Facts of the Case:

In this case, the petitioner imported raw materials under the Advance Authorisation Scheme during October 2018 to November 2020 and availed exemption from additional customs duties under Section 3(7) of the Customs Tariff Act, 1975. The imported materials were used for manufacture of goods exported from India, on which the petitioner paid IGST and claimed refund.

Subsequently, relying upon the retrospective explanation to Rule 96(10) of the CGST Rules, the petitioner treated itself as required to forgo one of the benefits and accordingly paid back the additional customs duties by getting the Bills of Entry reassessed in March/April 2022. Along with the duty, the petitioner paid approximately ₹43 lakh as interest to the Customs authorities. After this Court had held that there was no statutory authority to levy interest on delayed payment of additional customs duty, the petitioner sought refund of the interest paid.

Issue:

Whether the Customs authorities were legally empowered to levy and collect interest on the additional customs duties repaid by the petitioner, and consequently whether the petitioner was entitled to refund of such interest

Held That:

The Bombay High Court allowed the writ petition, holding that the petitioner was under no legal obligation to repay the additional customs duties and, consequently, no interest could legally be levied or collected on such repayment.

The Court first relied upon its earlier decisions in Mahindra & Mahindra Ltd. v. Union of India and A.R. Sulphonates Pvt. Ltd. v. Union of India, the Court held that, during the relevant period, the Customs Tariff Act, 1975 contained no provision authorising levy or collection of interest on belated payment of additional customs duties.

The Court further relied upon the Supreme Court’s decision in Goodluck India Ltd. v. Union of India, which held that Rule 96(10) of the CGST Rules is deemed to have been omitted from inception.

Applying this principle, the Bombay High Court held that Rule 96(10) was deemed to have been omitted from inception. Consequently, there was no legal requirement upon the petitioner to reverse the benefit of additional customs duty exemption and make repayment in March/April 2022. The repayment made by the petitioner was therefore not pursuant to any subsisting statutory obligation.

Once the underlying repayment itself was found to be legally unnecessary, the Court held that the question of charging interest on such repayment could not arise. Further, as the Customs Tariff Act did not contain any provision authorising such interest during the relevant period, the approximately ₹43 lakh collected from the petitioner as interest lacked statutory authority.

Case Name: Leben Laboratories Pvt. Ltd. Versus Union of India & Ors. dated 01.09.2026

Citation No. 2026 Taxo.online 2616