Good News! No interest or penalty is to be levied on late payment of the surcharge, CVD, SAD and IGST!

[Navjot Singh]

The judgment rendered by the Bombay High Court in the case of MAHINDRA & MAHINDRA LTD. (AUTOMOTIVE SECTOR) , VERSUS THE UNION OF INDIA, THE SETTLEMENT COMMISSION, ADDITIONAL BENCH, CUSTOMS & CENTRAL EXCISE, MUMBAI, THE COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI, THE ADDITIONAL DIRECTOR GENERAL, DGCEI, MUMBAI - 2022 (10) TMI 212 - BOMBAY HIGH COURT establishes that penalties or interest on additional customs duty (CVD) and special additional duty of customs (SAD), or surcharges, which are not intrinsically linked to the basic customs duty, cannot be imposed without explicit substantive provision.

Key Observations by the Court:

1. The imposition of penalties, when treated as additional taxes, necessitates a clear legal authority.
2. Section 28AB of the Customs Act, 1962, pertaining to the levy of interest on delayed payment of duty, exclusively applies to the basic customs duty under Section 12 of the Customs Act, 1962. The Finance Act, 2000, and the Customs Tariff Act, 1975 do not incorporate the provisions of the Customs Act, 1962, regarding the imposition of interest on delayed payment of duty.
3. In the case of INDIA CARBON LTD. VERSUS STATE OF ASSAM - 1997 (7) TMI 566 - SUPREME COURT the Supreme Court ruled that interest on delayed payment of tax can only be levied and charged if the statute that levies and charges the tax explicitly provides for such imposition.

In the aftermath of this judgment, the Revenue filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court, which was subsequently rejected on grounds of lack of merit. (UNION OF INDIA & ORS. VERSUS MAHINDRA AND MAHINDRA LTD. - 2023 (8) TMI 135 - SC ORDER)

Impact of the Judgment

1. The comprehensive nature of the judgment provides essential insights into the levy of penalties and interest, thereby proving valuable in ongoing litigation.
2. Subject to the constraints of the time period limitation, assessees may submit refund applications if they have remitted the said amounts.
3. The ratio decidendi of the judgment applies squarely to the imposition of interest/penalty on late payment of IGST.