A division bench of the Bombay High Court has held that no interest and penalty can be levied on the portion of payment pertaining to surcharge, CVD and SAD as the Customs Tariff Act does not provide a mechanism for the same.
Justices K.R. Shriram & A.S. Doctor was considering a petition by Mahindra & Mahindra Ltd wherein the petitioners claimed that the basic customs duty with surcharge had already been paid and the penalty and interest has been levied only on the differential duty which the show cause notice alleged petitioner had evaded and since neither Section 3 nor Section 3A of the Customs Tariff Act, 1975 or the Finance Act, 2000 provided for imposition of penalty or interest, there is no power under the Act to impose the same upon petitioner.
The petitioner further contended that Section 28AB of the Customs Act, 1962, interest on delayed payment of duty is applicable only for customs duty leviable under Section 12 of the Customs Act, 1962. It was also contended that Section 90 of the Finance Act, 2000 relating to surcharge, Section 3 of the Customs Tariff Act, 1975 relating to additional duty of customs and Section 3A of the Customs Tariff Act, 1975 relating to special additional duty of customs do not borrow the provisions of Customs Act, 1962 relating to interest.
Relying on a catena of decisions, the Court held that “this judgment, we are informed, was confirmed by the Apex Court. Therefore, when penalty is additional tax, constitutional mandate requires a clear authority of law for imposition thereof. Where the Act has to be explained by referential legislation or legislation by incorporation levies penalty or not, it is better for the Court to lean in favour of the tax payer. There is no room for presumption in such cases.”
Quashing the demand, the Court held that “in the absence of specific provisions for levying of interest or penalty due to delayed payment of tax unless the statute makes a substantive provision in this behalf, the same cannot be levied/charged. Sub-section (6) of Section 3 and sub-section (4) of Section 3A of the Customs Tariff Act, 1975 does not provide for any interest or penalty. Neither Section 90 of the Finance Act, 2000 provides for the same. Therefore, no interest and penalty can be levied on the portion of payment pertaining to surcharge, CVD and SAD.”
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