Supreme Court Issues Notice On Union's Appeal Against Bombay High Court Ruling On IGST Penalties

The Supreme Court recently issued notice on a Special Leave Petition filed by the Union government challenging a Bombay High Court ruling, which held that, prior to a 2024 amendment, the Customs Tariff Act did not permit the levy of interest, penalty, confiscation, or redemption fine on Integrated Goods and Services Tax collected on imported goods.

A bench of Justice K.V. Viswanathan and Justice Vipul M. Pancholi passed the order after hearing the Additional Solicitor General for the Revenue and counsel for the importer.

The court condoned the delay and directed completion of pleadings. “Considering the nature of the issue involved, we are inclined to issue notice,” the bench said.

The case relates to the levy of IGST on imported goods under the Customs Tariff Act. IGST is charged at the time goods enter the country so that imports are taxed in the same manner as domestic supplies.

While the tax is collected through the customs framework, the dispute concerns whether customs authorities had the power, before 2024, to also impose interest and penalties in cases of short payment or alleged violations.

The Bombay High Court had ruled in favour of the importer and partly set aside an adjudication order that had confirmed demand of IGST along with interest, penalty, confiscation, and redemption fine.

The High Court held that Section 3(12) of the Customs Tariff Act, as it stood prior to amendment, did not incorporate provisions of the Customs Act relating to interest, offences or penalties in respect of IGST levied under Section 3(7).

The High Court said interest and penalty are substantive charges and cannot be imposed unless the law clearly allows it. It also pointed out that Parliament amended Section 3(12) in 2024 to expressly permit such levies. According to the Court, the amendment took effect from August 16, 2024, and could not apply to past imports.

The Union government has challenged this finding before the Supreme Court. It argued that even before the amendment, Section 3(12) worked as legislation by reference. Once IGST is levied under the customs framework, it said, the power to impose interest and penalties follows.

To back this view, the government relied on earlier Supreme Court rulings, including a Constitution Bench decision.

The importer opposed the appeal and supported the High Court's reasoning. It said interest and penalties have serious financial and penal consequences and cannot be assumed without clear statutory backing.

The case will be heard next on April 7.

For Petitioner: Additional Solicitor General N. Venkatraman; Advocate-on-Record Gurmeet Singh Makker; Advocates V. Chandrashekara Bharathi, Padmesh Mishra, Seema Bengani, and Gaurav Arya.

For Respondents: Advocates Jitendra Motwani, Rinkey Jassuja, and Rushabh Luhar; Trilegal, Advocates-on-Record.