No Interest or Penalty on CVD or SAD Defaults - Customs and GST Implications

 In a major bombshell dropped on the Revenue, the Bombay High Court (‘HC’) in the case of Mahindra and Mahindra Limited v. Union of India, 2022 (10) TMI 2022, held that there is no provision under the Customs Tariff Act, 1975 ('CTA 1975') to levy interest or penalty on Countervailing Duty ('CVD') or Special Additional Duty ('SAD').

 

The HC decided basis the various Supreme Court ('SC') and HC decisions that interest and penalty are substantive levy and cannot be levied by implication.

 

| Remarks

 

·                At the outset, we completely agree with decision and the same stand has been taken by us since the beginning.

 

·                Now, this is a huge decision since it can apply to Integrated Tax ('IGST') on import of goods as well. There is no provision in CTA 1975 to levy interest or penalty on non-payment of IGST on import of goods [levied under Section 3(7) of CTA 1975].

 

·                Similarly, under GST, there is no interest provision for interest on erroneous refund, Input Tax Credit ('ITC') wrongly availed and utilised (amendment by Finance Act 2022 is not yet made effective) and wrongly availed or utilised transitional credits.

 

Importers can explore opportunity to claim refund of interest and penalty paid on the amount of CVD, SAD or IGST on import of goods. It is irrespective of the fact that the interest or penalty is paid even 20-30 years back since such collection of interest and penalty was unconstitutional [Refer SC decision in Mafatlal Industries Limited]