd on January 11, 2000 under Open General Licence.

The goods were warehoused under bond. On May 26, 2000, the company obtained by transfer an Advance Licence issued under the Duty Exemption Entitlement Certificate scheme, commonly known as the DEEC scheme, which was valid until November 18, 2000.

Under this export promotion framework, exporters were permitted to import inputs without payment of customs duty on the condition that those materials would be used to manufacture goods meant for export within the stipulated period, subject to compliance with licence conditions.

However, the company filed the ex bond bill of entry for home consumption only on December 8, 2000, after the licence had expired.

Before the Court, the company contended that it was entitled to the benefit of Customs Notification No. 31 of 1997 and argued that the licence need not remain valid on the date of removal from the warehouse.

The revenue authorities relied on Sections 15 and 68 of the Customs Act, 1962, which provide that in the case of warehoused goods, the relevant date for determination of duty is the date on which the bill of entry for home consumption is presented. The exemption notification also required that the licence be produced “at the time of clearance of imported materials for debit”.

Dismissing the appeal, the Court recorded, “In the present case, it is an admitted position that the goods were removed from the warehouse on 8 December 2000. On that date, the Advance Licence under the DEEC Scheme had already expired.”

It concluded, “Consequently, this Court is of the considered view that the High Court was justified in holding, in consonance with the judgment of this Court in Pratibha Processors (supra), that on the date when the duty was assessed, the appellant's entitlement to exemption under the DEEC licence had ceased.”

For Appellants: Advocate-on-Record K. V. Mohan; Advocate K. V. Balakrishanan; Advocate R. K. Raghavan; Advocate Devesh Kr. Khanduri.

For Respondents: Additional Solicitor General Raghvendra P. Shankar; Advocate-on-Record Gurmeet Singh Makker; Advocate Pallavi Mishra; Advocate Udayaditya Banerjee; Advocate Alankar Gupta; Advocate Karan Lahiri.