Ipca Laboratories LTD. vs. Union Of INDIA Through The Jt. Secretary, Dept. Of Revenue, Ministry Of Finance And Ors

Facts

The petitioner, IPCA Laboratories Ltd., filed a writ petition challenging the collection of interest on Integrated Goods and Services Tax (IGST) levied under Section 3(7) of the Customs Tariff Act, 1975, for the import of goods between October 2017 and March 2018. The petitioner contended that there was no specific charging provision under the Customs Tariff Act, 1975, or the Customs Act, 1962, that permitted the imposition of interest on such IGST. The respondents, Union of India and others, attempted to justify the levy of interest through an Affidavit-in-Reply. The matter had previously been decided by the Bombay High Court in similar cases.

Held

The Court held that the issue of levying interest on IGST on imported goods was no longer res integra, citing previous decisions of the Bombay High Court. Specifically, the Court referred to its own judgment in Mahindra & Mahindra Ltd. (Automotive Sector) Vs. The Union of India & Ors. and another decision dated 1st September 2026 in Leben Laboratories Pvt. Ltd. Vs. Union of India & Ors. (Writ Petition No. 15373 of 2025). Based on these precedents, the Court found that the writ petition deserved to be allowed. The operative directions included that if the petitioner makes an application to the proper authority for a refund of the interest amount, such application should be considered expeditiously, within 16 weeks from its receipt. The Court also noted that it would be incumbent upon the petitioner to satisfy the authority that the component of interest had not been passed on to buyers or customers.

Key Issues

1. Whether the levy of interest on IGST collected on the import of goods under Section 3(7) of the Customs Tariff Act, 1975, for the period October 2017 to March 2018, is legally sustainable in the absence of a specific charging provision under the Customs Tariff Act, 1975, or the Customs Act, 1962? Petitioner's Contention: The petitioner argued that the collection of interest was illegal as there was no statutory provision authorizing such a levy on IGST on imported goods. They relied on previous decisions of the Bombay High Court in similar matters. Respondents' Contention: The respondents, through their Affidavit-in-Reply, attempted to justify the levy of interest on IGST. They did not explicitly name any specific provisions or precedents in the judgment, but their stance was to defend the action of collecting interest.