Demand for IGST on ‘lithium-ion batteries’ @18% confirmed: CESTAT Chennai

Flextronics Technology India Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)

CESTAT Chennai held that demand for IGST on ‘lithium-ion batteries’ at the rate of 18%, however, demand for interest set aside since section 3(12) of the Customs Tariff Act incorporated interest only with effect from 16.08.2024.

Facts- M/s. Flextronics is engaged in the manufacture of cellular mobile phones and imports various parts and components. Department Audit found that during the period 26.7.2018 to 31.8.2018, IGST was discharged @12% for “lithium-ion batteries”. Since Sl. No. 376AA of Schedule – III of Notification, inserted by Notification No. 19/2018-IT (Rate) dated 26.7.2018 specifically covered “lithium-ion batteries”, it appeared that IGST was to be discharged at 18%. After due process of law, Adjudicating Authority confirmed the demand along with interest and imposed penalty. In appeal, Commissioner (Appeals) upheld the differential demand but however set aside the penalty. Hence this appeal against the duty and interest demanded.

Conclusion- Hon’ble Bombay High Court in Mahindra & Mahindra Ltd. v. Union of India, [2022 (10) TMI 212 – BOMBAY HIGH COURT], has examined an identical issue regarding interest. It was held that there is no substantive provision in Section 3 of Customs Tariff Act, 1975 requiring payment of interest and in the absence of specific provisions for levy of interest, same cannot be levied or charged.

Held that the legislature having now incorporated ‘interest’ into the Customs Tariff Act, 1975, the same can be demanded for non-payment of IGST only after the substitution of the said sub-section as above, from 16.08.2024 and not on the impugned goods which were imported before that date. Thus, the demand for IGST on “lithium-ion batteries” @ 18% as per S. No. 376AA of Schedule III to Notification No. 01/2017 – IT (Rate), is upheld. The demand for interest is set aside.

FULL TEXT OF THE CESTAT CHENNAI ORDER

This appeal is filed by the appellant against Order in Appeal C. Cus. I No. 89/2021 dated 5.3.2021 passed by the Commissioner of Customs (Appeals – I), Chennai.

2. Brief facts of the case are that M/s. Flextronics is engaged in the manufacture of cellular mobile phones and imports various parts and components. Department Audit found that during the period 26.7.2018 to 31.8.2018, IGST was discharged @12% for “lithium-ion batteries”. Since Sl. No. 376AA of Schedule – III of Notification, inserted by Notification No. 19/2018-IT (Rate) dated 26.7.2018 specifically covered “lithium-ion batteries”, it appeared that IGST was to be discharged at 18%. After due process of law, the Ld. Adjudicating Authority confirmed the demand along with interest and imposed penalty. In appeal, the Ld. Commissioner (Appeals) upheld the differential demand but however set aside the penalty. Hence this appeal against the duty and interest demanded.

3. Shri Rohan Muralidharan Aravindh, learned counsel appeared for the M/s Flextronics and Shri Anoop Singh, learned Authorized Representative appeared for Revenue.

3.1 The Ld. Advocate for the appellant submitted as follows:

(A) The Subject Goods are chargeable to IGST @ 12% as per Sl. No. 203 of Schedule II to Notification NO. 01/2017 – IT (RATE) – It is not disputed that the imported goods are lithium-ion batteries meant for use in cellular mobile phones. The subject goods viz., lithium-ion batteries are integral ‘parts’ of cellular mobiles without which the mobile phones are incomplete and cannot function. The Ld Advocate stated that S. No.203 is a more specific heading as lithium-ion batteries used for the manufacture of cell phones is more specific when compared to an entry which covers all lithium-ion batteries which may be for multiple uses such as motor vehicles, electronics, power tools etc. S. No. 376AA is a more general entry covering all types of lithium-ion batteries. Resultantly, the subject goods are chargeable to IGST at the rate of 12% under S. No. 203 of the Rate Notification.

(B) Without Prejudice, no Interest is leviable on the Appellant in the Absence of Machinery Provisions – IGST is levied under Section 3(7) of CTA. However, the CTA has limited provisions, and it borrows various provisions from the Customs Act for implementation of its provisions. Section 3(12) of the CTA, which is the borrowing provision with regard to IGST, does not borrow provisions of interest from the Customs Act. Therefore, he submitted that interest cannot be recovered for non-payment of IGST which is chargeable under Section 3 of the CTA. The Ld. Advocate prayed that the impugned order be set aside.

3.2 The Ld. AR submitted that a plain reading of notification shows that a specific entry exists for goods having description, namely, lithium-ion batteries. He submitted that when the language of a taxing statute is clear and the unambiguous reverence must be given to the intention of legislature. The Ld. AR stated that it is on record that Assessee has not declared anything about the end use at the time of assessment. Whether the subject Batteries cleared from Customs under BEs in dispute have been used as parts of manufacture of telephones cannot be decided on the basis of records available at this stage or in a retrospective fashion. The Ld. AR stated that Higher judicial forums have settled that the Courts shall reject that construction which will defeat the plain intention of the Legislature. He hence prayed that the insertion of Sl. No. 376AA in Notification No. 01/2017-IT (Rate) be given effect to, as intended by the legislature in clear and the unambiguous words and the appeal may be rejected.

4. We have gone through the Appeal Memorandum, responses by the rival parties both orally and in writing. We find that the issue is whether the rate of IGST payable on the import of lithium-ion batteries is at 12% as per S. No. 203 of Schedule II to Notification No. 01/2017 – IT (Rate) or at 18% as per  No. 376AA of Schedule III to Notification No. 01/2017 – IT (Rate), as inserted by Notification No. 19/2018-IT (Rate) dated 26.7.2018, which specifically covered “lithium-ion batteries”. The appellant has in the submissions made encapsulated the rates prevalent at different times as per a table which is given below. The period under dispute is from 26.7.2018 to 31.8.2018

IGST – Rate Schedule

IGST rate applicable to Lithium ion batteries.

4.1 It is the appellants contention that;

a) The imported lithium-ion batteries are integral ‘parts’ of cellular mobiles without which the mobile phones are incomplete and cannot function and is not in dispute.

b) The imported goods were classified under CTI 8507 6000 and is not disputed by the department.

c) S. No. 17 of Notification No. 57/2017 – Cus. dated 30.06.2017 describes the goods as ‘lithium-ion battery of cellular mobile phones’. The exemption availed by them for the payment of Basic Customs Duty (BCD) has also not been disputed.

d) The fact that the subject goods are intended for use in manufacture of mobile phones is also not under dispute.

e) No. 203 is a more specific heading as lithium-ion batteries used for the manufacture of cell phones is more specific when compared to an entry which covers all lithium-ion batteries which may be for multiple uses such as motor vehicles, electronics, power tools etc. The subject goods are parts used specifically for the manufacture of cell phones without which the cell phones cannot function. S. No. 376AA is a more general entry covering all types of lithium-ion batteries.

It is hence their contention that the lithium-ion battery which are parts of cellular mobile phones, continue to be eligible for exemption under Sl No. 203 of Schedule II to Notification No. 01/2017 – IT (Rate)

4.2 The department on the other hand is of the view that

a) A specific entry has been created for lithium Ion Battery in Notification 01/2017 – IT (Rate) by an insertion vide Notification No. 19/2018-IT (Rate) dated 26.7.2018, at S. No. 376AA of Schedule III on 26.7.2018. When the language of taxing statute is clear and the unambiguous reverence must be given to the intention of legislature. The appellant cannot be permitted to take shelter under a residuary description when a product can be covered under a specific description.

b) The legislature has not resorted to carve out any exception in description of the said S. No. 376AA such as “Lithium Ion Battery other than the one used as parts for manufacture of Telephone for cellular networks or for other wireless networks”:

c) The legislature has not resorted to carve out any exception in description such “parts for manufacture of Telephone for cellular networks or for other wireless networks including lithium Ion Battery”

d) The appellant has diverse business interest ranging from manufacture, export, trading of electronic equipments and automotive parts. The appellant has not declared anything about the end use of the batteries at the time of assessment. Neither have they resorted to first check or provisional assessment to resolve any imminent dispute pertaining to IGST rates and description etc.

e) It has been held by Higher judicial forums that the Courts shall reject that construction which will defeat the plain intention of the Legislature even though there may be some inexactitude in the language used. The Courts, ae very reluctant to hold that the Parliament has achieved nothing by the language it used when it is tolerably plain what it seeks to achieve. Lithium-ion batteries are likely to be a part or accessory of some machine or equipment, it cannot be the legislative intent that by classifying the impugned goods as per the main equipment or machine  No. 376AA of Schedule III to Notification No. 01/2017 – IT (Rate), as inserted by Notification No. 19/2018-IT (Rate) dated 26.7.2018 become redundant.

4.3 We find that;

a) Goods should be classified based on their description and condition when entered for import.

b) As laid down by the Hon’ble Supreme Court in Commissioner of Central Excise  Simplex Mills Co. Ltd. [(2005) 3 SCC 51 / 2005 (181) E.L.T. 345 (S.C.)], the General Rules of Interpretation will come into play, as mandated in Rule 1 itself, only when no clear picture emerges from the terms of the Headings and the relevant section or chapter notes.

c) In the case of ambiguity while classifying goods under the Customs Tariff importance is required to be given to the Rules of Interpretation of the Customs  Under Rule 3(a), it is provided that the heading which provides a specific description shall be preferred to a heading having a more general description.

d) As per the Customs Tariff 1985, Heading 8507 covers ‘Electric accumulators, including separators therefore, whether or not rectangular (including square)’. ‘Lithium-ion’ falls under the said heading at the single digit level. Its 8-digit classification being 8507 6000. Hence there is no ambiguity in the classification of the impugned goods.

e) The impugned goods imported as ‘lithium-ion batteries’ were also classified by the appellant under CTH 8507 6000 and not as parts of cellular phones. This classification is not under dispute by the rival parties.

f) Although the appellant did contended that the subject goods are integral ‘parts’ of cellular mobiles and that their intended use in manufacture of mobile phones is not under dispute, the claim was contested by revenue. Pleadings are not proof and if an issue is not discussed in the OIO it does not mean the issue is undisputed. There is nothing in the OIO to show a unity of mind as suggested by the appellant that the impugned goods are parts of cellular phones or even that they are intended for use in manufacture of mobile  The appellant have curiously also not replied to the SCN nor have they appeared for a PH in spite of three opportunities being given to them. [We find that the First Appellate Authority has assumed / presumed that the batteries were meant for use in cellular mobile phones, which is beyond the facts stated in the SCN and without divulging the source of his knowledge, but even he has not stated that the batteries were “parts” of cellular mobile phones].

g) All facts that are fundamental and necessary to formulate a complete view of a parties stand to the dispute for arriving at a decision, are in the nature of “material facts”. The material facts on which the party relies for his claim ie factaprobanda must be stated in their averments before the Original Authority. Since the object and purpose is to enable the opposite party to know the case he has to meet  In the absence of pleading, a party cannot be allowed to project facts that have a major bearing on the dispute to have been accepted, unless specifically expressed by the parties in no uncertain terms. Even a stray line in an order cannot be seen as being conclusive of a fact if the material fact was not raised before the Original Authority and tested through discussion. This is because of the inability of words to always achieve precision and language being an inadequate vehicle of thought. Sometimes words unwittingly convey more than what one meant. As stated by the Hon’ble Justice O. Chinnappa Reddy, in Girdhari Lal & sons Vs Balbir Nath Mathur [(1986) 2 SCC 237],:

“6. . . . Words are but mere vehicles of thought. They are meant to express or convey one’s thoughts. Generally, a person’s words and thoughts are coincidental. No problem arises then, but, not infrequently, they are not. It is common experience with most men, that occasionally there are no adequate words to express some of their thoughts. Words which very nearly express the thoughts may be found but not words which will express precisely. There is then a great fumbling for words. Long-winded explanations and, in conversation, even gestures are resorted to. Ambiguous words and words which unwittingly convey more that one meaning are used. Where different interpretations are likely to be put on words and a question arises what an individual meant when he used certain words, he may be asked to explain himself and he may do so and say that he meant one thing and not the other.. .” (emphasis added)

h) As pointed out by revenue the Bill of Entry does not indicate that the impugned goods are parts of mobile / cellular Since goods are assessed as presented and answered to a specific classification heading, knowing their use was perhaps not a necessity. Just because an importer of cellular phones imports lithium-ion batteries, it cannot be presumed that they are for use in cellular phones. It was pointed out by revenue that the appellant has diverse business interests ranging from manufacture, export, trading of electronic equipment’s and automotive parts. Nor can one go one step further on one’s own and answer the question of law and fact as to whether the imported batteries are “parts” of a cellular phone or an “accessory” etc. Although the appellant has made the ‘batteries being a part of cellular phone’ as the main stay of their arguments, there appears to have been no attempt for a discussion before the Original Authority on whether the lithium-ion batteries are part of a cellular phone, as per the Section and Chapter notes of the Customs Tariff. The crucial ‘test of essentiality’ required for parts is also not seen discussed, in the OIO. The Hon’ble Supreme Court in State Of Uttar Pradesh vs M/S. Kores (India) Ltd [AIR 1977 SUPREME COURT 132 / 1976 4 SCC 477], had after applying the test of essentiality, found that aviation petrol is not a part of the aero-plane nor diesel is a part of a bus in the same way, ribbon is not a part of the type-writer though it may not be possible to type out any matter without it. Hence the appellants averments that the subject goods are integral ‘parts’ of cellular mobiles cannot be taken on face value. If the appellant had felt this to be an important question of fact and law, having a bearing on the rate of IGST to be discharged, they should have raised the matter upfront and had the matter decided by the Original Authority without trying to pass it off as an undisputed matter.

i) Even otherwise,  No. 376AA of Schedule III Notification No. 19/2018-IT (Rate) dated 26.7.2018 covers lithium-ion batteries classified under CTH 8507 6000. There is no special carve out for lithium-ion batteries that are parts of cellular phones as done in the case of S. No. 139 shown at the table at para 4 above.

j) The Appellant has averred that S. No. 203 is a more specific heading, as lithium-ion batteries used for the manufacture of cell phones is more specific when compared to an entry which covers all lithium-ion batteries which may be for multiple uses such as motor vehicles, electronics, power tools  Even going by the appellant claim of ‘parts’, we find that “Lithium-Ion Batteries” is the genus (specific heading) and “parts of cellular phones” are, if at all, an indistinct species (residuary heading), thereof. Hence this averment of the appellant has no merits.

k) Personal hearing is not an empty  However, the appellant has not appeared for the PH on three occasions, which were opportunities not utilized to put forward their points with clarity, especially on the issue of ‘parts’ among others, in person, in spite of not even having replied to the SCN issued to them.

4.4 The Hon’ble Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar & Ors., AIR 1955 SC 661, stated that a legal enactment must be interpreted in its plain and literal sense, as that is the first principle of interpretation. Again, in Union of India Vs Hansoli Devi reported in (2002) 7 SCC 273, wherein the Apex Court held that it is a cardinal principle of construction of a statute that when the language of the statute is plain and unambiguous, the court must give effect to the words used in the statute. Besides, in a taxing Act one has to look merely at what is clearly said and there is no room for any intendment. In a taxing statute nothing is to be read in, nothing is to be implied, one can only look fairly at the language used. In the case of Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company & Ors. [AIR 2018 SUPREME COURT 3606 / AIRONLINE 2018 SC 73], a Constitution Bench of the Supreme Court consisting of 5 Judges, observed and held as under:

i) In interpreting a taxing statute, equitable considerations are entirely out of place.

ii) a taxing statute cannot be interpreted on any presumption or assumption.

iii) a taxing statute has to be interpreted in the light of what is clearly expressed.

iv) it cannot imply anything which is not expressed.

4.5 We find that based on the first principle of interpretation, the impugned goods were found covered under a specific heading which conveys only one meaning and were correctly determined to discharge IGST @ 18% as per S. No. 376AA of Schedule III of Notification No. 19/2018-IT (Rate) dated 26.07.2018, during the relevant period, by the Original Authority. Due to a lack of ambiguity in the rate notification and in the light of the judgment of the Hon’ble Apex Court in Simplex Mills Co. Ltd. (supra), there is no necessity here, to examine the claim of the goods at S. No. 203 of Schedule II to Notification No. 01/2017 – IT (Rate) and muddy the clear water. An aid to interpretation of the terms used in a statute or notification is resorted to only when there is some ambiguity in the words or expression used, which is not so the case here. Their averments have however been examined in detail above and will be again done separately below, while discussing the issues raised along with various supportive judgments cited by the appellant in their favour. The duty rate notifications for Customs and for IGST purposes are not in pari materia and the description of goods in a customs notification will not help decide the matter either way. It has also been recorded in the impugned order that the appellant has started paying 18% duty from the month of August.

Judgments

5. We now examine the judgments stated by the appellant; (A1) The appellant has stated that, lithium-ion batteries are integral ‘parts’ of cellular mobiles without which the mobile phones are incomplete and cannot function. Reference in this regard was made to the decision of the Hon’ble Tribunal in the case of Jas Telecom [2019 (369) E.L.T. 1515 (Tri. – Bang.)] Further, various decisions have ruled that a part is an essential component of the whole without which the whole cannot function. Reliance in this regard was placed on the following decisions; Commissioner v. Insulation Electrical Private Limited [2008 (224) E.L.T. 512 (S.C.)] and CTO, Anti Evasion, Circle III, Jaipur v. Praso on Enterprises [2019 (23) G.S. T.L. 441 (S.C.)]. The classification of goods involves an issue of fact and law, which in this case was not agitated before the Original Authority, as discussed above. Mere reference to law without stating the actual use, essentiality etc. of the impugned goods cannot prompt a decision ipse dixit. Further, as discussed above lithium-ion batteries carry a specific heading. The apex Court in C.C.E. v. Carrier Aircon, [2006 (5) SCC 596 / 2006 (199) E.L.T. 577 (S.C.)] held that it is a well settled principle that the end use of a product is not determinative of the classification of the product.

(A2) Further as per the Latin maxim ‘generalia specialibus non derogant’, a general law shall not derogate from specific law or the provisions of a general statute must yield to those of a special one. A similar legal principle is that a commodity cannot be classified in a residuary entry, in the presence of a specific entry, even if such specific entry requires the product to be understood in the technical sense, [see Akbar Badrudin v. Collector of Customs, (1990) 2 SCC 203; Commissioner of Customs v. G.C. Jain, (2011) 12 SCC 713]. The same would apply to a rate notification also. For the purpose for determining the rate of duty a residuary entry can be taken refuge of only in the absence of a specific entry; that is to say, the latter will always prevail over the former [see CCE v. Jayant Oil Mills,(1989) 3 SCC 343; HPL Chemicals v. CCE, (2006) 5 SCC 208; Western India Plywoods v. Collector of Customs, (2005) 12 SCC 731; CCE v. Carrier Aircon, (2006)5SCC 596]. This principle is echoed in Rule 1 of the General Rules of Interpretation.

(A3) That apart whether the goods are ‘parts’ of cellular phones does not flow from the file of the Original Authority as recorded in the OIO. Hence the cited judgments do not help the appellants cause.

(B) The appellant has stated that under GST, the Authority for Advance Ruling, Haryana, in Re: Epcos India Private Limited [2018 (15) G.S.T.L. 117 (A.A.R. – GST) in its decision dated 26.03.2018, has held that ‘battery of mobile handsets qualify to be covered under S. No.203 of Schedule – II of the Notification. Firstly, such rulings do not have any precedential value. As pointed out by Revenue the Advance Ruling is not related to the facts of the case as it relates to the description ‘Battery of Mobile Handsets’ and not ‘Lithium Ion Battery’. An advance Ruling is a private tax ruling and cannot formally be cited as an authority by another taxpayer / appellant in their own judicial proceedings. Each Ruling is an authority in the setting of its own facts and will not help advance other appellants cause in their case before judicial fora.

(B1) The Income Tax Appellate Tribunal – Mumbai, in the case of Assistant Director Of Income Tax vs Green Emirate Shipping And Travels [(2006) 100 ITD 203 (MUM) / [2006] 286 ITR 60 (MUM)], after referring to the Hon’ble Supreme Court’s judgment in Union Of India And Anr vs Azadi Bachao Andolan And Anr [AIR 2004 SUPREME COURT 1107], held that the Authority for Advance Rulings, not being a part of the judicial hierarchy, cannot lay down a binding precedent for anyone – the Revenue, the assessees or the appellate authorities.

(C) The appellant has stated that The Principle of Contemporaneous Expositio states that a statute must be constructed or interpreted in the manner in which the administrative or executive officers enacting the statute have interpreted the statue. Reliance in this regard is placed on the decision of Spandex Industries Ltd. v. Commissioner of Central Excise [2015 (324) E.L.T. 686 (S.C.)]. They have also referred to the recommendation of GST Council as being highly persuasive for interpreting the rate entries. The said judgment and recommendations are of no relevance when the matter is being decided on the basis of the first principle of interpretation.

(D1) The appellant has further averred that it is settled principle of law that in the matter of interpretation of charging section of a taxation statute, strict rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the assessee needs to be applied. Reliance in this regard is placed on the judgment of the Hon’ble Supreme Court in CC v. Dilip Kumar [2018 (361) E.L.T. 577]. Further, when the issue pertains to levy of the duty, i.e. the notification proposed to impose duty, the onus is on the Department to prove that the goods are leviable to such duty. Reliance in this regard was placed on the following decisions:

CC v. National Cereal Product [2005 140 STC 69 (SC)] Union of India v. Garware Nylons Ltd. [(1996) 10  SCC 413] CIT v. Provident Investment Company [1957 (32) ITR 190]

(D2) We find that the interpretation of the charging section of a taxation statute (rate notification) has been done strictly and decided on the basis of the first principle of interpretation, without any ambiguity. Hence the ratio of the cited judgments have been adhered to by the Original Authority without having to give the benefit of ambiguity to either of the parties.

(E) The appellant has by way of an additional submission dated 05/12/2024, relied on the Tribunals Final Order 50089/2023 dated 30/01/2023 in the case of M/s JMK Energy Vs Commissioner of Customs, Delhi. The goods imported in the said case was “portable solar home electric light – HANS 300”. The said goods in addition to the in- built LED lamps could be used for several other purposes through a 12 volt port. Unlike the impugned goods which are classifiable as per the first principle of interpretation, the classification of ‘HANS 300’ being a multi-functional machine performing several complementary or alternative functions, was to be done by the rules of interpretation based on its essential function and Chapter Notes. In Bhavnagar University Vs Palitana Sugar Mills Pvt. Ltd. [2003 (2) SCC 111], the Apex Court observed that, “It is well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision”. The facts being distinguished, the ratio in JMK Energy (supra) is hence not applicable.

No Interest or Penalty is leviable in the absence of machinery provision

6. The Appellant submits that IGST is levied under Section 3(7) of CTA. However, the CTA has limited provisions, and it borrows various provisions from the Customs Act for implementation of its provisions. Section3(12) of the CTA, which is the borrowing provision with regard to IGST, did not borrow provisions of interest from the Customs Act. Therefore, it is submitted that interest cannot be recovered for non- payment of IGST which is chargeable under Section 3 of the CTA.

6.1 Section 3(12) of the Customs Tariff Act, 1975, as it stood just prior to the Finance (No 2) Act 2024 been notified on 16th August 2024, is extracted below for ease of reference:

3(12) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties shall, so 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 the duties leviable under that Act.

While interest is compensatory in character, the Sub-Section above did not make any reference to interest. Although the Section 3(12) as it stood above is an inclusive one and should be given a broad meaning, Constitutional Courts have held that demand for interest can be made only if the legislature has specifically intended the collection of interest.

6.2 We find that the Hon’ble Bombay High Court in Mahindra & Mahindra Ltd. v. Union of India, [2022 (10) TMI 212 – BOMBAY HIGH COURT], has examined an identical issue regarding interest. It was held that there is no substantive provision in Section 3 of Customs Tariff Act, 1975 requiring payment of interest and in the absence of specific provisions for levy of interest, same cannot be levied or charged. The relevant portion of the decision is extracted below:

“34. Section 9A(8) of the Customs Tariff Act, 1975 which borrowed provisions from Customs Act, 1962 did not borrow provisions relating to interest and penalty. The Hon’ble Courts, in judgments cited supra, held that in view of no specific borrowing, no interest and penalty can be imposed on anti-dumping duty. Later on, Finance (No.2) Act, 2004 amended sub-section (8) of Section 9A suitably to include interest and penalty. However, similar amendments have not been made to Section 3(6) of the Customs Tariff Act, 1975 relating to CVD, i.e., additional duty equal to excise duty or Section 3A(4) of Customs Tariff Act, 1975 relating to SAD, i.e., special additional duty or surcharge under Section 9(3) of the Finance Act, 2000.

35. Further, Section 12 of the Customs Act, 1962 levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. In Customs Tariff Act, 1975, Section 2 provides the rates at which duties of customs are to be levied under the Customs Act, 1962 are as specified in the first and second schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act, 1962 there is no reference to any specific provision of Customs Tariff Act, 1975.

…

37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction.”

The said decision has been affirmed by the Hon’ble Supreme Court in Union of India v. Mahindra and Mahindra [2023 (8) TMI 135 – SC ORDER].

6.3 We also notice that Section 3(12) of the Customs Tariff Act has been substituted, vide Finance (No 2) Act 2024 which was notified on 16th August 2024, specifically including ‘interest’ among others measures. The new sub-section 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.”. (emphasis added)

The legislature having now incorporated ‘interest’ into the Customs Tariff Act, 1975, the same can be demanded for non-payment of IGST only after the substitution of the said sub-section as above, from 16.08.2024 and not on the impugned goods which were imported before that date. The appellants prayer hence succeeds on this issue.

7. In the light of the discussions above the impugned order is modified as under;

A) The demand for IGST on “lithium-ion batteries” @ 18% as per S. No. 376AA of Schedule III to Notification No. 01/2017 – IT (Rate), is upheld.

B) The demand for interest is set aside.

The appellant is eligible for consequential relief, if any, as per law. The appeal is disposed of accordingly.

(Order pronounced in open court on 11.03.2025)