CESTAT judgement in Mayur Uniquoters is fatally flawed
OCTOBER 21, 2024
By R K Singh
CESTAT has recently passed a judgement in the case of Mayur Uniquoters Ltd. - 2024-TIOL-774-CESTAT-DEL vide which it rejected the refund of interest paid on integrated tax paid on goods imported into India essentially on the ground that the said interest was leviable and the Bombay High Court judgement in the case of Mahindra and Mahindra :2022-TIOL-1319-HC-Mum-CUS was inapplicable .
The CESTAT judgement is quite detailed, amply speaking and worth complimenting. But the said judgement suffers from two fatal flaws: (i) It has ended up arriving at a wrong conclusion about the provision of law under which integrated tax on the goods imported into India is levied, and (ii) if its conclusion regarding the provision of law under which integrated tax on the goods imported into India is levied is presumed to be right, then it fell into the error of deciding the issue of the said refund without jurisdiction.
2. In paras 21, 27 and 30 of the said judgement, it is held as under:
"21. It is evident from s. 5 of the IGST Act and section 3 (8) and 3(9) of Customs Tariff Act, what is charged is not a duty of customs, but the IGST and that it is charged under section 5 of the IGST Act 2017 read with s.3 of the Customs Tariff Act……"
"27. The taxable event for levy of IGST is the inter-state supply of goods and services which definition also includes supply in the course of importation. The charging section for collection of IGST on the imported goods is section 4 of the IGST Act read with section 3(8) of the Customs Tariff Act…."
"30. The undisputed legal position is that if there is delayed payment of IGST under section 5 of the IGST Act, interest is payable. Section 20 of IGST Act 2017 made several provisions of CGST Act applicable to IGST, including section 50 of CGST Act 2017, which provides for interest."
(Evidently there are typos in the above quoted paras of the CESTAT judgement inasmuch as section 4 is mentioned instead of s.5 and s.3(8) and 3(9) are mentioned instead of s.3(7) and 3(8) but such typos are eminently ignorable.)
3. In the following paragraphs it will be demonstrated that charging section for levy of 'integrated tax' on goods imported into India is only s.3(7) of the Customs Tariff Act and not s. 5 of the IGST Act (read with s.3 of the Customs Tariff Act). For ready reference the said two sections are reproduced below:
S. 5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:
Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.
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Section 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges –
(1) Any article which is imported into India shall, in addition, be liable to pay duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article :
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(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent as is leviable under Section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8).
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4. From perusal of s.5 of the IGST Act it is as clear as daylight that while integrated tax on inter-state supply of goods is levied under s.5(1) of IGST Act, the proviso to s. 5(1) carves out an exception in respect of the goods imported into India and unambiguously states that as far as the levy of integrated tax on goods imported into India is concerned, the same shall be levied, (indeed not only levied but also collected) in accordance with the provisions of s.3 of the Customs Tariff Act. In other words, integrated tax on goods imported into India is NOT levied under s. 5 of IGST Act. This becomes even more evident and beyond any doubt when s. 3(7) of the Customs Tariff Act is perused. The said s. 3(7) stipulates that an article imported into India shall be liable to integrated tax at such rate as is leviable on like article under s.5 of the IGST Act. Thus, charging section for integrated tax on goods imported into India is only and only s.3(7) of the Customs Tariff Act without having to be read with s.5 of the IGST Act.
5. Indeed, as is clear from the wording of s.3(7) of the Customs Tariff Act, the integrated tax on the goods imported into India would be leviable even if the proviso to s.5(1) did not exist. One may ask, then what is the purpose of the said proviso? The purpose of the said proviso is that in the absence of the said proviso, the goods imported into India, while continuing to be liable to integrated tax under s. 3(7) of the Customs Tariff Act, would have also become liable to integrated tax under s, 5(1) of the IGST Act. Thus, the said proviso by introducing an exception to s. 5(1) of the IGST Act in respect of the goods imported into India saves them (i.e. the Goods imported into India) from the levy of integrated tax under s.5(1) of the IGST Act.
6. Indeed, it is precisely because integrated tax on goods imported into India is leviable only under s.3(7) of the Customs Tariff Act (and not under s.5 of IGST Act) that the legal provisions applicable to integrated tax leviable/levied on goods imported into India are those of Customs Tariff Act and Customs Act (eg. s. 27 and 28 thereof in case of refund and demand) and not of IGST/CGST Act.
7. Thus the said CESTAT judgement has clearly erred (a) in essentially treating integrated tax on the goods imported into India as leviable under s.5 of the CGST Act (read with s.3 of the Customs Tariff Act), (and not purely only under s.3(7) of Customs Tariff Act), and consequently being subject to the provisions of IGST/ CGST Act (including s.50 of CGST Act with regard to the levy of interest thereon) and (b) on that basis holding that (i) interest was leviable on integrated tax late-paid thereon and (ii) Bombay High Court's judgement in the case of Mahindra and Mahindra was inapplicable.
8. Having said so, it is also pertinent to mention that if it is presumed that CESTAT was right in holding that integrated tax on the goods imported into India was levied under s.5 of the CGST Act (read with s.3 of the Customs Tariff Act) and, therefore, the provisions of IGST/CGST Act (including s.50 of the CGST Act) would apply thereto, then CESTAT did not have jurisdiction to deal with the same in any manner, thereby rendering the said CESTAT judgement devoid of legal authority on account of lack of jurisdiction.
[The author is former Member CESTAT and Sr. Partner, TLC Legal Advocates. The views expressed are strictly personal.]
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