The Delhi High Court has held that customs department can levy interest on IGST by way of notification if importer breaches exemption condition.
The bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma has observed that Section 25(1) of the Customs Act empowers the Central Government to impose conditions for exemption from payment of specified duties. And, the Central Government had stipulated payment of interest from the date of clearance of the material if the importer had failed to discharge their export obligations, as one such condition.
The bench stated that the petitioners had bound themselves to the said conditions and had availed the benefit of the Notification. The order imposing interest on delayed payment of duties is not contrary to law.
The petitioner/assessee is a company named M/s. KBS Industries Limited (KBS). The petitioner filed an application under Section 154 of the Customs Act, 1962 seeking rectification of the order to the extent that it imposed the interest of Rs. 1,15,13,067, which was rejected.
The Settlement Commission held that the rectification of errors under Section 154 of the Customs Act, 1962 is confined to arithmetical or clerical errors and the petitioners’ application was beyond the scope of the Section 154 of the Customs Act, 1962.
The Settlement Commission found that there was no clerical or arithmetical error which would warrant any rectification of the order. It was communicated to the petitioners by a letter.
The petitioners assail the order to the limited extent that the Settlement Commission has imposed interest computed at Rs. 1,15,13,067 on the delayed payment of duty.
The Settlement Commission had accepted the report of the Commissioner filed under Section 127C(4) of the Act, whereby the interest payable by the petitioners was computed at Rs. 1,15,13,067.
Section 25(1) of the Customs Act, 1962 expressly empowers the Central Government to impose conditions as may be specified in the notification, for exempting goods of any specified description from the whole or any part of duty of customs leviable.
The court noted that the petitioner had imported goods for the purpose of export without payment of custom duty, additional duty, safeguard duty and anti-dumping duty, subject to the conditions as stipulated in the Notification dated 01.04.2015. The petitioners had availed the benefit of the Notification and had bound themselves to comply with the conditions as stipulated in the said Notification.
The court held that The exemption was granted subject to the importer satisfying its export obligations. The petitioners do not challenge the grant of advance authorizations and permission to import the goods in question without payment of duties on the condition of fulfilling the export obligations. Clearly, if the conditions were not satisfied, the petitioner would be liable to pay the duties on the material imported.
The court held that the duties would be payable on the date of clearance of the goods and therefore stipulating that the interest would be payable on such dates if the conditions are not satisfied cannot by any stretch be stated to be arbitrary or unreasonable.
Case Details
Case Title: KBS Industries Ltd & Anr. Versus The Customs Central Excise And Service Tax Settlement Commission
Case No.: W.P.(C) 10505/2024 & CM APPL. 43170/2024
Date: 13/01/2025
Counsel For Petitioner: Tuhina and Mr. Deep Shah
Counsel For Respondent: Harpreet Singh, Senior Standing Counsel
