Legal principle

The amendment to Section 3(12) of the Customs Tariff Act, 1975 by the Finance (No. 2) Act, 2024 — importing the Customs Act's interest, offence and penalty provisions into IGST levied under Section 3(7) — is prospective from 16 August 2024, so for earlier imports only the IGST itself is recoverable and no interest, confiscation, redemption fine or penalty can be imposed.

Court decision

The Division Bench (per Firdosh P. Pooniwalla, J., with B. P. Colabawalla, J.) partly allowed the petition in favour of the Petitioner: it declared Circular No. 16/2023-Customs bad in law to the extent it purports to levy interest on the IGST payment; quashed the order dated 1 August 2024 to the extent it recovers interest, confiscates goods, and imposes redemption fine and penalty; and declared that the amendment to Section 3(12) of the Tariff Act by the Finance (No. 2) Act, 2024 is prospective, applying only from 16 August 2024. The Petitioner remains liable to pay the IGST itself, which regularizes the imports; Rule was made absolute with no order as to costs.

Facts

A. R. Sulphonates Pvt. Ltd., a manufacturer-exporter of LABSA, imported Linear Alkyl Benzene (LAB) worth Rs. 39,93,06,014 between 27 October 2017 and 27 March 2018 at Mumbai, Mundra and Kandla ports under eleven Advance Authorization Licenses, claiming IGST exemption under Notification No. 18/2015-Customs (as amended) without complying with the then-mandatory pre-import condition. After a DRI investigation (including a Section 108 statement of its GM), a Show Cause Notice dated 10 October 2019 proposed recovery of Rs. 7,18,75,084 as IGST under Section 28(1) of the Customs Act, confiscation under Section 111(m), interest, penalty and redemption fine. The Commissioner of Customs (Adjudication), Mumbai, by order dated 1 August 2024, demanded interest, penalty and redemption fine in lieu of IGST; the Petitioner also challenged CBIC Circular No. 16/2023-Customs dated 7 June 2023 insofar as it levies interest on such IGST payment.

Key provisions

• Section 3(12), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 3A(4), Customs Tariff Act, 1975 — Omitted [****]
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 143(3), Customs Act, 1962 — Power to allow import or export on execution of bonds in certain cases
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 3, Customs Act, 1962 — Classes of officers of customs
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 28(8), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 5, The Integrated Goods and Services Tax Act, 2017 — Levy and collection.
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 9(8), Customs Tariff Act, 1975 — Countervailing duty on subsidized articles