Introduction
In Vishal Oil and Lubricants Co. v. Commissioner of Customs (Import) [W.P.(C) 7004/2026 and CM APPL. 34395/2026], a Division Bench of the Hon’ble Delhi High Court examined a question importers frequently face: from what date can interest be computed on liability arising from confiscation and redemption of goods? The Hon’ble Court held that interest cannot be charged for a period during which the liability itself has not been determined. The Hon’ble Court stopped short of a blanket waiver, directing instead that interest be recomputed from 28.02.2023.
Factual Background
The petitioner, a proprietorship engaged in importing petroleum products, filed Bill of Entry No. 9174780 on 08.05.2015 at ICD Tughlakabad, declaring the goods as “Bitumen” under Custom Tarriff Heading (CTH) 27132000, valued at ₹36,73,758/-. The Bills of Entry was assessed with duty of ₹9,22,210/-.
On examination, however, the drums were found to contain a substance that the Central Revenue Control Laboratory reported as “Used Oil”, and not “Bitumen”. The goods were seized on 05.06.2015 under Section 110 of the Customs Act, 1962. A Show Cause Notice dated 15.09.2015 proposed confiscation under Section 111 and penalties under Section 112, 114A and 114AA.
The Petitioner replied on 01.10.2015, attended a personal hearing on 08.12.2015 and repeatedly sought early adjudication. The matter was nevertheless decided only on 28.02.2023, by the Order-in-Original that reclassified the goods as non-hazardous Used Oil under CTH 27101990, confirmed the duty already paid, held the goods liable to confiscation but allowed redemption on a fine of ₹1,83,000/- under Section 125 and imposed penalties. The Bill of entry was re-assessed on 29.08.2023.
When the petitioner sought clearance, the Customs EDI (Electronic Data Interchange) System showed “interest charges” of about ₹11,74,000/- in November 2023, rising to roughly ₹15,21,000/- by May 2026. Representations went unanswered, and the present writ petition followed.
Contentions Before the Hon’ble Court
The Petitioner argued that it could not bear interest for a period in which the goods remained seized and adjudication was pending, particularly since it had consistently sought a decision and the delay was departmental. The Petitioner further submitted that Section 46(3), which deals with late presentation of a bill of entry, had no application, and relied on Swatch Group India Pvt. Ltd. v. Union of India [2023 SCC OnLine Del 4938] and Gala International Pvt. Ltd. v. Additional Director General, DRI [2023 SCC OnLine Del 6073].
Customs responded that the writ was not maintainable in view of the statutory appellate remedy, that having accepted the Order-in-Original and sought redemption, the petitioner could not dispute its consequences. Under Section 125 and the Supreme Court’s decision in Navayuga Engineering Co. Ltd. v. Union of India [2024 INSC 547]: duty and interest on delayed payment follow redemption, adding that the EDI System merely reflects statutory liability, which mere pendency of proceedings cannot extinguish.
Reasoning: Navayuga and the Date of Determination
The Hon’ble Court first clarified the controversy. Customs did not allege delayed presentation under Section 46(3 its case rested entirely on confiscation and redemption under Section 125.
Turning to Navayuga, the Court noted the Hon’ble Supreme Court’s distinction between the occasion on which liability under Section 125(2) arises, namely when the owner exercises the redemption option and the Department accepts it, and the machinery under Section 28 through which that liability is assessed. Interest on delayed payment is attracted once Section 28 applies.
Applying this, the Hon’ble Court found that the liability flowing from the confiscation proceedings was determined only on 28.02.2023. The May 2015 assessment rested on the “Bitumen” declaration and was followed almost immediately by seizure. The later liability could not be retrospectively treated as payable from that date merely to compute interest. Having chosen to rest its demand on Section 125, Customs Authority could not fall back on the original assessment. The Hon’ble Court also took note that the petitioner had not been idle, having sought expeditious adjudication throughout.
Objections Rejected and the Limits of the Ruling
The Hon’ble Court rejected the alternative remedy objection, since the petitioner did not challenge the Order-in-Original but only the period of interest computation, on undisputed facts. Acceptance of the order it held does not make every later EDI figure immune from scrutiny.
Equally important is what the Hon’ble Court did not hold. It expressly declined to say that departmental delay, by itself, extinguishes interest liability, as that would be inconsistent with the statutory scheme and the Navayuga Case.
The holding is narrower: interest cannot be calculated for a period during which the liability sought to be subjected to interest had not itself been determined. The Order-in-Original was left undisturbed, Swatch and Gala decisions of court, were not examined, and no opinion was expressed on any independent statutory default.
Directions Issued
Partly allowing the petition, the Hon’ble Court directed Customs Authority to recompute interest under the Customs Act, excluding the period from the original assessment in May 2015 up to 28 February 2023, to determine interest, if any, for the later period strictly in accordance with law to account for the 29 August 2023 re-assessment and credit all amounts paid towards duty, fine and penalties, and to issue a fresh computation within four weeks of receiving the judgment. The EDI computation was set aside to the extent it treated the earlier period as delayed payment.
AMLEGALS Remark
While this ruling may not establish a novel principle of law, its core significance lies in reinforcing strict judicial discipline regarding statutory interest. The Hon’ble High Court has definitively affirmed that the liability to pay interest under the Customs Act, 1962, cannot operate in a vacuum it must remain intrinsically linked to the exact date on which a specific fiscal liability is legally crystallized, rather than anchored to a historical or superseded assessment that was subsequently overtaken by confiscation proceedings.
For the importing community, this judgment serves as an important precedent against automated, arbitrary calculations generated by the Customs EDI system. It clarifies that departmental delays during pendency cannot retrospectively burden an assessee with interest prior to the adjudication date under Section 125. Importers facing disproportionate or systemic interest demands on redemption fines and duties should meticulously verify the exact start date of the computational period applied by the authorities. However, as the relief is contingent upon specific procedural timelines and facts, a case-by-case evaluation remains essential to determine applicability.
For any queries or feedback, feel free to connect with Dhwani.tandon@amlegals.com