The Bombay High Court has held that interest and penalty are not leviable on IGST not paid on imports, before the amendment to Section 3(12) of the Customs Tariff Act, 1975 by the Finance (No. 2) Act, 2024. The Court relied upon its earlier decision in the case of Mahindra & Mahindra which was upheld by the Supreme Court.
It noted that the unamended Section 3(12), which was applicable to the levy of IGST, was pari materia to Sections 3(6) and 3A(4) of the Customs Tariff Act as referred to in the case of Mahindra & Mahindra. The decision in Mahindra & Mahindra had earlier held that since no specific reference was made to interest and penalties in Sections 3(6) and 3A(4), which were substantive provisions, imposing interest and penalty would be without the authority of law.
Similarly, the Department’s submissions based on the use of the word ‘including’ in Section 3(12) of the Tariff Act, thus implying that the other provisions of the Customs Act were also applicable, were also found to be not acceptable.
The fact that the Department had itself transferred the matter to Call-book in view of pendency of the Review Petition before the Supreme Court in the earlier case, also went against the Department here. The High Court in A.R. Sulphonates Private Limited v. Union of India also held that the amendment in Section 3(12) was prospective in nature and would apply only with effect from 16 August 2024.
Further, CBIC Circular No. 16/2023-Cus., to the extent that it sought to recover interest in case of violation of ‘pre-import’ condition of advance authorization scheme, was found to be bad in law.