2022 (10) TMI 212 - HC - Customs

Court quashes Settlement Commission's interest and penalty orders, directs refund and cancels bank guarantee.

Mahindra & Mahindra Ltd. (Automotive Sector), Versus The Union of India, The Settlement Commission, Additional Bench, Customs & Central Excise, Mumbai, The Commissioner of Customs (Import), Mumbai, The Additional Director General, DGCEI, Mumbai

Mahindra & Mahindra Ltd. (Automotive Sector), Versus The Union of India, The Settlement Commission, Additional Bench, Customs & Central Excise, Mumbai, ... Issues Involved:1. Leviability of interest and penalty on amounts payable as duty other than basic customs duty.2. Jurisdiction and authority of the Settlement Commission to impose interest and penalty.3. Applicability of Section 28AB of the Customs Act, 1962 to surcharge, additional duty (CVD), and special additional duty (SAD).Detailed Analysis:1. Leviability of Interest and Penalty on Amounts Payable as Duty Other Than Basic Customs Duty:The petitioner challenged the imposition of interest and penalty on differential customs duty other than basic customs duty. The court examined the relevant statutory provisions, including Section 3 and Section 3A of the Customs Tariff Act, 1975, and Section 90 of the Finance Act, 2000. These sections did not provide for the imposition of interest or penalty. The court referred to several precedents, including *J.K. Synthetics Ltd. v. Commercial Taxes Officer* and *India Carbon Ltd. v. State of Assam*, which established that provisions for charging interest or penalty must be substantive and explicitly stated in the statute. The court concluded that since the relevant sections did not explicitly provide for interest or penalty, the imposition was unwarranted.2. Jurisdiction and Authority of the Settlement Commission to Impose Interest and Penalty:The petitioner argued that the Settlement Commission (respondent no.2) acted beyond its jurisdiction by imposing interest and penalty. The court referenced the Supreme Court's judgment in *Jyotendrasinhji v. S.I. Tripathi and Ors.*, which held that the court should interfere if the Settlement Commission's order is contrary to the provisions of the Act. The court found that the Settlement Commission's reliance on Section 127C of the Customs Act, 1962, to impose interest was misplaced, as this section did not provide the authority to impose interest or penalty beyond the provisions of the Customs Act. The court ruled that the Settlement Commission's order was contrary to the provisions of law and thus invalid.3. Applicability of Section 28AB of the Customs Act, 1962 to Surcharge, Additional Duty (CVD), and Special Additional Duty (SAD):The court examined whether Section 28AB of the Customs Act, 1962, which provides for interest on delayed payment of duty, applied to surcharge, CVD, and SAD. The court noted that Section 28AB applied only to duties levied under Section 12 of the Customs Act, 1962, and not to duties under Section 3 or Section 3A of the Customs Tariff Act, 1975, or Section 90 of the Finance Act, 2000. The court cited precedents, including *Collector of Central Excise, Ahmedabad v. Orient Fabrics Pvt. Ltd.* and *Pioneer Silk Mills Pvt. Ltd. v. Union of India*, which held that interest and penalty could not be imposed without explicit statutory authority. The court concluded that Section 28AB did not apply to surcharge, CVD, or SAD, and thus, the imposition of interest and penalty was incorrect and without jurisdiction.Conclusion:The court quashed and set aside the Settlement Commission's orders imposing interest and penalties on the petitioner. It directed the respondents to refund the penalty amount deposited by the petitioner and to cancel the bank guarantee provided by the petitioner. The court emphasized that interest and penalties could only be imposed if explicitly provided for in the relevant statutory provisions, which was not the case here. The petition was disposed of with no order as to costs.