2025-VIL-328-BOM-CU
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CUSTOMS High Court Cases

Customs/IGST – Challenge to Circular No. 16/2023-Customs dated 07.06.2023, Levy interest on IGST payable under Section 3(7) of the Customs Tariff Act, 1975, Applicability of judgement in Mahindra & Mahindra Limited case - Petitioner had applied for and obtained Advance Authorization Licenses to import input materials duty-free. During the period from 13th October 2017 to 9th January 2019, when the pre-import condition was applicable, the petitioner imported input materials without paying IGST, in contravention of the condition - Show cause notice was issued to the petitioner demanding IGST, interest, penalty and redemption fine - Whether the demand for interest, penalty and redemption fine on the IGST payable under Section 3(7) of the Customs Tariff Act is sustainable - HELD - In Mahindra & Mahindra Limited, this Court, after going through the provisions of Section 3 (6) of the Tariff Act and Section 3 A (4) of the Tariff Act as applicable at the relevant time, held that no specific reference was made to interest and penalties in Sections 3(6) and 3A (4) of the Tariff Act, which are substantive provisions and, therefore, imposing interest and penalty would be without the authority of law - In the present case, the levy of IGST is under Section 3(7) and Section 3(12) of the Tariff Act which is pari materia to Sections 3(6) and 3A(4) of the Tariff Act as referred to in the case of Mahindra & Mahindra Limited. In these circumstances, the said decision is squarely applicable to the facts of the present case - When the provisions of the Customs Tariff Act under Section 3(12) (which is pari materia to Sections 3(6) and 3A(4) considered in the Mahindra & Mahindra case) do not specifically provide for interest and penalty, the same cannot be imposed - the amended Section 3(12), which now includes provisions related to interest and penalties, is prospective in nature and would apply only from 16th August 2024 onwards - Regarding the redemption fine, since the amended Section 3(12) is prospective, the confiscation provisions would not apply to the present case - It is declared that Circular No.16 of 2023-Customs dated 7th June, 2023, to the extent that it purports to levy interest upon the IGST payment, is beyond the provisions of the Customs Tariff Act, 1975 and is bad in law - the demand for interest, penalty and redemption fine is quashed and set aside - It is declared that the amendment to the provisions of Section 3 (12) of the Customs Tariff Act, 1975 by Finance (No.2) Act, 2024 dated 16th August, 2024 is prospective in nature and is applicable only from 16th August, 2024 onwards – The writ petition is allowed - Principles of judicial discipline - Respondent No.2 erred in relying upon the decision of the CESTAT, Kolkata in the case of Texmaco Rail Engineering Limited to confirm the levy of interest. Respondent No.2 ought to have followed the decision of this Court in the case of Mahindra & Mahindra Ltd. as this Court was the jurisdictional High Court, and not on the decision of the CESTAT, Kolkata. The decision of this Court was binding on Respondent No.2. Despite the same, Respondent No.2 erroneously decided to follow the decision of the CESTAT, Kolkata, which is totally contrary to the principles of judicial discipline. Further, in this context, Respondent No.2 sought to distinguish the ratio laid down by this Court in Mahindra & Mahindra Ltd. only on the ground that in Mahindra & Mahindra Ltd., this Court was concerned with a settlement case, which was a variation/ deviation from the applicability of the routine structural legal process and, therefore, not applicable. The said finding of Respondent No.2 is totally erroneous as the Judgement of this Court in Mahindra & Mahindra Ltd. squarely applies to the facts of the present case and it makes no difference to the ratio of the said case that it was decided in a settlement case.
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