Union of India & Ors. Vs A. R. Sulphonates Private Limited & Anr. (Supreme Court of India)
The dispute concerned whether interest, penalty, confiscation, and redemption fine could be levied on Integrated Goods and Services Tax (IGST) payable on imports made under Advance Authorization licences during the period when a “pre-import condition” was in force. The imports were made between 13 October 2017 and 9 January 2019 without payment of IGST, contrary to the pre-import condition then prescribed. After investigation and issuance of a show cause notice, the adjudicating authority confirmed IGST demand and also ordered recovery of interest, imposed penalty, ordered confiscation of goods, and levied redemption fine.
The core issue was whether, prior to its amendment in August 2024, section 3(12) of the Customs Tariff Act, 1975 empowered the authorities to levy interest, penalty, and confiscation in respect of IGST levied under section 3(7). The High Court held that the unamended section 3(12) merely applied procedural provisions of the Customs Act and did not specifically incorporate provisions relating to interest, offences, or penalties. Relying on earlier precedent, it held that interest and penalty are substantive liabilities and cannot be imposed without clear statutory authority. Consequently, the High Court quashed the demand of interest, penalty, confiscation, and redemption fine, and also declared that the relevant customs circular was invalid to the extent it sought to recover interest.
