Customs Act Amendment Ruled Unconstitutional, Refund Ordered for Excess Duties

The court declared Section 25(4) of the Customs Act, 1962, as amended by the Finance Act, 2016, unconstitutional. It also ruled that Notification No. 29/2018-Cus dated 1st March 2018 was effective only from 6th March 2018, the date of its electronic publication. Consequently, the court ordered the refund of excess customs duty and IGST collected from the petitioners.

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Issues Involved:
1. Constitutionality of Section 25(4) of the Customs Act, 1962 as amended by the Finance Act, 2016.
2. Validity and applicability of Notification No. 29/2018-Cus dated 1st March 2018.
3. Determination of the effective date for the increased customs duty under Notification No. 29/2018-Cus.
4. Refund of excess customs duty and IGST paid by the petitioners.

Detailed Analysis:

1. Constitutionality of Section 25(4) of the Customs Act, 1962:
The petitioners challenged the constitutionality of Section 25(4) of the Customs Act, 1962, as amended by the Finance Act, 2016, arguing it was arbitrary, illegal, and ultra vires. They contended that the amended section, which states that notifications come into force on the date of issue for publication in the official gazette, was inconsistent with Section 25(1) and (2A) which require publication in the official gazette for the notification to take effect. The court concurred with the Andhra Pradesh High Court's judgment, declaring Section 25(4) as arbitrary and contrary to Section 25(1) and (2A) of the Customs Act, 1962.

2. Validity and Applicability of Notification No. 29/2018-Cus:
The petitioners argued that Notification No. 29/2018-Cus dated 1st March 2018, which increased the basic customs duty from 30% to 44%, was not applicable to their goods as the notification was electronically published on 6th March 2018. The court held that the notification could not be applied retrospectively to the goods for which bills of entry were filed on 1st March 2018, prior to the electronic publication of the notification.

3. Determination of the Effective Date for the Increased Customs Duty:
The court examined whether the increased customs duty under Notification No. 29/2018-Cus was effective from 1st March 2018 or from the date of its electronic publication on 6th March 2018. The court ruled that the notification would only come into force from the date of its publication in the official gazette, which was 6th March 2018. Therefore, the increased duty could not be applied to the goods for which bills of entry were filed on 1st March 2018.

4. Refund of Excess Customs Duty and IGST:
The court directed the respondents to refund the excess customs duty and differential IGST collected from the petitioners. The refund was to be made with simple interest at 6% per annum from the date of deposit until the date of payment. This decision was based on the finding that the increased duty was not applicable to the goods in question as the notification was not published at the time the bills of entry were filed.

Conclusion:
The court declared Section 25(4) of the Customs Act, 1962, as amended by the Finance Act, 2016, unconstitutional. It also ruled that Notification No. 29/2018-Cus dated 1st March 2018 was effective only from 6th March 2018, the date of its electronic publication. Consequently, the court ordered the refund of excess customs duty and IGST collected from the petitioners.

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