AUGUST 19, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

THE  CESTAT has passed Final Order No.. 58005-58006 /2024 dt 12-08-2024 -  2024-TIOL-774-CESTAT-DEL in the case of

M/s MAYUR UNIQUOTERS LIMITED Jaipur Vs Commissioner Jaipur Customs Appeal No. 51841 of 2021 arising out of Order in Appeal No. 103(SM) CUS/JPR/2021 dated 26.07.2021 passed by the Commissioner (Appeals) Central Excise & CGST, Jaipur

And

M/s JLC ELECTROMET PRIVATE LIMITED, Jaipur Vs Commissioner Jaipur Customs Appeal No. 51895 of 2021 arising out of Order in Appeal No. 80(SM)CUS/JPR/2021 dated 22.06.2021 passed by the Commissioner (Appeals) Central Excise &CGST, Jaipur

on the issue of refund of the interest which they had paid on the IGST on imported goods which they paid with delay. This Final Order is against the two appeals filed by the importer appellant

BRIEF FACTS

2. Both the Appellant importers had imported goods under advance authorizations issued by the Directorate General of Foreign Trade DGFT availing the benefit of Notification No. 18/2015-Cus dated 01.04.2015, as amended by Notification no. 79/2017-Cus dated 13.10.2017. They cleared goods on self-assessment without any re-assessment by the officers. Later, they realized that the exemption from IGST available under the notification was subject to pre-import condition, which they had not fulfilled. Therefore, they re-determined the liability on the imports and paid the IGST on the basis of their own assertion along with interest. Thereafter they filed refund claims for refund of the interest which they had paid asserting that no interest was payable on the IGST on imported goods even if the IGST was paid after delay. This claim for refund was rejected by the Joint Commissioner and such rejection was upheld by the Commissioner (Appeals) by the impugned orders. Aggrieved of the decisions of the Commissioner Appeals, the Appellant importers filed appeals with Hon'ble CESTAT

3. Arguments of the appellant are as follows:

- i. The IGST on the imported goods was paid under section 3(3) of the Customs Tariff Act, 1975. The sub section (12) of section 3(3) of the Customs Tariff Act, 1975. does not specifically demand for payment of interest on delayed payment of IGST as specifically provided for safeguard duty referred to in sections 8B and 8C;the countervailing duty referred to in section 9; and the anti-dumping duty referred to in section 9A. There was no power under the law to impose interest on additional duty of customs in the form of IGST.

- ii. The Hon'ble Bombay High Court in the Case of Mahindra and Mahindra Limited vs. Union of India - 2022-TIOL-1319-HC-MUM-CUS held that there is no mechanism to pay interest or penalty on delayed payment of Cess or special additional duty. The Hon'ble Supreme Court, vide its order dated July 28, 2023, has dismissed the Special Leave Petition (‘SLP') filed by the Revenue Department against the Bombay High Court's decision

- iii. Therefore, the appellants were not required to pay interest at all on the delayed payment of IGST which must be refunded to them. Refunds have been wrongly denied by the lower authorities

4. Arguments of the Authorised Representative for the Department are as follows:

- i. The appellants had voluntarily requested for re-assessment and paid the IGST and interest as applicable. The interest was due to the delay in payment of IGST in the Bills of Entry. After depositing the IGST along with interest the appellants availed credit of said IGST. It is well settled that where tax liability arises, applicable interest automatically becomes payable.

- ii. The appellants did not file any appeal against the re-assessment nor did they pay interest on IGST under protest.

- iii. CBIC's circular no. 16/2023 dated 07.06.2023 categorically directs that applicable IGST must be recovered along with interest

- iv. Interest is a consequence of delayed payment of duty or tax. As held by the Hon'ble Supreme Court vide its order dt 23-07-2024 - 2024-TIOL-64-SC-CUS in case of M/s Navyuga Engineering co Ltd Vs Union of India & Others in Civil Appeal No. 1024/2014 once section 28 applies for determination of duty obligation arising under section 125(2) of the Customs Act, the interest on delayed payment of duty arises under section 28AB of the Customs Act, 1962.

5 The issues involved in this case are discussed as follows:

6. APPELLANTS CLAIMING REFUND ON THE BASIS OF A JUDGMENT PASSED IN THE CASE OF SOME OTHER IMPORTER

6.1 In the instant case when the nature of refund proceedings are examined, it is clear that these Refunds are in the nature of execution proceedings and do not determine the mutual rights and liabilities between the Importer and the Revenue. They are simple cases refunding the money which is due to the assessee as per the assessment.The Hon'ble CESTAT has held (ref para 9 of this Order) that " If a judgment is delivered by a court in a case with respect to an assessee, it does not automatically increase or reduce the liabilities of every other assessee who is similarly placed ."

6.2 This is on the basis of Hon'ble Supreme Court judgement in the case of MAFATLAL INDUSTRIES LTD. Versus Union of India - 2002-TIOL-54-SC-CX-CB [19-12-1996], where in in the para 99(iv) of the judgement it is held that

"(iv) It is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax………"

Thus reliance on Hon'ble Bombay High Court in the Case of Mahindra and Mahindra Limited vs. Union of India 2022-TIOL-1319-HC-MUM-CUS does not support Appellants' arguments

7. CLAIM REFUND OF THE INTEREST PAID BY IMPORTER WITHOUT ASSAILING THE ASSESSMENT ITSELF

7.1 As per Section 28(1)(b) of Customs Act 1962, an importer can pay differential duty along with interest on its own and in such cases, the proper officer cannot issue an SCN. The appellants, realizing that they needed to pay the IGST, paid it under Section 28(1)(b) along with interest. Therefore, no SCN was issued by the proper officer and the modification of the original self-assessment attained finality. This assessment has not been assailed before any higher judicial forum.

7.2 The Hon'ble Supreme Court judgement in the case of  ITC Limited vs. Commissioner of Customs, Kolkata, -  2019-TIOL-418-SC-CUS-LB,  has held that the appellants cannot claim refund without assailing the assessment.

The Hon'ble CESTAT has held (ref para 10 of this Order) that "As per the ratio laid down in ITC Ltd., the appellants cannot claim refund without assailing the assessment."

8. NATURE OF THE IGST CHARGED ON THE GOODS IMPORTED INTO INDIA

8.1 The IGST on the imported goods is levied on supply in the course of import under section 5 of IGST Act, 2017 read with section 3(7) of Customs Tariff Act, 1975 which has come into effect 01-07-20217. It is different from Additional Duty of Customs as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article levied under section 3(3) of Customs Tariff Act, 1975.

8.2 The differences between Additional Duty of Customs and IGST are :

8.3 On a query from the Bench learned counsel for the appellant clarified that when the appellants had prepared the challan to pay IGST on the imported goods, the customs EDI system itself calculated the amount of interest payable and, accordingly, both appellants had paid interest.

9 INTEREST PROVISIONS

9.1 The levy of the Additional duty of Customs chargeable is under section 3 of the Customs Tariff Act, 1975. Therefore, Interest shall be payable under the provisions of Section 28AA of the Customs Act, 1962

9.2 The levy of IGST on supply in the course of import is under section 5 of IGST Act, 2017 and section 3(7) of Customs Tariff Act,1975. Interest is leviable under section 50 of CGST Act, 2017 on delayed payment of tax. The Section 20 of IGST Act, 2017 makes several provisions of the CGST Act applicable to IGST including section 50 of CGST Act,2017 which provides for interest on delayed payment of tax. Thus, there is statutory provision for levy of interest on delayed payment of tax.

9.3 The impugned period on import is after 01-07-2017. Hence in the instant case, for delayed payment of IGST, the interest is payable under the Section 20 of IGST Act, 2017 read with section 50 of CGST Act, 2017.

9.4 It is not relevant for the instant case to discuss whether interest can be demanded under Sec 28AA for delayed payment of Additional duty of Customs. For academic purposes it is not out of place to mention that the Sec 3(12) Customs Tariff Act, 1975 has been amended vide Sec 106 of Finance Act 2024, for which assent of the President is given on the 16th August, 2024 which is reproduced below :

"(12) The provisions of the Customs Act, 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, chargeable under this section as they apply in relation to duties leviable under that Act or all rules or regulations made thereunder, as the case may be."

The words " interest " has been specifically added

10. The judgement of Case of Mahindra and Mahindra Limited vs. Union of India - 2022-TIOL-1319-HC-MUM-CUS pertain to period where SCNs were issued in 2004 and 2005 that is well before the GST was introduced in 2017. At that time, Additional duty of Customs was leviable under section 3 of the Customs Tariff Act, 1975. After the introduction of the GST in 2017, IGST is levied on supply in the course of import is under section 5 of IGST Act, 2017 read with section 3(7) of Customs Tariff Act, 1975. Thus the Hon'ble CESTAT has held (ref para 28 of this Order) that "We find that this judgment was delivered in a matter where the SCNs were issued in 2004 and 2005 well before the GST was introduced in 2017.…….. Therefore, reliance on Mahindra and Mahindra is misplaced."

11. Considering all the above, the Hon'ble CESTAT has passed Final Order Nos.. 58005-58006 /2024 dt 12-08-2024 - 2024-TIOL-774-CESTAT-DEL categorically stating that [ref para 35(g)] " the appellants had correctly paid the interest on delayed payments of IGST and both the lower authorities were correct in rejecting the claim of refund."

12. So the take aways from this case are :

- i. One has to examine the nature of refund proceedings particularly when it is in the nature of execution proceedings and do not determine the mutual rights and liabilities between the Importer and the Revenue. The Hon'ble CESTAT has held (ref para 9 of this Order) that "If a judgment is delivered by a court in a case with respect to an assessee, it does not automatically increase or reduce the liabilities of every other assessee who is similarly placed." This is in line with Hon'ble Supreme Court judgement in the case of MAFATLAL INDUSTRIES LTD. Versus Union of India - 2002-TIOL-54-SC-CX-CB [19-12-1996],

- ii. The Hon'ble CESTAT has held (ref para 10 of this Order) that "As per the ratio laid down in ITC Ltd., the appellants cannot claim refund without assailing the assessment." This is in line with the Hon'ble Supreme Court judgement in the case of  ITC Limited vs. Commissioner of Customs, Kolkata, -  2019-TIOL-418-SC-CUS-LB,  

- iii. The differences between Additional Duty of Customs and IGST are :

- iv. The judgement of case of Mahindra and Mahindra Limited vs. Union of India - 2022-TIOL-1319-HC-MUM-CUS pertain to period prior to 30-06-2017 where additional duty of Customs was being levied under section 3(3) of Customs Tariff Act,1975.

- v. For the period after 01-07-2017, for delayed payment of IGST, the interest is payable under the Section 20 of IGST Act, 2017 read with section 50 of CGST Act, 2017