The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that interest, penalty, and redemption fine cannot be levied on Integrated Goods and Services Tax (IGST) demands for the period prior to 16 August 2024, reaffirming the legal position that such imposition lacked statutory backing under the unamended law.
The Bench of Justice Dilip Gupta (President) and P. Anjani Kumar (Member-Technical) observed that the issue is no longer res integra and stands settled by judicial precedents, particularly those of the Bombay High Court and the Supreme Court of India.
The issue raised was whether interest under Section 28AA of the Customs Act, along with penalty under Section 112(a) and redemption fine under Section 125, could be imposed on IGST already paid by the appellant.
Relying on the Bombay High Court’s decision in A.R. Sulphonates Pvt. Ltd. vs Union of India, which in turn followed the Supreme Court-approved ruling in Mahindra & Mahindra Ltd., the Tribunal noted that prior to the amendment of Section 3(12) of the Customs Tariff Act, 1975, there was no explicit provision enabling the levy of interest, penalty, or fine on IGST.
The Tribunal highlighted that the High Court had categorically held that in the absence of a specific statutory provision, such levies would be without authority of law. It further rejected the Revenue’s argument that the use of the term “including” in Section 3(12) implied applicability of all provisions of the Customs Act, observing that such interpretation had already been negated by binding precedent.
The Tribunal emphasized that the amendment to Section 3(12), which came into effect from 16.08.2024 and expressly enabled imposition of interest and penalties on IGST, is prospective in nature. Therefore, for transactions occurring prior to this date, such levies are not legally sustainable.
The Bench also relied on its earlier decision in GTN Engineering (India) Ltd., where it was held that the amended provisions cannot be applied retrospectively to impose additional liabilities for past periods.
The Tribunal set aside the impugned order to the extent it imposed interest, penalty, and redemption fine. However, it upheld the demand and recovery of IGST itself, thereby partly allowing the appeal.
Case Details
Case Title: Avery Dennison India Pvt. Ltd. Versus Commissioner of Customs, Nhava Sheva-II
Citation: JURISHOUR-1026-CES-2026(MUM)
Case No.: Customs Appeal No. 86471 Of 2024
Date: 27.04.2026
Counsel For Appellant: Mahir Chablani, Advocate
Counsel For Respondent: Jitesh Kumar Jain, Authorized Representative
