2024 (10) TMI 732 - AT - Customs

Refund of amount of interest paid alongwith the amount of IGST - non-fulfilment of pre-import condition as the goods imported under Advance Authorizations - wrongful availment of benefit of IGST exemption for import under mistake of wrongly interpreting the definition of pre-import condition - HELD THAT - It is clear that the appellant initially claimed IGST exemption, however, made the payment thereof at a subsequent later stage. This issue before the adjudicating authority below had not yet attained the finality as the Revenue s appeal against the decision of Hon ble Gujarat High Court in M/s. Maxim Tubes 2019 (2) TMI 1445 - GUJARAT HIGH COURT was pending adjudication. Subsequent to the order under challenge the Supreme Court decision in that respect has been announced on 28.04.2023 setting aside the said order of Gujarat High Court. The pre-import condition in the Notification No.79/2017 dated 13.10.2017 has been held to be valid and intra vires. Also it is an admission of appellant itself that pre-import conditions were not fulfilled by the appellant. Though the plea taken to be a bonafide mistake but today it stands established that appellant was not entitled for availing IGST exemption under Advance Authorization. The said amount of IGST was paid voluntarily at a later date subsequent to the re-assessment of 18 Bill of Entries. Coming to the decision in the case of Mahindra Mahindra 2022 (10) TMI 212 - BOMBAY HIGH COURT , it is held that present is the case where interest on late payment of IGST is prayed to be refunded whereas in the said case (Mahindra Mahindra) the refund claim was filed about amount of interest paid alongwith additional duty of customs which was paid at the date later than the relevant date. IGST on imports is not additional duty of customs hence the logic arrived at by Bombay High Court (affirmed by Hon ble Supreme Court) is not applicable to the interest on IGST. The opinion is based on following discussion on statutory provisions. The liability of the appellant to pay interest on delayed payment of IGST was automatic. The appellant is not entitled to claim the refund of the said amount of interest paid along with amount of IGST. The refund claim is therefore held to have been rightly rejected - Appeal dismissed.

Summary

Issues Involved:

1. Whether the appellant was liable to pay interest on the amount of IGST paid voluntarily due to misinterpretation arising out of an ambiguous Notification.
2. Whether the interest paid by the appellant is refundable.

Issue-wise Detailed Analysis:

1. Liability to Pay Interest on IGST:

The appellant initially claimed an exemption from IGST under Notification No.18/2015, which was later amended to include a "pre-import condition" via Notification No.79/2017. The appellant self-assessed and realized that they had not complied with this condition, leading to a request for re-assessment of the Bills of Entry and subsequent payment of IGST along with interest. The core issue was whether the appellant was liable to pay interest on this delayed IGST payment, given that the non-payment was due to a misinterpretation of the Notification.

The Tribunal observed that the appellant had voluntarily paid the IGST after realizing their non-compliance with the pre-import condition. The Supreme Court's decision in the case of Cosmo Films Ltd. upheld the validity of the pre-import condition, reinforcing that the appellant was not entitled to the IGST exemption initially claimed. Therefore, the liability to pay interest was automatic, as per the statutory provisions, irrespective of the appellant's claim of a bona fide mistake.

2. Refundability of Interest Paid:

The appellant sought a refund of the interest paid on the IGST, arguing that the exemption Notification was ambiguous and had been declared ultra vires by the Gujarat High Court in the case of Maxim Tubes. However, the Supreme Court later set aside this decision, affirming the validity of the pre-import condition. The Tribunal noted that the interest liability arises automatically upon delayed payment of IGST, as established in previous legal precedents, including the decision of the Karnataka High Court in Commissioner of Customs, Bangalore vs. Pierre Colsun Inc.

The Tribunal further distinguished the present case from the Mahindra & Mahindra case, where the refund of interest was related to additional customs duty, not IGST. It emphasized that IGST is not an additional duty of customs but a tax on inter-state supply, including imports, as per Article 269A of the Constitution. Consequently, the interest on delayed IGST payment is governed by the same principles as for inter-state supplies within India, where interest is payable under Section 50 of the CGST Act.

Conclusion:

The Tribunal concluded that the appellant's liability to pay interest on the delayed IGST payment was automatic and not subject to refund. The appeal was dismissed, upholding the order under challenge, as the appellant was not entitled to claim a refund of the interest paid along with the IGST. The decision was pronounced in the open Court on 14/10/2024.