IGST on imports differs from additional customs duty, interest calculated under Section 50 CGST Act not Section 28AB Customs Act
CESTAT New Delhi held that IGST on imported goods is distinct from additional duty of customs, being levied under different constitutional provisions and statutory frameworks. When IGST payment is delayed, interest must be calculated per Section 50 of CGST Act, not Section 28AB of Customs Act as applied by the Commissioner. The tribunal distinguished IGST from additional customs duty, noting different crediting mechanisms and constitutional bases. The matter was remanded to the Commissioner to recalculate interest using correct CGST provisions. Appeal allowed by way of remand.
The core legal questions considered by the Tribunal in this appeal are:
1. Whether the appellant was liable to pay interest on the delayed payment of Integrated Goods and Services Tax (IGST) on imported goods, despite having paid the IGST after being pointed out by the Directorate General of Revenue Intelligence (DRI).
2. Whether IGST levied on imported goods constitutes an Additional Duty of Customs under the Customs Tariff Act, 1975, and if so, whether the provisions relating to interest on delayed payment applicable to Additional Duty of Customs extend to IGST.
3. The constitutional and statutory basis for the levy of IGST on imports as distinct from Additional Duty of Customs, including the relevant charging provisions and their implications for interest liability.
4. Whether the interest on delayed payment of IGST was correctly calculated and appropriated by the Commissioner of Customs under the relevant statutory provisions.
Issue-wise Detailed Analysis:
Issue 1: Liability to Pay Interest on Delayed Payment of IGST on Imports
Relevant Legal Framework and Precedents: The appellant contended reliance on a Bombay High Court decision, upheld by the Supreme Court, which held that Additional Duty of Customs does not attract interest on delayed payment. The appellant argued that IGST on imports is an Additional Duty of Customs under section 3 of the Customs Tariff Act, 1975, and thus interest provisions do not apply. The Tribunal had previously examined this issue in an earlier appeal involving the same appellant and rejected this contention.
Court's Interpretation and Reasoning: The Tribunal reaffirmed its earlier view that IGST levied on imports is not an Additional Duty of Customs. It emphasized that IGST is levied under a distinct constitutional and statutory framework, separate from customs duties. The Tribunal noted that interest is payable on IGST under the IGST Act, 2017, and the provisions of the Central Goods and Services Tax (CGST) Act made applicable to IGST, specifically section 50 of the CGST Act.
Key Evidence and Findings: The appellant did not dispute the liability to pay IGST but contested the interest liability. The DRI's investigation established that the appellant wrongly claimed exemption from IGST under the Advance Authorisation scheme without fulfilling the 'actual user' condition, leading to delayed payment of IGST with interest.
Application of Law to Facts: Since the appellant delayed payment of IGST, the statutory provisions mandating interest on delayed payment under the IGST and CGST Acts applied. The Tribunal held that the IGST on imports is a tax distinct from customs duties and interest provisions under the GST law are applicable.
Treatment of Competing Arguments: The appellant's reliance on the Mahindra & Mahindra judgment was distinguished on constitutional and legislative grounds. The Tribunal noted that while Additional Duty of Customs is levied under Article 246 and entry 83 of the Union List, IGST is levied under Articles 246A and 269A, reflecting a different constitutional scheme and taxing power.
Conclusion: The appellant is liable to pay interest on delayed payment of IGST on imported goods.
Issue 2: Nature and Constitutional Basis of IGST on Imports versus Additional Duty of Customs
Relevant Legal Framework: The Tribunal conducted a detailed constitutional analysis to distinguish IGST from Additional Duty of Customs. Article 265 mandates that no tax shall be levied except by authority of law. Article 246 delineates legislative competence between Parliament and State Legislatures. Duties of Customs fall under entry 83 of List I (Union List) and are levied under Article 246. GST, including IGST, is levied under the newly inserted Article 246A and Article 269A, empowering both Union and States, with IGST specifically on inter-state and international supplies.
Court's Interpretation and Reasoning: The Tribunal emphasized that IGST on imports is levied as a tax on supply in the course of international trade, distinct from customs duties which are levied on the act of importation or exportation. The taxable event for customs duties is importation/exportation; for IGST, it is supply in the course of inter-state or international trade. The Tribunal also highlighted the distinct accounting and distribution mechanisms: customs duties are credited to the Consolidated Fund of India and divided as per the Finance Commission recommendations, whereas IGST is divided between Centre and States as per the GST Council's recommendations.
Key Evidence and Findings: The Tribunal referred to constitutional provisions, budget heads, and statutory charging sections to demonstrate the distinct nature of IGST and customs duties. Section 12 of the Customs Act charges basic customs duties; Additional Duties of Customs are levied under the Customs Tariff Act. IGST is charged under section 3 of the Customs Tariff Act read with section 5 of the IGST Act, with no separate rate prescribed in the Customs Tariff schedules.
Application of Law to Facts: The appellant's claim that IGST is an Additional Duty of Customs was rejected based on the constitutional and statutory distinctions. The Tribunal clarified that IGST is a tax on supply and not a customs duty, and thus the legal framework governing customs duties does not apply to IGST.
Treatment of Competing Arguments: The Tribunal distinguished the appellant's reliance on customs duty jurisprudence, explaining that the constitutional basis and charging provisions for IGST differ fundamentally from those for customs duties.
Conclusion: IGST on imports is a distinct tax from Additional Duty of Customs, levied under a separate constitutional and legislative framework.
Issue 3: Correct Calculation and Appropriation of Interest on Delayed IGST Payment
Relevant Legal Framework: Section 20 of the IGST Act makes several provisions of the CGST Act applicable to IGST, including section 50 of the CGST Act which provides for interest on delayed payment. Section 28AB of the Customs Act provides for interest on delayed payment of customs duties.
Court's Interpretation and Reasoning: The Tribunal found that the Commissioner of Customs had incorrectly calculated and appropriated interest under section 28AB of the Customs Act, which applies to customs duties, rather than under section 50 of the CGST Act as made applicable to IGST by section 20 of the IGST Act.
Key Evidence and Findings: The impugned order confirmed interest as applicable under section 28AB of the Customs Act rather than the CGST Act provisions. The appellant challenged this approach as incorrect.
Application of Law to Facts: Since IGST is not a customs duty but a tax under the GST regime, interest on delayed payment must be computed as per the GST law provisions. The Tribunal held that the matter deserves remand for recalculation of interest according to the correct statutory provisions.
Treatment of Competing Arguments: The Revenue contended that the interest demand was valid as per the Customs Act provisions, but the Tribunal disagreed, emphasizing the distinct nature of IGST and the applicability of GST interest provisions.
Conclusion: The matter was remanded to the Commissioner for re-determination of interest payable on IGST under the correct GST provisions.
Significant Holdings:
"Additional duty of Customs is levied on the act of importation or the act of exportation under the Customs Tariff Act, 1975 in exercise of the powers under Article 246 read with entry 83 of List I (Union List) of the Seventh Schedule to the Constitution. IGST is levied on the supply in the course of imports under section 3 of the Customs Tariff Act, 1975 read with Section 5 of the IGST Act in exercise of the powers under Article 269 of the Constitution."
"While Additional duty of Customs gets credited to the Consolidated Fund of India and the divisible pool of tax revenues divided between the States and Union as per the recommendations of the Finance Commission, IGST does not get credited to the Consolidated Fund of India and gets divided between the State and Union as decided by the Parliament on the recommendations of the GST Council."
"If there is delay in payment of IGST, interest as per Section 50 of the CGST Act, 2017 is payable. There is no reason to treat IGST paid on goods supplied in the course of international trade differently than the IGST paid on inter-state supply of goods."
"The impugned order is set aside and the matter is remitted to the Commissioner to determine the interest as applicable to the IGST."
Core principles established include the constitutional and statutory distinction between customs duties and IGST, the applicability of GST interest provisions to delayed IGST payments on imports, and the requirement that interest be calculated under the correct legal provisions applicable to IGST rather than customs duties.
The Tribunal allowed the appeal by remanding the matter for recalculation of interest under the GST regime, confirming the liability of the appellant to pay interest on delayed IGST payment but directing adherence to the correct statutory provisions for interest computation.
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