Bombay High Court
LEBEN LABORATORIES PVT LTDversusUNION OF INDIA THR MINISTRY OF FINANCEAND ORS
- Decided
- Disposal
- Disposed Off
Holding
Rule 96(10) is deemed omitted since inception, there was no legal authority to levy interest on the repayment of additional customs duties, and the petitioner is entitled to a refund of the interest paid.
Summary
Leben Laboratories imported raw materials under the Advance Authorization Scheme, claimed exemption from additional customs duties under Section 3(7) of the Customs Tariff Act, 1975, and later paid IGST on exports, seeking refund under Section 16 of the IGST Act. Between October 2018 and November 2020 the company made 25 such transactions and, pursuant to the retrospective explanation to Rule 96(10) of the CGST Rules, repaid the customs duties and paid Rs. 43 lakhs as interest. After the Supreme Court struck down the interest provision, the petitioner demanded a refund of the interest, arguing that neither the Customs Tariff Act nor the CGST Rules authorized such interest. The respondents contended that the refund application was not made to the proper officer and that the earlier Mahindra & Mahindra decision was inapplicable. The Court, relying on Mahindra & Mahindra, A.R. Sulphonates and Goodluck India decisions, held that Rule 96(10) is deemed omitted since inception, leaving no legal basis for levying interest on the repayment of customs duties. Consequently, the writ petition was allowed and the respondents were directed to refund the interest amount to the petitioner.
Issues considered
- Whether the levy, collection and retention of interest on IGST paid on imports under Section 3(7) read with Section 3(12) of the Customs Tariff Act, 1975, was authorized by law.
- Whether Rule 96(10) of the CGST Rules is deemed omitted, thereby negating any obligation to repay additional customs duties and the attendant interest.
- Whether the petitioner is entitled to a refund of the interest paid on the alleged customs duty repayment.
Legislation cited
- Constitution of India — s. Article 265
- Customs Tariff Act, 1975 — s. 3(12), 3(7)
- Integrated Goods and Services Tax Act, 2017 — s. 16
Subjects
- Customs duty
- Interest on customs duty
- Rule 96(10)
- IGST refund
- Article 265
- Refund of interest
- Advance Authorization Scheme
Judgment
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ARJUN
MACHHINDRA
KADAM IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
Digitally signed by
ARJUN
MACHHINDRA WRIT PETITION NO. 15373 OF 2025
KADAM
Date: 2026.09.01
17:28:20 +0530
Leben Laboratories Pvt. Ltd. … Petitioner
Versus
Union of India & Ors. ... Respondents
__________________________
Mr. Prithwiraj Choudhari a/w. Ms. Kausarjahan Sayed and Mr. Aansh
Desai i/b Pythagoras Legal for the Petitioner.
Mr. Siddharth Chandrashekar and Mr. Abhishek R. Mishra for
Respondent Nos.4 & 5.
__________________________
CORAM : M. S. KARNIK AND
SANDESH D. PATIL, JJ.
DATED : 1st SEPTEMBER, 2026.
ORAL JUDGMENT (PER M. S. KARNIK, J.)
1. Heard learned counsel for the petitioner.
2. The petitioner prays for declaration that levy, collection
and retention of interest on IGST paid on imports in terms of Section
3(7) read with unamended Section 3(12) of the Customs Tariff Act,
1975, for the period prior to 16 th August, 2024, is without authority
of law and is in violation of Article 265 of the Constitution of India.
The petitioner further prays for a direction to the respondents to
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refund the amount of interest paid by the petitioner, as more
particularly described in paragraphs 8(a), (b) and (c) of the petition.
3. Facts of the case in brief are that the petitioner imported
some raw materials under Advance Authorisation Scheme and
claimed exemption from levy of additional duties of customs leviable
under Section 3(7) of the Customs Tariff Act, 1975 on such imports.
The said imports were used for manufacture of products which were
exported from India. At the time of export, the petitioner opted to
pay IGST on exports and claimed refund of such IGST amount under
Section 16 of the IGST Act.
4. During the period starting from 4th October, 2018 to 27th
November, 2020, the petitioner effected 25 such imports by claiming
additional duties of customs exemption followed by exports with
refund of IGST paid on such exports. As per explanation to Rule
96(10) introduced retrospectively w.e.f. 23 rd October, 2017, since the
petitioner claimed benefit both on the import side (exemption) as
well as on the export side (refund), the petitioner was required to
pay back any one of the benefits. The petitioner chose to pay back
the additional duties of customs on the import side on account of
Rule 96(10) of the CGST Rules by recalling and getting the bills of
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entries reassessed with the recomputed duty.
5. While paying back the additional duties of customs, the
petitioner also paid interest to the tune of Rs.43 lakhs on such
amounts to the respective customs authorities. Subsequently, once
the levy of interest on additional duties of customs under the
Customs Tariff Act, 1975 was struck down by this Court, the
petitioner submitted letters to the customs authorities asking for
return of the interest amount paid by the petitioner.
6. Learned counsel for the petitioner submitted that this
Court in Mahindra & Mahindra Ltd. Vs. Union of India 1 and A. R.
Sulphonates Pvt. Ltd. Vs. Union of India 2 has held that there were no
provisions under the Customs Tariff Act, 1975 during the relevant
period which empowered the Customs Authorities to levy and collect
interest on belated payment of additional duties of customs.
7. The respondents have filed Affidavit-in-Reply. The
Affidavit-in-Reply is taken on record. We have perused the Affidavit-
in-Reply where a stand has been taken that for the reasons
mentioned, the petition is not entitled for refund.
8. Learned counsel for the respondents opposed the
1 (2023) 3 Centax 261 (Bom.)
2 2025 (393) E.L.T. 246 (Bom.)
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petition. It is submitted that the application for refund has not been
made to the proper officer. It is further submitted that even on
merits, the decision in Mahindra & Mahindra Ltd. Vs. Union of India
(supra) may not apply to the facts of the present case. It is
submitted that in such circumstances, there is no question of
processing the refund application or grant of refund or interest.
9. We have heard learned counsel for the parties. This
Court in Mahindra & Mahindra Ltd. Vs. Union of India (supra) and
A. R. Sulphonates Pvt. Ltd. Vs. Union of India (supra) held that there
were no provisions under the Customs Tariff Act, 1975 during the
relevant period which empowered the Customs Authorities to levy
and collect interest on belated payment of additional duties of
customs. Further, it is profitable to rely upon the decision of recent
origin of the Hon’ble Supreme Court in Goodluck India Ltd. Vs.
Union of India3 which holds that Rule 96(10) is deemed to be
omitted since inception.
10. In our view, since Rule 96(10) is deemed to have been
omitted since inception, there was no legal requirement or obligation
on the petitioner to have made the repayment of the additional
3 (2026) 45 Centax 171 (S.C.)
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duties of customs in March/April, 2022. Therefore, following the
view taken in the aforesaid decisions, we have no hesitation in
holding that there was no legal requirement or obligation to make
such payment. The question therefore of levying interest on such
repayment does not arise.
11. In such view of the matter, the writ petition deserves to
be allowed and is accordingly allowed.
12. Respondent Nos.2, 4 and 6 or the proper authorities are
directed to process the application made by the petitioner for refund
of the amount of interest, as more particularly described in tables
(a), (b) and (c) of paragraph No.8 of the petition and accordingly
refund the amount of interest expeditiously.
13. No order as to costs.
(SANDESH D. PATIL, J.) (M. S. KARNIK, J.)
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