Bombay HC holds interest and penalty not leviable on delayed payment of customs surcharge CVD and SAD

This Tax Alert summarizes a recent ruling of the Bombay High Court (HC). The issue involved in the writ petition is imposition of interest and penalty on short/delayed payment of certain duties other than basic customs duty (BCD), viz., customs surcharge, additional duty of customs (CVD) and special additional duty (SAD).

Petitioner contended that section 90 of the Finance Act, 2000 relating to customs surcharge, section 3 of the Customs Tariff Act, 1975 (CTA) relating to CVD, and section 3A of the CTA relating to SAD are the charging sections for the said duties and none of these provisions contemplated imposition of interest or penalty on such duty.  

Revenue contended that customs surcharge, CVD, and SAD, though charged under different statutes, are duties of customs and covered under section 12 of Customs Act, 1962. Further, these duties are part of total customs duty and are calculated by considering the value of goods and basic customs duty. The petitioner had misstated the assessable value by undervaluing the imported goods. Hence, interest and penalty are to be levied on delayed payments of customs surcharge, CVD, and SAD.

Bombay HC held that interest and penalty could be levied only on BCD and not on customs surcharge, CVD, and SAD, as there was no power under the law to impose interest or penalty on the said duties.

Comments

• HC ruling is likely to benefit all importers facing disputes under customs w.r.t surcharge, CVD, and SAD demands.
  
• As per the settled principle, the decision of the High court, unless overruled or in the absence of any contrary rulings, shall have a binding effect across jurisdictions in India.
  
• Applicability of the HC judgment to other levies under Customs, such as, Integrated Goods and Services Tax (IGST), Compensation Cess on import of goods, etc., may need to be evaluated. 
  
• It is quite likely that the ruling may be challenged before the Supreme Court, considering the revenue implications.
  
• Taxpayers who paid interest and penalty on CVD, SAD, and surcharge in the past may explore the possibility of claiming refund.