Quick answer: In Vishal Oil and Lubricants Co. v. The Commissioner of Customs (Import), W.P.(C) 7004/2026, decided on 28 September 2026, a Division Bench of the Delhi High Court (Anil Kshetarpal and Shail Jain, JJ.) held that where goods are confiscated and later redeemed on payment of fine under Section 125 of the Customs Act, 1962, the Customs authorities cannot compute interest on the resulting liability from the date of the original assessment of the Bill of Entry. The liability was determined only by the Order-in-Original dated 28 February 2023, so the period from the May 2015 assessment to that date could not be treated as a period of delayed payment. The Court did not grant a blanket waiver: interest for the period after 28 February 2023 remains payable if the statute attracts it, and the department was directed to recompute within four weeks.
Key Takeaways
- Date of determination matters. The Court distinguished the original assessment of a Bill of Entry from the later determination of the liability arising from confiscation and redemption, and held that interest cannot run for the period before that determination.
- The holding is narrow. The Court expressly refused to hold that departmental delay extinguishes a statutory liability to pay interest.
- The EDI System is not a source of liability. A figure displayed in the Customs EDI System neither creates nor immunises a liability; the question is correct computation under the Act.
- A writ was entertained despite the appellate remedy. The challenge concerned only the period for which consequential interest was computed, on undisputed facts, and the Court treated that as a reason to proceed.
- Post-determination interest is left open. Interest after 28 February 2023 is to be worked out under the applicable provisions, with credit for all payments and the re-assessment of 29 August 2023.
1. Introduction
In customs litigation the goods are often held by the department while the dispute is decided. When the importer finally comes to clear them, an electronic system may display a large “interest” figure that no order has quantified. This case concerns exactly that figure.
The petitioner imported a consignment declared as bitumen. The department concluded it was used oil, seized it in June 2015, and took until February 2023 to adjudicate. After the adjudication order allowed redemption, the Customs Electronic Data Interchange (EDI) System displayed interest of about Rs.11,74,806/- in November 2023, rising to Rs.15,21,645/- by 1 May 2026. The petitioner asked the High Court to direct a waiver.
The Division Bench did not waive the interest. It identified the real question as the date from which interest could be computed, and answered that interest cannot reach back to a period when the liability had not yet been determined. That is more modest than the petitioner sought, but it matters to any importer whose goods were held during a long adjudication.
This article sets out the facts and chronology, the issues the Court decided, and the reasoning, which rests on Section 125 and Section 28 of the Customs Act, 1962 as explained by the Supreme Court in Navayuga Engineering Co. Ltd. v. Union of India (cited in the judgment as 2024 INSC 547). It then examines the limits of the holding, including what the Court left undecided, and closes with its consequences for importers and their advisers. The regime is the Customs Act, 1962. Nothing in the judgment addresses the Central Goods and Services Tax Act, 2017, and the reasoning should not be carried across to GST interest without independent analysis.
2. Case Summary and Background
The import and the seizure. The petitioner, a proprietorship concern engaged in the import and sale of petroleum products, filed Bill of Entry No. 9174780 dated 08.05.2015 at the Inland Container Depot, Tughlakabad, New Delhi. It declared the goods as “Bitumen” under Customs Tariff Heading 27132000, with a declared value of Rs.36,73,758/-. The Bill of Entry was assessed on 08/09.05.2015 and customs duty of Rs.9,22,210/- was assessed.
The consignment was placed on hold for physical examination on 13 and 14 May 2015. Of 90 declared drums, 80 contained a black-coloured substance and 10 were empty. The Central Revenue Control Laboratory reported on 02.06.2015 that the samples were “Used Oil”, which the department treated as falling under Heading 27101990 and as a restricted item requiring permission or licence. The goods were seized under Section 110 of the Act on 05.06.2015. The petitioner’s statement under Section 108 was recorded on 06.07.2015; its case was that it had ordered bitumen and the supplier had sent used oil by mistake.
Adjudication. On 19.08.2015 the petitioner asked for waiver of the show cause notice and early adjudication. A Show Cause Notice dated 15.09.2015 nevertheless proposed confiscation under Section 111 and penalties under Sections 112, 114A and 114AA. The petitioner replied on 01.10.2015 and was heard through counsel on 08.12.2015. A further hearing fixed for 27.10.2016 was not attended, but by a letter of that date the petitioner said it had already filed its reply and been heard, did not want a further hearing, and asked again for expeditious adjudication. The matter next reached the Additional Commissioner of Customs, ACE, New Delhi, who heard it on 31.01.2023, when the petitioner’s representative again asked for conclusion of the proceedings.
Order-in-Original No. 11/SK/ADC/ACE/2023 was passed on 28.02.2023. It amended the description and classification from “Bitumen” under Heading 27132000 to “Used Oil” under Heading 27101990, recorded that the used oil was non-hazardous, accepted the declared transaction value of Rs.36,73,758/- and held that no duty beyond what had been determined was payable. It confirmed duty of Rs.9,22,210/-, which it recorded as already paid and appropriated. It held the goods liable to confiscation under Sections 111(l) and 111(m), allowed redemption on payment of a fine of Rs.1,83,000/- under Section 125, imposed a penalty of Rs.5,000/- under Section 112(a)(ii) and a further Rs.1,83,000/- under Section 114AA, and dropped the proposed penalty under Section 114A. The Bill of Entry was re-assessed on 29.08.2023.
The interest figure. On seeking clearance the petitioner found an amount described in the Customs EDI System as “interest charges”, about Rs.11,74,806/- on 16.11.2023, Rs.12,10,874/- on 22.02.2024, Rs.13,61,713/- on 28.03.2026 and Rs.15,21,645/- as on 01.05.2026. The petitioner made representations on eight dates between 16.11.2023 and 28.03.2026 and received no effective response. It then filed the writ petition seeking waiver.
Contentions. The petitioner argued that it could not be charged interest for the period during which the Bill of Entry could not be processed because of seizure and pending adjudication; that Section 46(3), which deals with delayed presentation of a Bill of Entry, had no application because the Bill of Entry was presented promptly; and that departmental delay should not prejudice it, relying on the Delhi High Court decisions in 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). The department argued that a statutory appeal lay against the Order-in-Original; that the petitioner had accepted that order and exercised the redemption option; that the EDI figure did not represent a Section 46(3) charge but a consequence of redemption under Section 125; and that, on Navayuga Engineering, an owner who redeems confiscated goods must pay duty and charges and statutory interest on delayed payment of duty.
Holding. The Court partly allowed the petition. It held that the department was not justified in computing interest arising from the confiscation and redemption proceedings from the date of the original assessment in May 2015, set aside the EDI computation to the extent it treated the period before 28.02.2023 as one of delayed payment, and directed a fresh computation of any interest for the period after 28.02.2023, to be issued within four weeks.
3. Legal Analysis
Issue 1: What was the interest in issue? The Court began by defining the controversy, and this step decides the case. The department did not say the EDI figure was a charge for late presentation of the Bill of Entry under Section 46(3). Its case was that the liability arose from confiscation and redemption under Section 125. The Court therefore set the Section 46(3) question aside, observing that the Bill of Entry was filed on 08.05.2015 with no allegation of delay, and that the interest reflected in the EDI System “is sought to be justified on an entirely different basis” (paragraph 22). Having chosen that basis, the department was held to it. Paragraph 35 makes the point directly: the department did not contend that the demand was merely interest on an unpaid amount from the original assessment, and the Court continued: “Once the Respondent chooses to sustain the interest demand on that basis, the date on which the liability arising from the confiscation proceedings was determined assumes significance.”
Issue 2: The effect of Navayuga Engineering. Both sides relied on it; the Court applied it. As the Court read the decision, the owner remains liable for customs duty after redemption; the obligation to pay duty and other charges under Section 125(2) arises when the owner exercises the redemption option and the department accepts it; the duty liability is then assessed under Section 28; and once Section 28 applies, statutory liability for interest on delayed payment of duty is attracted (paragraph 23). From this the Court drew two propositions (paragraph 24): the Section 125(2) liability is a consequence of confiscation and redemption, distinct from the original assessment, and where that liability must be determined through Section 28, the statutory interest provision would follow “in accordance with law”.
The step from these propositions to the result is where the reasoning does its work. If the liability under Section 125(2) is distinct from the original assessment and is determined only on adjudication, interest on it cannot be said to have been accruing since the original assessment. The Court found the Order-in-Original of 28.02.2023 to be the point at which “the consequences flowing from the confiscation proceedings stood determined” (paragraph 30). Before that, the nature, description and classification of the goods were themselves in dispute, the goods were seized, and whether confiscation and redemption would follow was undecided (paragraph 28). On the Court’s analysis, it could not then be said that any sum “determined” later was in delayed payment from May 2015.
Issue 3: The scope of the holding. The Bench was careful. Paragraph 37 states: “This Court is not holding that departmental delay, by itself, extinguishes a statutory liability to pay interest.” It then frames the narrower proposition: “interest cannot be calculated for a period during which the liability sought to be subjected to interest had itself not been determined.” Paragraph 38 draws the line between an amount determined and then left unpaid, where delayed-payment consequences may follow, and an amount that is determined only when the confiscation proceedings end, in which case the earlier period “cannot automatically be treated as a period of delayed payment of that subsequently determined liability.”
The Court also noted the petitioner’s conduct (paragraph 36): it filed a reply, appeared, and repeatedly asked for early adjudication. The judgment presents this as a supporting circumstance, not a condition of the rule, so whether an importer who contributed to delay would fare differently is left open.
The Court gave no relief for the period after 28.02.2023. It said the petitioner “cannot be granted a blanket waiver of interest for the period subsequent to determination of the liability” (paragraph 44), and directed the department to compute interest from that date “strictly in accordance with the applicable statutory provisions” (paragraph 51), taking into account the re-assessment of 29.08.2023 and credit for all payments and appropriations. Paragraph 47 adds a reservation: the reference to the Order-in-Original as the date of determination is confined to the liability arising from the confiscation proceedings, and the Court expressed no opinion on “any independent statutory liability” arising from “a separate and legally recognised default”.
Issue 4: Alternative remedy and the EDI System. The department argued that the petitioner had accepted the Order-in-Original and had an appeal. The Court answered in two steps. First, accepting the order does not mean “every amount subsequently reflected in the EDI System is immune from examination” (paragraph 40); the petition did not reopen classification, confiscation, redemption fine or penalty, and those findings were left undisturbed (paragraphs 39 and 53). Second, in paragraph 49, the alternative remedy did not require dismissal because the question was confined to the period from which consequential interest could be computed, and the “material facts are undisputed and the issue turns upon the application of the statutory scheme to the admitted chronology”. On the EDI System, the Court agreed with the department that it merely reflects liability but added that “The EDI System cannot create a liability which is otherwise not authorised by the Act” (paragraph 41), and treated the continuing growth of the figure as itself indicating computation from an earlier date (paragraph 42).
Issue 5: The Delhi High Court decisions on delay. The Court did not decide whether Swatch Group India and Gala International supported a complete waiver, because the relief flowed from Sections 125 and 28 as explained in Navayuga Engineering (paragraph 48). Those cases were relied on by counsel and not applied.
Critique. The result is sensible and the restraint is commendable, but three points deserve attention.
First, the judgment does not identify the provision that charged the interest. It speaks of “the applicable statutory provisions governing interest” and the “statutory interest provision” without naming it. That leaves the reader unable to test whether the date-of-determination rule is dictated by the text of that provision, or is an inference from Navayuga Engineering and the structure of Sections 125 and 28. A different interest provision with different trigger language might yield a different answer, and the judgment does not say.
Second, the Court observed that the original assessment contained a duty of Rs.9,22,210/-, and the Order-in-Original recorded that duty as already paid and appropriated. The judgment does not explain how that fits with a continuing interest figure, nor what amount, after 28.02.2023, can be “determined” and left unpaid if duty was paid and the only further sums were the redemption fine and penalties, which the judgment does not say were unpaid. The direction to recompute defers that question to the department. It is therefore possible that the recomputation yields little or nothing for the post-2023 period, but the judgment does not say so.
Third, the decision rests partly on a distinction between “determination” and “assessment” that may be harder to maintain where the duty determined on adjudication differs from the duty first assessed, for example on a re-classification that raises the rate. The Court did not need to address that case, because no additional duty was payable. The reasoning should not be assumed to extend to a demand for differential duty under Section 28, where the interest provisions may operate differently and Navayuga Engineering was itself concerned with that machinery.
Amendments. The judgment does not discuss any amendment to Sections 28, 46 or 125 and states no provision text. It applies the statute as the Court understood it in Navayuga Engineering, to a Bill of Entry of 2015. Readers should read the judgment as applying to the provisions in force for that Bill of Entry and the redemption of 2023, and check the current text of the relevant sections before applying it to a later import.
4. Practical Significance
Check how the interest was computed, not just how much. An EDI figure is a computation, not an adjudication. Where goods were seized and held during adjudication, importers and their advisers should ask the date from which interest runs, and by which provision, before paying or contesting. The Court has accepted that a system-generated figure that begins at the original assessment date can be set aside if the liability was determined later.
Anchor the argument to the determination date. The favourable reasoning depends on identifying the order that determined the liability arising from confiscation and redemption. In a similar case, the importer’s submission should isolate that order, the date of the redemption option, and the chronology between assessment and determination, as this petitioner did.
Do not frame the relief as waiver. The petitioner asked for waiver and received recomputation. The Bench said expressly that departmental delay alone does not extinguish interest. A prayer to exclude the pre-determination period, with recomputation thereafter, matches what the Court granted.
Record the importer’s own diligence. The Court noted that the petitioner replied to the show cause notice, appeared, and repeatedly asked for early adjudication. The holding does not depend on this, but importers should keep a written trail of such requests, since the department will argue that the facts differ where the importer contributed to delay.
Choice of remedy. The Court entertained a writ because the challenge was confined to computation on admitted facts, and left the Order-in-Original untouched. An importer who wishes to challenge classification, confiscation, redemption fine or penalty should use the statutory appeal; the judgment does not suggest that a writ can substitute for it. A narrowly framed computation challenge, by contrast, was held to be suitable for writ jurisdiction, but that conclusion depended on undisputed facts and may not be available where the department disputes the chronology.
Post-determination interest and demurrage. The importer remains exposed to interest after 28.02.2023 if the statute attracts it. The Court’s direction to credit all amounts “already paid or appropriated towards customs duty, redemption fine and penalties” means importers should compile a reconciliation of every payment and appropriation before the department issues the fresh computation. The Court did not answer the department’s submission that hardship, detention charges and demurrage cannot ground a waiver, so those charges should not be assumed to fall within this relief.
Precedential weight. This is a decision of a two-judge Bench of the Delhi High Court on a writ petition, fact-specific in its chronology and limited in its holding. The judgment as available does not carry a reportability designation. It is persuasive authority elsewhere, and a department that disagrees may argue that it turns on its facts. Advisers should cite paragraphs 37, 38, 43 and 46 for the operative rule and paragraph 47 for its stated limit.
5. Conclusion
The judgment answers a question that arises whenever goods are detained for years while a customs dispute is decided: from when does interest on the resulting liability run? The Delhi High Court’s answer is that it cannot run from the original assessment of the Bill of Entry if the liability sought to be charged arose only from confiscation and redemption and was determined only by the adjudication order. The Court reached that answer through Sections 125 and 28 of the Customs Act, 1962 as explained in Navayuga Engineering, and was careful to say that it was not holding that departmental delay extinguishes interest.
The case is best read as one about computation. It does not touch classification, confiscation, redemption fine or penalty, and it grants no waiver. It leaves open interest after 28 February 2023. It does not name the interest provision, address a differential-duty demand, or say anything about the GST regime.
Within those limits, the decision gives importers a clear argument against interest figures that begin on the day of assessment when the real liability arose later. It also shows how a court may manage a writ against a system-generated figure: by refusing to review the underlying order, confining relief to the computation, and returning the arithmetic to the department. The unresolved points, above all the provision under which interest is charged and how the rule applies to a determined demand for additional duty, will need to be settled in later cases.
Authorities and Legislation
Applied by the Court:
- Navayuga Engineering Co. Ltd. v. Union of India, 2024 INSC 547 (Supreme Court) — liability under Section 125(2) of the Customs Act, 1962 on redemption, and its assessment under Section 28; cited in the judgment as relied on by the department and applied by the Court.
Cited by counsel and not examined for the relief granted:
- Swatch Group India Pvt. Ltd. v. Union of India, 2023 SCC OnLine Del 4938 (Delhi High Court).
- Gala International Pvt. Ltd. v. Additional Director General, Directorate of Revenue Intelligence, Delhi, 2023 SCC OnLine Del 6073 (Delhi High Court).
Legislation:
- Sections 28, 46(3), 108, 110, 111(l) and (m), 112(a)(ii), 114A, 114AA and 125, Customs Act, 1962 — https://www.indiacode.nic.in/
- Customs Tariff Headings 27132000 and 27101990.
- Judgment text: https://indiankanoon.org/doc/120072957/
This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.