Leben Laboratories PVT LTD vs. Union Of INDIA Thr Ministry Of Financeand Ors

Held

The Court held that the levy, collection, and retention of interest on IGST paid on imports, as challenged by the petitioner, was without authority of law. The Court relied on its previous decisions in Mahindra & Mahindra Ltd. Vs. Union of India and A. R. Sulphonates Pvt. Ltd. Vs. Union of India, which established that the Customs Tariff Act, 1975, lacked provisions to levy interest on belated payment of additional duties of customs during the relevant period. Furthermore, the Court considered the Supreme Court's decision in Goodluck India Ltd. Vs. Union of India, which held that Rule 96(10) of the CGST Rules is deemed to have been omitted since its inception. Consequently, the Court found no legal requirement for the petitioner to repay the additional duties of customs in March/April 2022, and therefore, the question of levying interest on such repayment did not arise. The Court directed the proper authorities to process the petitioner's application for refund of the interest amount and refund it expeditiously.

Facts

The petitioner, Leben Laboratories Pvt. Ltd., imported raw materials under the Advance Authorisation Scheme, claiming exemption from additional duties of customs under Section 3(7) of the Customs Tariff Act, 1975. These materials were used for manufacturing exported products. The petitioner paid IGST on exports and claimed refunds. Between October 4, 2018, and November 27, 2020, the petitioner made 25 such imports. Due to Rule 96(10) of the CGST Rules, which required paying back one benefit if both import exemption and export refund were claimed, the petitioner opted to repay the additional customs duties on imports. While repaying these duties, the petitioner paid approximately Rs. 43 lakhs as interest. Subsequently, following a High Court ruling that struck down the levy of interest on additional duties of customs, the petitioner sought a refund of the interest paid.

Key Issues

1. Whether the levy, collection, and retention of interest on IGST paid on imports, in terms of Section 3(7) read with the unamended Section 3(12) of the Customs Tariff Act, 1975, for the period prior to August 16, 2024, is without authority of law and in violation of Article 265 of the Constitution of India? Petitioner's arguments: The petitioner contended that this Court in Mahindra & Mahindra Ltd. Vs. Union of India and A. R. Sulphonates Pvt. Ltd. Vs. Union of India has held that no provisions under the Customs Tariff Act, 1975, empowered Customs Authorities to levy and collect interest on belated payment of additional duties of customs during the relevant period. Respondents' arguments: The respondents argued that the refund application was not made to the proper officer. They also submitted that the decision in Mahindra & Mahindra Ltd. Vs. Union of India may not apply to the present case, and therefore, there is no question of processing the refund or granting it.