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TMI Blog2025 (4) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ular No. 16/ 2023-Customs dated 7th June, 2023 issued by the Central Board of Indirect Tax and Customs (herein after referred to as "CBIC") to the extent it purports to levy interest upon the IGST payment. 3. The Petitioner is, inter alia, engaged in the manufacture, export and supply of Linear Alkyl Benzene Sulphonic Acid (herein after referred to as "LABSA"). In order to manufacture LABSA, the Petitioner procures input materials such as Linear Alkyl Benzene (herein after referred to as "LAB") domestically as well as from foreign vendors. Section 12 of the Customs Act 1962 (herein after referred to as "the Customs Act") is the charging Section which stipulates that duties of customs shall be levied on all goods imported into India or exported out of India at such rates as may be specified under the Tariff Act. Along with Basic Customs Duty (herein after referred to as "BCD"), Additional Customs duties ("CVD" and "SAD"), Anti-dumping duty and Safeguard duty were also levied by the Customs Act, read with the Tariff Act. 4. With the introduction of GST with effect from 1st July, 2017, Additional Customs duties were subsumed into the newly introduced Integrated Goods and Services Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 13th October, 2017. 12. Subsequently, the said condition inserted by Notification No. 79/ 2017 dated 13th October, 2017 was omitted by Notification No. 1 of 2019-Customs dated 10th January, 2019 issued by CBIC. 13. Thus, for the period from 13th October, 2017 to 9th January, 2019, the pre-import condition was to be mandatorily complied by the importer to be entitled to exemption from payment of IGST. 14. During the period 13th October, 2017 to 9th January, 2019, in terms of the aforesaid Advanced Authorizations, the Petitioner and most of the similarly placed Advanced Authorization holders had imported various exempt materials claiming the benefit of Notification No. 18 of 2015 - Customs dated 1st April, 2015 (as amended) without payment of IGST leviable under Section 3 (7) of the Tariff Act, albeit in contravention of the pre-import condition. 15. During the period 27th October, 2017 to 27th March, 2018, the Petitioner had imported input materials, namely - LAB, amounting to Rs. 39,93,06,014/- under the cover of eleven Advanced Authorization Licenses. Out of the total input materials amounting to Rs. 39,93,06,014/- imported under valid Advanced Authorization Licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the decision of the Hon'ble Supreme Court, a Show Cause Notice dated 10th October, 2019 was issued to the Petitioner, calling upon it to show cause as to why: (i) Cumulative Duty of Customs amounting to Rs. 7,18,75,084/- in the form of IGST, saved in course of imports of the goods through ports of Mumbai, Mundra and Kandla under Advance Authorization licenses should not be demanded and recovered under Section 28 (1) of the Customs Act for the period 27.10.2017 to 27.03.2018. (ii) The goods having assessable value of Rs. 33,05,86,230/- should not be held liable for confiscation under Section 111 (m) of Customs Act. (iii) Interest should not be held liable to be demanded and recovered under Section 28AA of the Customs Act. (iv) Penalty should not be imposed under Section 112 (a) of the Customs Act (v) Bonds executed at the time of import should not be enforced in terms of Section 143 (3) of the Customs Act for the recovery of Customs duty of Rs. 7,18,75,084/- and interest thereon. 23. The Petitioner filed its reply to the show cause notice by a letter dated 12th December, 2019 and denied all the allegations made therein. 24. Thereafter, a personal hearing opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded that all the imports made under the Advance Authorization Scheme on or after 13th October, 2017 and up to and including 9th January, 2019, which could not meet the pre-import condition, may be regularized by making payments as prescribed in the Customs Circular No. 16/2023-Customs dated 7th June, 2023. 28. Thereafter, the show cause notice was taken out of the call book and a personal hearing was scheduled on 31st August, 2023 before Respondent No. 2 wherein it was, inter alia, submitted on behalf of the Petitioner that no interest could be levied as there is no machinery provision under the Tariff Act to levy interest on IGST which is payable under Section 3 (7) of the Tariff Act. Reliance in this regard was placed on the decision of this Court in Mahindra and Mahindra v/s. Union of India & Others - 2022 (10) TMI 2012, as confirmed by the Hon'ble Supreme Court in its Order in Union of India & Others v/s. Mahindra & Mahindra Ltd., 2023 (8) TMI 135 - SC, by which the SLP against the Judgement of this Court was dismissed. 29. After the personal hearing, the Petitioner filed written submissions on 14th October, 2023. 30. Thereafter, Respondent No. 2, by a letter dated 15th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Order dated 1st August, 2024, by Finance Act (No. 2) of 2024, Section 3 (12) of the Tariff Act was amended prospectively with effect from 16th August, 2024, to inter alia include the applicability of interest and penalty provisions of the Customs Act to the Tariff Act. 36. It is in these circumstances that the Petitioner has filed the present Writ Petition. 37. Mr. Motwani, the learned Counsel appearing on behalf of the Petitioner, submitted that the issue regarding levy of interest and penalty in respect of duties levied by Section 3 of the Tariff Act is no longer res integra in view of the decision of this Court in the case of Mahindra & Mahindra Limited (supra), which has been upheld by the Hon'ble Supreme Court. Mr. Motwani submitted that, in the said case, this Court, after going through the provisions of Section 3 of the Tariff Act regarding levy of additional duty equal to excise duty and Section 3A of the Tariff Act dealing with special additional duty as applicable at the relevant time, has held that when no specific reference was made to interest and penalty under Sections 3 (6) and 3A (4) of the Tariff Act, imposing interest and penalty would be without th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. Accordingly, once the Review Petition was dismissed, the Respondent ought to have followed the judgement of this Court in the case of Mahindra & Mahindra Limited (supra). In support of this proposition, Mr. Motwani relied upon the judgement of this Court in Shreenathji Logistics v/s. Union of India 2022 (11) TMI 709, Bombay High Court. 42. Mr. Motwani then submitted that Respondent No. 2 erred in relying upon the decision of the CESTAT, Kolkata, in the case of Texmaco Rail Engineering Limited (Appeal No. 75921 of 2014) to confirm the levy of interest. Mr. Motwani submitted that the CESTAT, Kolkata, decided the same issue of levy of interest on duties leviable under Section 3 of the Tariff Act, which was settled by the jurisdictional High Court in the case of Mahindra & Mahindra Limited (supra). He submitted that the decision of this Court in Mahindra & Mahindra Limited (supra) was binding on Respondent No. 2. Despite the same, Respondent No. 2 chose to follow the decision of CESTAT, Kolkata, which is not acceptable and is contrary to the principle of judicial discipline. 43. Mr. Motwani further submitted that Respondent No. 2 wrongly distinguished the ratio laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director General of Foreign Trade, by Notice No. 7 of 2023-24, dated 8th July, 2023, had clarified that all imports made under Advance Authorization Scheme on or after 13th October, 2017 and upto and including 9th January, 2019, which could not meet the pre-import condition, may be regularized by making payments as prescribed in Circular No. 16 of 2023-Customs, dated 7th June, 2023. Mr. Motwani submitted that, considering the same, no confiscation or redemption fine is imposable. He submitted that the said Circular does not mention about demanding any redemption fine. 49. Mr. Motwani further submitted that, in the present case, once the Petitioner pays the IGST, it would amount to the Petitioner not having availed the benefit of exemption and the issue would be regularized. Therefore, the provisions of Section 111 (o) of the Customs Act will not be attracted. Consequently, no fine and penalty would be recoverable from the Petitioner. 50. In conclusion, Mr. Motwani submitted that, for all the aforesaid reasons, the present Writ Petition ought to be allowed. 51. In reply, Mr. Ram Ochani, the learned Counsel appearing on behalf of Respondent No. 3, submitted that the decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court was interpreting Sections 3 (6) and 3A (4) of the Tariff Act, which are pari materia to the unamended Section 3 (12) of the Tariff Act, and which read as under:- "3.(6):- The provisions of the Customs Act, 1962 (52 of 1962), and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act." "3A(4):- The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to refunds and exemptions from duties shall, so far as may be apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act." 59. In Mahindra & Mahindra Limited (supra), this Court held as under:- "26:- Sub-section (6) of Section 3 and sub-section (4) of Section 3A of the Customs Tariff Act, 1975 does not provide for any interest or penalty. Neither Section 90 of the Finance Act, 2000 provides for the same. Therefore, no interest and penalty can be levied on the portion of payment pertaining to surcharge, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional duty equal to excise duty or SAD, i.e. special additional duty to be levied at a rate having regard to the maximum sales tax or local tax or any other charges leviable on a like article or surcharge to be levied under the Finance Act, 2000. 28:- A perusal of sub-section (6) of Section 3 and sub-section (4) of Section 3A of the Customs Tariff Act, 1975 or Section 90 of the Finance Act, 2000 show that the breach of the provisions has not been made penal or an offence. It only provides for application of the procedural provisions of the Customs Act, 1962 and the rules and regulations made thereunder so far as it apply to the duty chargeable under Section 3 or Section 3A of the Customs Tariff Act, 1975 or levy and collection under Section 90 of the Finance Act, 2000. As stated earlier, if penalty or interest has to be levied on CVD or SAD or surcharge, the authority has to be specific and explicit and expressly provided. The Customs Tariff Act, 1975 provides for additional Customs duty and special additional duty but creates no liability for penalty or interest for additional duty or special additional duty. Likewise the Finance Act, 2000 under Section 90. That being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (12) use the term "including" and the same implies that the provisions of the Customs Act will be made applicable to the Tariff Act. As can be seen from the Judgement of this Court in Mahindra & Mahindra Limited (supra), Sections 3(6) and 3A(4) of the Tariff Act, which were considered by this Court in the said Judgement, also use the word "including". Despite the same, this Court came to the conclusion that, since there was no specific reference to interest and penalties, imposing interest and penalties would be without the authority of law. 63. In these circumstances, in our view, the submissions of the Respondent, based on the use of the word "including" in Section 3 (12) of the Tariff Act, cannot be accepted. 64. All this apart, further, the Respondents, by letter dated 15th January, 2024 addressed to the Petitioner, confirmed that the matter was being transferred to the Call Book in view of the pendency of the Review Petition before the Hon'ble Supreme Court in the case of Mahindra & Mahindra Limited (supra). This clearly shows that the Respondent also believed that the Judgement of this Court in Mahindra & Mahindra Limited (supra) had a direct bearing on the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In our view, the said finding of Respondent No. 2 is totally erroneous. As held herein above by us, the Judgement of this Court in Mahindra & Mahindra Ltd., (supra) 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. 66. Further, as far as the applicability of Section 3 (12), after its amendment by Finance (No. 2) Act, 2024, dated 16th August, 2024, is concerned, it would be appropriate to first refer to the provisions of the amended Section 3 (12) of the Tariff Act. Amended Section 3 (12) of the Tariff Act reads as under:- "12:- The provisions of the Customs Act, 1962 (52 of 1962) and all rules and regulations made thereunder, including but not limited to those relating to the date for determination of rate of duty, assessment, non-levy, short-levy, refunds, exemptions, interest, recovery, appeals, offences and penalties shall, as far as may be, apply to the duty or tax or cess, as the case may be, chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1944 and the rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be apply in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in sub-section (1)." 6. A perusal of the said provision shows that the breach of the provision of the Act has not been made penal or an offence and no power has been given to confiscate the goods. It only provides for application of the procedural provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder. It is no longer res integra that when the breach of the provision of the Act is penal in nature or a penalty is imposed by way of additional tax, the constitutional mandate requires a clear authority of law for imposition for the same. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. The authority has to be specific and explicit and expressly provided. The Act created liability for additional duty for excise, but created no liability for any pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndantly clear that Section 3 (12) of the Tariff Act, as amended by Finance (No. 2) Act, 2024 dated 16th August, 2024, would apply only prospectively and would not be applicable to the case of the Petitioner at all. 70. In our view, for all the reasons stated hereinabove, the impugned Order, to the extent that it levies interest and penalty, is without the authority of law and is liable to quashed and set aside. 71. As far as Circular No. 16/2023-Customs dated 7th June, 2023 is concerned, it seeks to recover interest along with IGST. The relevant part of the said Circular reads as under:- "(a):- for the relevant imports that could not meet the said pre-import condition and are hence required to pay IGST and Compensation Cess to that extent, the importer (not limited to the respondents) may approach the concerned assessment group at the POI with relevant details for purposes of payment of the tax and cess along with applicable interest." 72. In our view, for all the reasons stated herein above, the said Circular, to the extent that it seeks to recover interest, is bad in law. 73. As far as redemption fine imposed by the impugned Order is concerned, the same is demanded in lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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